How to Calculate the Return on Investment for a Vacation Rental Property in Puerto Vallarta
At Canoa Bienes Raíces, we understand that many buyers consider acquiring properties not only as an asset but also as a source of income. Puerto Vallarta, with its growing tourist popularity, is one of the most attractive destinations to invest in vacation rental properties.
However, to make an informed decision, it is essential to understand how to calculate the return on investment for this type of property. Below, we explain clearly how to do it.
What is Return on Investment?
Return on investment (ROI) is a way to measure how profitable a real estate investment is. There are two common ways to calculate it:
➤ Gross Yield
This is obtained by dividing the annual rental income by the purchase price of the property and then multiplying by 100.
Formula:
(Annual income ÷ Property value) × 100
➤ Net Yield
This is calculated by subtracting the annual expenses from the rental income, then dividing that result by the purchase price.
Formula:
((Annual income – Expenses) ÷ Property value) × 100
What expenses should I consider?
The main expenses that affect the net yield include:
- Maintenance and cleaning
- Property management (if handled by a third party)
- Utilities (water, electricity, internet, gas)
- Taxes and insurance
- Platform commissions (Airbnb, Booking)
What is a realistic occupancy rate in Puerto Vallarta?
According to specialized reports, Puerto Vallarta maintains an average annual occupancy rate of 50 to 60% for vacation rental properties. Areas such as Zona Romántica, Conchas Chinas, and Versalles tend to stand out for their high demand, especially during peak seasons.
What is considered a “good return”?
In Puerto Vallarta, the following ranges can serve as a reference:
- Gross yield: between 6% and 8%
- Net yield: between 4% and 6%
- Cash-on-Cash Return: ideally between 8% and 12%
These numbers can improve if the property is managed efficiently and is well located.