Glossary
Real estate glossary
Key terms and concepts to understand the real estate and investment market in Mexico.
A
- ADR (Average Daily Rate)
- Average vacation rental rate per night. Calculated by dividing total income by occupied nights.
- Amenities
- Shared facilities and services in a development: pool, gym, rooftop, security, coworking and more.
- Appraisal (AvalĂșo)
- Technical report that determines the commercial value of a property. Required by banks to grant credit and by notaries for title transfer.
- Appreciation (PlusvalĂa)
- Increase in property value over time. In high-demand zones like Tulum, it can be 10-20% annually.
B
- Bridge Loan
- Temporary financing to buy a property before selling another. Short terms of 6-12 months.Learn more â
- Bank Trust (Fideicomiso)
- Legal instrument allowing foreigners to "own" property in restricted zones of Mexico through a bank. Renews every 50 years.
C
- Cap Rate (Capitalization Rate)
- Annual net rental income divided by purchase price. A 6-8% Cap Rate is considered good in the Mexican market.Learn more â
- Cash-on-Cash Return
- Annual cash return on actual cash invested (down payment + closing costs), not considering appreciation.
D
- DSCR (Debt Service Coverage Ratio)
- Ratio measuring whether rental income covers mortgage payment. DSCR > 1.25 is ideal for bank qualification.
- Down Payment (Enganche)
- Initial payment when buying a property. In Mexico, typically 10-30% of value depending on financing type.Learn more â
I
- IRR (Internal Rate of Return)
- Annualized return considering the time value of money. Includes appreciation, rental income, and costs over time.
N
- NOI (Net Operating Income)
- Gross rental income minus operating expenses (maintenance, management, insurance). Does not include mortgage payment.
O
- Occupancy Rate
- Percentage of nights a vacation property is rented. In Riviera Maya, the average is 60-75%.
P
- Pre-sale (Preventa)
- Stage where units are sold before construction begins. Offers the best prices (20-40% less than ready-to-move-in).
- Property Manager
- Person or company managing a vacation rental: check-in/check-out, cleaning, maintenance. Typical commission: 15-25%.
R
- Ready to Move In
- Completed property ready to inhabit or rent, with no construction waiting period.
- RevPAR (Revenue per Available Room)
- Revenue per available night = ADR Ă Occupancy Rate. Key metric for comparing performance between properties or zones.
- ROI (Return on Investment)
- Total return (rental + appreciation) relative to amount invested, expressed as an annual percentage.Learn more â
- Restricted Zone
- Strip of 50 km from the coast and 100 km from Mexico's borders where foreigners need a trust (fideicomiso) to buy property.
T
- Title Transfer (EscrituraciĂłn)
- Legal process of transferring property before a notary public. Costs include taxes, notary fees, and registration.Learn more â
Y
- Yield
- Annual rental income as a percentage of property value. Gross yield = gross rent, Net yield = after expenses.
Z
- Zoho Pipeline
- Commercial status of the development within the CRM. Defines whether the property is available, reserved, in process, or delivered.