Airbnb in Cabo San Lucas: is it really profitable?

Authored by the expert who managed and guided the team behind the Mexico Property Pack

Yes, the analysis of Cabo San Lucas' property market is included in our pack

Who is the author of this content?

THE LATINVESTOR

A team specialized in real estate investing in LATAM countries

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Cabo San Lucas. If you'd like to learn more about us, you can check our presentation page.

What are the most popular neighborhoods in Cabo San Lucas for Airbnb rentals and how do they compare in demand and nightly rates?

Medano Beach, Marina, Downtown, and Pedregal consistently rank as the top-performing neighborhoods for Airbnb rentals in Cabo San Lucas as of September 2025.

These central locations attract the highest tourist demand due to their proximity to beaches, nightlife, restaurants, and shopping centers. Properties in these areas command average nightly rates of $231, with premium units featuring ocean views, pools, and beach access fetching between $500 to over $1,000 per night.

The Marina district particularly excels for luxury condos and waterfront properties, while Medano Beach draws families and groups seeking beach access. Downtown Cabo appeals to travelers wanting walkable access to restaurants and nightlife, and Pedregal offers upscale vacation rentals with stunning views.

Median monthly revenue across these prime neighborhoods reaches around $1,800, but top-performing properties exceed $10,000 per month during high season periods from November through April.

It's something we develop in our Mexico property pack.

What types of properties tend to perform best for short-term rentals in Cabo San Lucas in terms of occupancy and revenue?

Entire homes, condos, and larger units with two or more bedrooms significantly outperform studios and single rooms for both occupancy rates and revenue generation in Cabo San Lucas.

Group-friendly homes, villas, and luxury condos especially excel when they include amenities like private pools, outdoor kitchens, and ocean views. These properties attract vacation groups, event travelers, and families who are willing to pay premium rates for space and privacy.

Three-bedroom homes and luxury condos with premium amenities achieve the highest booking rates and occupancy levels, serving multiple guest segments including wedding parties, corporate retreats, and extended family vacations. Properties with outdoor entertainment spaces, infinity pools, and direct beach or marina access command the strongest demand.

Two-bedroom units in prime neighborhoods typically earn $45,000+ annually, while three-bedroom luxury homes can generate $60,000 or more per year. Single-bedroom units and studios generally underperform due to limited guest capacity and lower nightly rates.

What's the average occupancy rate for similar listings in the area and how does it fluctuate seasonally?

The average occupancy rate for short-term rentals in Cabo San Lucas stands at 53% annually, translating to approximately 193 nights booked per year as of September 2025.

Occupancy rates experience significant seasonal fluctuations, jumping to 46-73% during peak season from November through April. March and December represent the strongest months, with some properties achieving near-maximum occupancy during these periods.

The shoulder seasons of May-June and September-October see moderate occupancy rates of 35-45%, while the lowest occupancy occurs during the summer months of July and August, typically dropping to 25-35% due to extreme heat and hurricane season concerns.

Successful property managers leverage dynamic pricing strategies during peak months, implementing higher nightly rates and minimum stay requirements to maximize revenue during high-demand periods while offering competitive rates during slower seasons to maintain consistent bookings.

What's the typical nightly rate across different property types and neighborhoods?

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What's the estimated annual gross rental income based on current market trends?

The typical annual gross rental income for Airbnb properties in Cabo San Lucas averages $16,000 per listing, based on the standard 53% occupancy rate and $86 average daily rate.

However, income varies dramatically by property type and location. Two-bedroom units in prime neighborhoods like Marina and Medano Beach typically generate $45,000+ annually, while three-bedroom luxury homes can reach $60,000 or more per year.

Studio and one-bedroom units in less desirable locations may only achieve $12,000-$20,000 annually, while premium beachfront villas and luxury properties can exceed $100,000 in gross rental income during strong performance years.

Properties that implement professional management, dynamic pricing, and maintain high guest satisfaction ratings consistently achieve 15-25% higher revenues than average performers in the same neighborhoods.

What are the average operating expenses for an Airbnb in Cabo San Lucas, including cleaning, utilities, property management, and platform fees?

Operating expenses for Cabo San Lucas Airbnb properties typically consume 35-50% of gross rental income, significantly impacting net profitability.

Cleaning costs range from $40-$75 per turnover, resulting in annual expenses of $2,500-$5,000 depending on occupancy rates. Utilities including electricity, water, internet, and cable average $200-$400 monthly, totaling $2,400-$4,800 annually.

Property management fees represent the largest expense category at 20-30% of gross rental income for full-service management, while Airbnb and platform fees consume approximately 15% of gross bookings. Maintenance and repairs typically cost $1,000-$3,000 annually depending on property age and usage intensity.

Local taxes include 16% VAT on all bookings, plus potential municipal fees and permits. Insurance, supplies, and miscellaneous expenses add another $1,000-$2,000 annually, bringing total operating expenses to $8,000-$20,000+ per year for most properties.

What does the gross yield look like based on average purchase prices and gross rental income?

Gross yields for Cabo San Lucas Airbnb properties typically range from 6-10%, with top-performing units occasionally achieving higher returns.

Using typical scenarios: a $250,000 condo generating $16,000 annually achieves a 6.4% gross yield, while a $300,000 two-bedroom unit earning $45,000 delivers a strong 15% gross yield. Luxury properties purchased for $500,000+ often achieve gross yields of 8-12% when managed effectively.

Properties in prime locations like Marina and Medano Beach command higher purchase prices but also generate superior rental income, often balancing out to achieve competitive yield ranges. The key factor determining gross yield performance is the relationship between purchase price and achievable rental rates in specific neighborhoods.

Investors focusing on properties under $400,000 in well-located areas typically achieve the strongest gross yield performance, while luxury buyers prioritize capital appreciation alongside rental income.

What's the expected net yield after accounting for all expenses, taxes, and maintenance costs?

Net yields for Cabo San Lucas Airbnb properties typically fall between 4-7% after accounting for all operating expenses, taxes, and maintenance costs.

Using a $300,000 property generating $45,000 gross income as an example: after deducting $15,000-$20,000 in operating expenses (cleaning, utilities, management, platform fees, taxes, maintenance), the net income becomes $25,000-$30,000, resulting in a 8.3-10% net yield.

Properties with efficient management and lower expense ratios can achieve net yields at the higher end of the range, while those with high management fees or significant maintenance issues may see net yields drop to 3-4%. The variance depends heavily on property condition, management efficiency, and local tax compliance.

It's something we develop in our Mexico property pack.

How do short-term rental returns compare to long-term rental returns for similar properties in the same areas?

Short-term rentals significantly outperform long-term rentals in Cabo San Lucas, delivering 1-4% higher gross yields on average.

While long-term rentals offer more predictable income streams with gross yields typically ranging from 4-6%, short-term rentals achieve 6-10% gross yields despite requiring more active management. The higher returns compensate for increased vacancy risk and management complexity.

Long-term rentals provide steady monthly income with lower management requirements, making them suitable for passive investors. However, short-term rentals capture premium tourist pricing, especially during peak seasons when nightly rates can be 3-5 times higher than daily long-term rental equivalents.

The trade-off involves higher potential returns from short-term rentals versus stability and simplicity from long-term leases. Most investors in Cabo San Lucas prefer short-term rentals for maximum profitability, accepting the additional management responsibilities and seasonal income fluctuations.

We did some research and made this infographic to help you quickly compare rental yields of the major cities in Mexico versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.

What are the current local regulations for Airbnb and other short-term rentals, and how strictly are they enforced?

Short-term rental regulations in Cabo San Lucas remain generally lenient as of September 2025, though some zoning laws and registration requirements apply.

Hosts typically need to register their properties with local authorities, pay applicable taxes including 16% VAT on all bookings, and comply with any municipal license caps in specific neighborhoods. Some residential areas have restrictions on short-term rentals to preserve neighborhood character.

Enforcement has been increasing but remains moderate compared to other major tourist destinations. Local authorities primarily focus on tax compliance and noise complaints rather than aggressive licensing enforcement. Properties operating without proper registration face potential fines and booking platform removal.

Successful operators maintain compliance by working with local property managers who understand current regulations, properly registering properties, and maintaining good relationships with neighbors to avoid complaints that trigger enforcement actions.

What level of initial investment is required, including purchase price, furnishing, and setup costs, to launch a competitive Airbnb in the area?

The total initial investment for a competitive Cabo San Lucas Airbnb ranges from $265,000 to $540,000+ depending on property type and furnishing standards.

Property purchase costs typically range from $250,000-$500,000+ for prime condos and homes, with luxury properties exceeding $1 million. Well-located two-bedroom condos in Marina or Medano Beach start around $300,000-$400,000.

Furnishing and setup costs add $15,000-$40,000 depending on property size and target market. This includes furniture, appliances, linens, kitchen equipment, electronics, and décor to create an attractive, functional space that competes with established listings.

Additional startup costs include licensing fees, professional photography ($500-$1,500), initial marketing, insurance setup, and working capital for first-month expenses. Budget an extra $5,000-$10,000 for these miscellaneous launch costs to ensure smooth operations from day one.

What are the main risks or market trends that could affect future profitability of an Airbnb in Cabo San Lucas?

Market oversupply represents the primary risk to Cabo San Lucas Airbnb profitability, as new property developments and increased investor interest could saturate popular neighborhoods.

Regulatory changes pose ongoing risks, including potential stricter licensing requirements, increased taxes, or zoning restrictions that could limit short-term rental operations. Municipal authorities may implement caps on short-term rental licenses in residential areas to address local housing concerns.

Economic factors including currency fluctuations affecting USD-peso exchange rates, rising operating costs, and increased platform fees could compress profit margins. Climate risks from hurricanes and extreme weather events can cause significant property damage and disrupt tourism flows.

Changing traveler preferences toward alternative destinations, increased competition from new vacation rental platforms, and potential tourism market shifts could affect demand patterns. Properties in prime locations with premium amenities typically demonstrate greater resilience against these market risks.

It's something we develop in our Mexico property pack.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

Sources

1. AirROI Cabo San Lucas Market Report
2. TripAdvisor Cabo San Lucas Best Areas Guide
3. The LatinVestor Cabo San Lucas Property Analysis
4. Airbtics Annual Airbnb Revenue Report
5. AirROI Cabo San Lucas Data Portal
6. Airbtics Los Cabos Investment Guide
7. Airbnb Community Cabo Investment Discussion
8. Airbnb Tax Information Mexico