Vacation Home Ownership Options
The vacation-home market has been continually evolving to meet the needs of consumers and their families, so that today’s marketplace provides potential homeowners many different and unique buying options. When selecting a vacation home that will best suit your lifestyle needs, it’s important to first educate yourself about market terminology and options available, and then assess your vacation preferences, travel goals and budget. You also should obtain relevant information online, and talk with a real estate professional located in the region.
Five Vital Factors
Five main factors, which most affect the cost of a vacation home, need to be considered to ensure you obtain what best fits your needs.
- Location: As they say, when it comes to real estate, the three most important factors are “location, location and location,” and the situation is no different here in Vallarta and Nayarit. Where the property is located will affect the sales price, type of view and proximity of the amenities most important to you. Vallarta and Nayarit offer a wide variety of options when it comes to location; you can be in the city, a small out-of-the-way village, a gated community, mega-development, high on a hillside overlooking the bay, on the beach, within a marina or along a golf course fairway. The types of property here are greater than anywhere else in Mexico
- View: In warm-weather places such as Vallarta, where considerable time can be spent outside on the terrace, having a nice view is worth considering. On the south side of Vallarta, the foothills of the Sierra Madres provide spectacular bay and city views. But there are other views to consider, such as golf fairways (someone else mows your backyard), marinas (easy to keep an eye on your boat) and lush jungle (quite spectacular).
- Size: How large a place will you need? Will friends and relatives be visiting, and do you want them to stay with you? Usually, a second room that serves as an office/TV room/guest room is a good idea. Regarding condominium living, how big a building/project do you want? Usually, the larger the project (more units), the more amenities provided.
- Amenities: If you have a strong interest in boating or golf, you’ll probably want to be located as close to a marina or golf course as possible. If you enjoy dining out and socializing, you won’t want to live somewhere remote. If you surf, swim or enjoy long walks on the beach, you’ll want easy access to the ocean and surf breaks.
- Time: How much time will you actually use your vacation property? If you’re only vacationing a couple of weeks a year, do you even need to consider ownership? Perhaps a property rental or condo/hotel would suit your needs best for now. Or you could consider one of the popular alternative forms of vacation ownership mentioned below. If you’re spending any more than four months, however, you probably will want your own place and will go with full-time ownership. Another option, if you plan to use your property for just a few weeks a year for now but intend to spend more time here in the future, perhaps even retiring here, is to purchase and then rent out the unit when you’re not using it, using the income to pay maintenance costs and part of the mortgage (if there is one). Demand for rentals has been strong recently, so you may be able to rent out your place frequently, especially if it positively incorporates these four factors: good view, location, size and amenities. Keep in mind, however, that there are only four to six strong months for rentals each year and that dealing with coordinating the rentals can take up a lot of your time.
Traditional Forms of Vacation Ownership
The traditional forms of vacation ownership in Puerto Vallarta involve full-time home or condominium living, condominiums making about 80% of this market. There’s a wide variety of options available for nearly every potential vacation homeowner. Most of the current market is made up of re-sale properties, as the new-product market slowed during the past five years. That is changing, however, and developers are building once again, most offering a product that matches a different buyer than in the past: one looking for something smaller, less expensive and with fewer amenities, basically to keep ongoing and initial investment costs low. A downside to new-product purchasing is not always knowing what you’ll eventually get; however, on the upside, whatever it is will be “new” and built with the latest building products and designs. Purchasing existing real estate may be safer in some respects (you know what you’re getting), but there’s nothing quite like buying a brand-new property that you can participate in designing and decorating. With traditional forms of vacation ownership (vs alternative forms), there’s also the potential added benefit of appreciation.
Traditional second-home ownership appeals to those seeking a vacation setting to share with family and friends and/or use for business whenever they choose. Owners, however, have full responsibility for maintaining the property, which may include hiring a management company.
For most people, condominium living is the way to go. It’s simpler to maintain and easy to lock up and leave when you return home. Yes, you have to put up with neighbors, perhaps on all sides (consider that when selecting a unit), and yes, you have to share the responsibilities of repair and maintenance with others (the good: you share the costs; the bad: you don’t always get what you want but what the majority wants). Condominiums can be tall towers offering spectacular views. They can be situated right downtown, making it easy to get around. But it is communal living; you need to realize that and be willing to live with the good and not-so-good.
There are both new and re-sale houses, but the selection is more limited than it is for condominiums. And it currently is even more limited if you’re looking for a developer-built home. If you want to create something of your own, however, you can buy a lot and build your dream home and get exactly what you want. With home ownership, concerns regarding neighbors are less, and you certainly won’t have anyone above or below you. But the cost of operation is solely your responsibility. You don’t have to share the pool or garden areas, so you’ll have much more privacy, but you alone are paying for the maintenance. View properties are a little harder to find, unless you’re looking at the South or North Shores of the bay, where there is more elevation. Most vacation homes in Vallarta are found along golf courses or waterways, such as in Nuevo Vallarta. They are inside gated communities, which provide more security, if that’s a concern
Alternative Forms of Vacation Ownership
For those who only want to invest for the amount of time they actually will be vacationing, there are alternatives that involve purchasing just a portion or fraction of the weeks’ or months of the year. This can involve receiving actual title or deed, or it can be a right-to-use, commonly 25 to 30 years. This form of vacation ownership is best for those anticipating usage for the full term of the ownership, as re-sales rarely reflect the original purchase price and capital gains are not common.
Timeshare / Vacation Ownership
Timeshare ownership may be purchased through deeded property ownership, right-to-use or a more flexible points-based program. Owners purchase a condo or villa for one or more weeks use within a fixed or “floating time” system, which allows scheduling each year’s vacation during the most convenient week within a specified season. With timeshare, consumers have the opportunity to purchase time at resorts offering a wide range of amenities at different destinations. While most vacation ownership villas have two bedrooms and two baths, floor plans range from studios to three or more bedrooms.
Ownership is a one-time purchase, which often is developer financed, owners then paying an annual maintenance fee based on the unit size, location and amenities. Timeshare is not intended to be an investment opportunity, rather an alternative to traditional vacation accommodations and a way to hedge against “vacation inflation.” Pricing varies considerably based on the five factors mentioned above, but usually ranges from $15,000 to $50,000 USD per week. Puerto Vallarta was one of the first and most successful timeshare destinations in Mexico and offers a wide variety of different types of products, plans and pricing.
Private Residence Clubs
A step above timeshare is fractional ownership, which usually comes with a recorded deed and title. Fractional ownership has the benefits of second-home ownership, but for a fraction of the cost and without the maintenance responsibilities. Considering the average vacation-home buyer uses the property just three to four weeks a year, fractional ownership tends to be more in line with the actual use of the vacation home. Additionally, fractional properties are generally affiliated with high-end hotel companies or high-end boutique operators, so owners have the benefits of personalized services and amenities.
Fractional interests can range from $60,000 to $650,000 USD per interest, based on floor plan, location and size of the fraction. In addition to the purchase price, there also are annual maintenance fees to consider. Fractional ownership has not been as popular as timeshare in Vallarta and Nayarit, but there are programs available.
Members of a destination club are not buying a specific property, but rather the right to use any of a portfolio of homes owned or operated by the club company. With few exceptions, they offer a non-equity-based membership emphasizing a broad selection of vacation-home experiences. Most destination clubs also offer members concierge services.
The average length of stay at destination clubs ranges from one to nine weeks, and costs include a one-time fee ranging from $20,000 to $1.5 million USD, which is typically between 80 and 100% refundable if they choose to exit the program. Annual dues range from $1,500 to $30,000 USD. The club may also charge a nightly fee while guests are in residence.
Condo hotels offer a portion of their hotel room inventory for sale to the public. The owner may use it for vacation or corporate housing needs or place it in a rental program, typically managed by the hotel. Owners then receive proceeds from the rentals. Buyers enjoy the benefits of owning real estate in a desirable location coupled with hotel amenities and services. Annual dues also apply. Condo hotel pricing varies by real estate market trends; however, currently there are few options available for condo hotels in Vallarta.
When it comes to vacation ownership, especially in and around Puerto Vallarta, there are myriad options available to you. Getting exactly what you want will involve first knowing what your needs are, obtaining as much product information as you can on what meets your needs, and then weighing one against the other. Spending a little time now to think it fully through can ensure long-term enjoyment for many years to come.