Real Estate Value in Los Cabos
By Randy Thompson.
It is time you knew the truth about real estate value in Baja California. Originally I moved to Los Cabos to sell luxury tourist real estate. I have sold Real Estate since 1984, and have learned to establish value the income approach.
I’ve learned real estate that can pay for itself within 7 years of rental income, is considered good value. With local occupancy rates at 75% in the 3 good years, 39% for the remaining 7 years averaging 49.8 % occupancy per decade. This is a double digit return, and considered a good investment.
Years ago my good friend, Maximiliano Lucero invited me to visit his home town Santiago, 41 Km North of the Airport in San Jose. Santiago sits at the base of the highest peak in the Sierra de la Laguna experiencing 10 times the rain of San Jose or Cabo San Lucas. Small orchards make up this charming Village rich with history dating back to the 1700’s when a mission was built.
I have completed a study on a few potential properties with water sources. We will purchase a property in Santa Rosa near Km 38 Hwy 1 in San Jose with 3 Hectares, or 7.5 Acres. We will farm 2 Hectares, or 5 Acres consisting of 20,000 M2. We have established a planting density of 3 plants per M2. The tomato yields between 5 – 9 kilos per plant. Assuming we grow 5 Kilograms per plant with a growing season of 60 – 80 days. We will assume we harvest 3 seasons per year. The price of non-organic tomatoes today at the El Comer are $39.90 P/ Kilo, /19 P Pesos per U.S. Dollar = $2.05. I will use $2.00 U.S./Kilo for realistic income projections.
3 Plants x 5 Kilos per crop, x 3 crops per year x $2.00 U.S. / kilo x 20,000 M2 = $1,800,000.00 U.S. How’s this possible, $1,800,000.00 U.S. in less than a year? If we harvest one crop per year, the gross income is $600,000.00 U.S.
I chose tomatoes because they are the most thrifty fruit or vegetable using 28 gallons of water per pound of produce. The tomato can be sold fresh, dried, and it is easy to preserve. Potential products include tomato juice, clamato juice, salsa, Ketchup, and spaghetti sauce.
Why aren’t more people gardening in Baja California Sur? I search for feedback and the most common response is a reliable labor force. I approached a contractor I know for a wage quote. He pays a laborer $375.00 Pesos per day and masons $750.00 Pesos per day. We will match these wages, with an increase of 50% the following year. Each employee will take on an apprentice, preparing them to join our work force. This integration process will build self-esteem while teaching life skills for a better future.
We will purchase the first property with vendor financing for 3 years, with the seller allowing access and the use of the property to generate a crop. Upon completion of the first year we will purchase the second parcel choices in Santa Catarina.
With a 50% down payment towards the purchase of the property known as El Alamo, in Santa Anita consisting of 493 hectares. We will secure the option to purchase the remaining 50% any time within the next 3 years at the current list price.
We plan to secure food contracts with UABCS and the families of their 7,500 students. Working with the 200+ students from the agricultural department of UABCS, we will obtain organic designation for our food products. We will solicit assistance from the Municipalities of Los Cabos and La Paz and the State and Federal government for funding for schools or aid for assisting the poor.
We will approach COSTCO, EL COMER, SORIANO and CHEDRAUI to secure food contracts for the future. We will expand to the state of Baja California repeating this successful business model.