Belize Market Data to Maximize Real Estate Investment Cashflow
Much of the post-2020 market is largely speculation, and we wouldn’t want anyone to make an investment decision strictly based on a hunch. That is why we use actual historical and current data trends to educate potential buyers and investors to make informed decisions.
In 2019, 20% of all lodging was booked through Airbnb. That is a massive market share, and in Belize, it is the leading source for accommodation bookings (2nd is bookings.com). What makes systems like Airbnb and VRBO so enticing is the fact that in the Caribbean markets, the percentage of revenue growth for whole-unit (detached) rentals has increased by an average of 76% each year.
81% of Airbnb bookings in 2019 came from whole-units and detached homes. When you look at Ambergris Caye, the year-over-year growth in demand for entire homes has increased by 18%. Comparatively, the demand for condos has decreased by 9%. This could be a product of the post-COVID market, but this was already the trend prior to the pandemic.
The rental income potential of homes over condos has ultimately been driven by numerous factors over the years. The most significant factor in the home vs condo debate has been the emergence of businesses like Airbnb and VRBO. Airbnb has become one of the most significant market disruptors in recent history. Although there is a large demand for homes, there are actually far fewer homes in the market than there are condos. This demand is also driven by the fact that Ambergris Caye does not have any ‘all-inclusive’ resorts.
An important aspect to consider when purchasing or building a vacation rental home is the unit size. Currently, the market on Ambergris Caye does not match the shift in consumer demand for larger home rentals. 4 bedroom homes have higher demand and lower competition than 2 bedrooms. 2 bedroom homes have far greater demand over 1 bedroom homes. The top-performing rental properties on the island are large villas. The homes with 6+ bedrooms have almost 0 vacancies as there are very limited options available in this size. What a lot of people fail to realize is that 80% of the rental inventory on the island of Ambergris Caye consists of 1 bedroom or studio suites (often condos).
The breakdown of available rental properties currently on Airbnb & VRBO are the following (excludes hotels):
55% 1 bedroom
26% 2 bedrooms
12% 3 bedrooms
4% 4 bedrooms
3% 5+ bedrooms
Another advantage of buying land and building is customization. This is not only for yourself but also for renters. Rental sites use filters and search criteria to help the renter narrow down the best fit rental home for them, and the more criteria you match, the higher the likelihood that you have of getting a booking.
Below are the most common amenities/criteria people searched for on Ambergris Caye in 2019:
97% air conditioning
79% golf cart parking
79% full private kitchen
76% en suite laundry
51% swimming pool
Below you can see all of the most frequently used filters for people looking for rentals on the island.
If you are looking to optimize revenue, you should try and check as many boxes as you can. However, what is most important is ensuring that your revenue outweighs your cost.
Below are the ADR (average daily room rate) for each detached unit type and the monthly revenue for 2019:
ADR: $104 to $149
Monthly Revenue Estimate: $902 to $4,941
ADR: $165 to $227
Monthly Revenue Estimate: $1,287 to $9,059
ADR: $228 to $612
Monthly Revenue Estimate: $3,267 to $14,393
4 Bedroom ADR: $399 to $744
Monthly Revenue Estimates: $4,898 to $18,319
On the chart below you are able to see the month-to-month ADR which is the nightly rental rate for the different unit types. As you can see, the more bedrooms a unit has, the higher the ADR.
Below you can see the historic monthly revenue by unit type. These numbers came directly from Airbnb and VRBO stats of the island, these are the actual number and revenue generated by the unit type. You obviously see a dip starting in April with COVID, but the uptick is already moving towards normalcy. Revenue is important as it takes not only the nightly rental rate but the occupancy of the unit into consideration.
Another interesting statistic is that there has been nearly an 800% increase in people inquiring about remote work options and long-term rentals in Belize due to COVID-19. People are social distancing, which leads to concerns over clustered developments. Even in New York and Chicago, there is an immediate shift to suburbs over urban centers. This is seen in the sales volume of homes over condos in the US over recent months. Looking at US migration patterns, the state with the largest growth in internal migration is Idaho. The state with the highest outbound migration is Illinois. With new flexibility to work from home or work remotely, Belize is seeing a shift in inquiries:
One of the key advantages of a home over a condo is the ownership structure. Many condos use a strata title, a timeshare, or a lease. The reason we only work with projects, land, and developments with fee-simple title and full foreign ownership. Mahogany Bay for example is that you get the best of both worlds – you receive the benefits of an HOA with professional management of nightly rentals similar to a condo, but you own the land and home outright with a fee-simple title.
If you are pursuing a 4 bedroom home, we suggest looking to buy land and build options that are below replacement cost. Completed homes in the market are generally priced well above replacement cost. That is why savvy investors look at buying and then build options that produce cash flow, with immediate appreciation in a completed build.