How to Calculate Rental Yield in Mexico: Step-by-Step

Quick answer: Calculate Mexico rental yield in two passes — gross (rent ÷ all-in cost) for screening, net (rent minus management, HOA, taxes, vacancy, trust fees, then ÷ all-in cost) for underwriting. Use 65–70% occupancy and 25–30% management unless you have building-specific proof. Playa Centro base case nets ~4–5%; Tulum Region 15 can fall under 3%.

Every failed Mexico investment started with a yield number that skipped expenses. This guide is the calculator walkthrough — copy the framework into spreadsheet before any offer.

Theory: Gross vs Net Yield Mexico. Colonia tables: Mexico Rental Yield Guide.

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Inputs you need before calculating

Before calculating rental yield on any Mexico property, you need four core inputs: the all-in acquisition cost (purchase price plus closing costs), expected gross rental income based on comparable ADR and occupancy, variable expenses (management fees, cleaning, platform commissions), and fixed annual costs (HOA, fideicomiso fees, predial tax, insurance). Missing any input leaves you with gross yield only, not the net yield required for investment decisions.

Input	Source
Purchase price	Contract
Closing estimate	Notario preliminary
ADR (average daily rate)	Seller P&L or manager quote
Occupancy %	12-month history or conservative assume
Management %	Written manager quote
HOA monthly	Seller + bylaws
Predial annual	Seller receipt
Fideicomiso annual	Bank quote
Insurance STR	Broker quote
Lodging tax %	Municipio / manager

Missing manager quote or HOA → you have a gross yield only.

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Step 1: All-in acquisition cost

All-in acquisition cost includes purchase price plus all closing expenses (ISAI taxes, notario fees, registry, fideicomiso setup, legal costs) to establish the true investment basis. Using price-only inflates yield calculations by 30–50 basis points and creates inaccurate ISR capital gains basis for future exit planning — the quick method applies 7% loading to purchase price for $250K+ Riviera Maya resales.

All-in = Purchase price + ISAI + notario + registry + fideicomiso setup + legal

Quick method: Price × 1.07 for $250K+ RM resale (indicative).

The 7% loading factor provides a reasonable approximation for Riviera Maya closing costs on mid-market resale transactions, with lower-priced properties often requiring higher percentages due to fixed fee impacts, while luxury properties may see slightly lower percentage costs due to economies of scale on absolute dollar amounts.

Price	7% stack	All-in
$180K	$12.6K	$192.6K
$300K	$21K	$321K
$450K	$31.5K	$481.5K

Cost of Buying Property Mexico.

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Step 2: Gross rental income

Gross rental income calculation multiplies average daily rate (ADR) by occupied nights per year, derived from annual occupancy percentage applied to 365 days. Conservative modeling uses 65–70% annual occupancy for established markets like Playa del Carmen, while aggressive assumptions above 75% require building-specific proof from comparable units’ actual performance history rather than peak-season extrapolations.

Occupied nights = 365 × occupancy rate
Gross rent = ADR × occupied nights

Example — Playa Centro base case

Base case scenario for Playa del Carmen Centro assumes $130 ADR with 68% annual occupancy, generating 248 occupied nights and $32,240 gross annual revenue. This conservative modeling reflects realistic year-round performance including summer low season, hurricane period discounting, and typical vacancy between bookings rather than peak-only projections that inflate expectations.

Variable	Value
ADR	$130
Occupancy	68%
Occupied nights	248
Gross rent	$32,240

Aggressive case (need proof)

Aggressive scenarios with $155 ADR and 78% occupancy generate $44,104 gross revenue but require building-specific proof from comparable units’ actual 12-month performance. These optimistic assumptions work only in premium locations with documented high-season premiums, excellent management, and proven track records — not as blanket expectations across Riviera Maya markets.

Variable	Value
ADR	$155
Occupancy	78%
Gross rent	$44,104

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Step 3: Variable expenses

Variable expenses scale with rental activity and include management fees (typically 25–30% of gross revenue), per-turnover cleaning costs, platform commissions, and municipal lodging taxes. Management represents the largest variable cost, often consuming $8,000+ annually on a $32,000 gross unit, while cleaning and platform fees add additional drag that many gross yield projections conveniently omit.

Line	Formula	Example
Management	Gross × 25–30%	$8,060 at 25%
Cleaning (if extra)	Turns × fee	Often in mgmt
Platform fees	If not in mgmt	3% some cases
Lodging tax	% of gross	$800–1,500

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Step 4: Fixed annual expenses

Fixed annual expenses include monthly HOA fees, annual predial property taxes, fideicomiso maintenance, STR insurance, and capital repairs reserves — costs that remain constant regardless of occupancy levels. HOA represents the largest fixed cost, ranging from $200–500+ monthly, while predial, trust fees, and insurance typically add $2,000–2,500 annually to most condo investments.

Line	Example USD
HOA × 12 ($280/mo)	$3,360
Predial	$350
Fideicomiso	$650
Insurance STR	$1,100
Repairs reserve (5% gross)	$1,612
Fixed subtotal	$7,072

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Step 5: Net operating income (NOI)

Net operating income represents true cash flow after deducting all management fees, fixed property costs, and variable expenses from gross rental revenue. This NOI figure reveals the actual annual cash generation before income taxes and debt service — often 40–60% lower than gross revenue once all operational costs are properly accounted for in realistic yield calculations.

NOI = Gross − management − fixed − variable

Playa base case continued

The Playa Centro base case with $32,240 gross revenue yields $17,108 NOI after deducting 25% management ($8,060) and $7,072 in fixed costs, demonstrating how operational expenses consume over 47% of gross income. This $17,108 NOI on $321,000 all-in cost produces 5.33% net yield — substantially below the 10%+ gross yields commonly marketed to investors.

Line	USD
Gross	$32,240
Management 25%	−$8,060
Fixed stack	−$7,072
NOI	$17,108

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Step 6: Net yield

Net yield divides annual NOI by total all-in acquisition cost to produce the true unlevered return percentage. This final calculation reveals actual investment performance after all costs, providing the realistic basis for comparing Mexico property returns against alternative investments like US Treasuries, REITs, or other real estate markets.

Net yield = NOI ÷ all-in cost

$17,108 ÷ $321,000 = 5.33% — aggressive occupancy/ADR case.

Stress test 60% occupancy, $125 ADR:

Line	USD
Gross	$27,375
Mgmt 28%	−$7,665
Fixed (HOA $300)	−$7,372
NOI	$12,338
Net on $321K	3.84%

Centro base case band 4–4.5% sits between these stresses.

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Gross yield for same unit

Gross on price only: $32,240 ÷ $300,000 = 10.7% — fantasy marketing.

Gross on all-in: $32,240 ÷ $321,000 = 10.0% — still not net.

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Sensitivity table: occupancy × management

All-in $321K, ADR $130, HOA $280/mo, fixed $2,712 ex-HOA:

Occ \ Mgmt	22%	28%	32%
60%	3.9%	3.4%	3.1%
68%	4.8%	4.2%	3.8%
75%	5.5%	4.9%	4.5%

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Tulum Region 15 worked example

Input	Value
Price	$185,000
All-in (8%)	$199,800
ADR	$105
Occupancy	55%
Gross rent	$21,062
Management 30%	−$6,319
HOA $380/mo	−$4,560
Other fixed	$2,800
NOI	$7,383
Net yield	3.7%

Broker indicative tables show ~2.6% net for median R15 1BR — meaning many buildings underperform this illustration on ADR or carry higher HOA. Always demand seller operating history; city averages smooth away failing towers.

Tulum area guide.

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Cash-on-cash with financing

Input	Value
All-in	$321K
Down 35%	$112,350
Closing in cash	$21K
Cash invested	$133,350
NOI	$14,000
Debt service	$10,500
Cash flow	$3,500
Cash-on-cash	2.6%

Leverage can make 4.5% net unlevered into 2.6% cash-on-cash — or negative if rates rise.

Non-Resident Mortgage Mexico.

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Long-term rent yield alternative

Input	Value
Monthly rent	$1,250
Gross annual	$15,000
Mgmt 10%	−$1,500
HOA etc	−$4,500
NOI	$9,000
All-in $250K	3.6% net

Lower gross, lower mgmt %, lower ban risk — compare if HOA uncertain on STR.

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Spreadsheet template (copy)

Row	Your deal
A Purchase price
B Closing (7%)
C All-in (A+B)
D ADR
E Occupancy %
F Gross (365×E×D)
G Management (F×rate)
H HOA × 12
I Other fixed
J NOI (F−G−H−I)
K Net yield (J÷C)
L Stress occ −10%
M Stress HOA +20%

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Red flags in seller-provided numbers

• Occupancy over 80% without platform export
• Management at 12% “estimate”
• HOA $150 on 2022 luxury tower
• Gross based on peak week only
• Cleaning “included” but not in mgmt contract

Reject pro forma — build your own.

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Colonia benchmarks (sanity check)

Market	Net band
Playa Centro	4–5%
Tulum AZ	3–4%
Tulum R15	2.5–3.5%
Cabos branded	3–4%

If your spreadsheet beats top of band — find the error.

Mexico Rental Yield Guide.

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STR legal zero scenario

If HOA bans STR after purchase:

Net yield → 0% STR
Fallback long-term rent → recalculate

Legal DD prevents zero scenario — Due Diligence Mexico.

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Tax-adjusted yield (optional layer)

After NOI, subtract estimated Mexican + US tax on rent for cash in pocket:

NOI	Est. after-tax cash
$15,000	$9,000–11,000 depending on bracket

Mexico Property Taxes Explained.

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When to walk away from yield

Pass if net under hurdle after stress AND:

• STR not in bylaws
• Special assessment pending
• 30+ identical competitors
• Seller won’t share operating history

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Multi-year yield projection template

Year	Occ	ADR	Gross	NOI	Net %
1	62%	$125	$28.4K	$12.1K	3.8%
2	66%	$129	$31.1K	$14.2K	4.4%
3	68%	$133	$33.1K	$15.8K	4.9%

Year 1 ramp is normal — do not annualise month 3 performance.

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Platform fee inclusion check

If management “includes everything,” confirm:

• Airbnb host fee 3% in or out?
• Payment processing?
• Professional photography amortised?

Hidden 3% platform fee = 30 bps net on $300K.

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Comparison to 10-year Treasury (2026 context)

Asset	Unlevered yield	Hassle
US Treasury ~4%+	Liquid	None
Playa net ~4.4%	Illiquid	High

Mexico property competes with risk-free rate — appreciation and personal use must justify hassle premium.

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Owner-use weeks adjustment formula

Adjusted gross = Gross × (365 − owner days) ÷ 365

21 owner days on $32K gross → adjusted $30.2K gross — 6% reduction before expenses.

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Excel / Google Sheets formula reference

Gross = ADR * 365 * Occ
Mgmt = Gross * MgmtRate
HOAannual = HOAmonth * 12
NOI = Gross - Mgmt - HOAannual - OtherFixed
NetYield = NOI / AllIn

Cell references beat mental math — share sheet with attorney or manager for sanity check.

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Grouping expenses: OpEx categories

Category	Examples
Variable	Mgmt %, cleaning, lodging tax
Fixed property	HOA, predial, trust, insurance
Reserve	Repairs, vacancy
One-time	Furniture — exclude from recurring NOI

Consistent categorisation prevents double-counting cleaning.

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Benchmarking against Mexico Rental Yield Guide

After calculation, compare net to colonia table:

Your result	Action
Within band	Proceed DD
100 bps above band	Verify optimism
100 bps below band	Renegotiate or pass

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Calculator mistakes checklist

• Used all-in not price
• Occupancy annual not peak month
• Management 25%+ unless contract says less
• HOA verified not guessed
• STR ban ruled out
• Special assessment asked

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Final formula card (printable)

ALL-IN = Price + Closing
GROSS = ADR × 365 × OCC
NOI = GROSS − MGMT − HOA − FIXED − RESERVE
NET = NOI ÷ ALL-IN

Stress OCC −10%, HOA +20% before offer.

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Google Sheets column layout (recommended)

Col	Field
A	Month
B	ADR
C	Occupied nights
D	Gross
E	Mgmt
F	HOA
G	Other
H	NOI
I	Cumulative net yield

Twelve rows — seasonality visible — beats single annual average.

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Compare calculated net to broker claim

Gap	Action
under 50 bps	Normal rounding
50–150 bps	Ask questions
over 150 bps	Reject pro forma

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Practice exercise (self-test)

Assume $295K price, $20K closing, $130 ADR, 67% occ, 27% mgmt, $295 HOA, $1.5K other fixed.

Calculate net yield before scrolling to Playa examples above — target ~4.1% band if math correct.

If your result differs 50+ bps — find arithmetic error before using template on live deal.

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Calculator outputs to save per deal

Save PDF: input assumptions, monthly seasonality table, stress test occ −10%, stress HOA +20%, final net vs hurdle. Attach to attorney file — proves underwriting discipline if partners question purchase later.

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Key takeaway

Always calculate net yield on all-in cost with 25–30% management, real HOA, and 65–70% occupancy unless building history proves otherwise. Gross yield is marketing; net yield is your decision.

Cross-check colonia benchmarks in Mexico Rental Yield Guide and theory in Gross vs Net Yield Mexico.

Recalculate net yield after any HOA special assessment vote — static spreadsheets go stale fast in Mexico condos.

Share final spreadsheet with your CPA — after-tax cash flow may differ materially from NOI on leveraged purchases.

Run the same calculator on a second building in the same colonia — if nets diverge 200+ bps, building choice matters more than city marketing.

Label spreadsheet tab with property address and date — reuse template without mixing assumptions from prior deals.

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Related guides

• Gross vs Net Yield Mexico
• Invest in Playa del Carmen
• Airbnb Investment Mexico
• Mexico Property Investment Guide
• Playa del Carmen Area

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Calculator framework is educational. Verify building-specific data. Mexico Invest does not provide investment advice.