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Cabo San Lucas delivers impressive rental yields ranging from 6% to 12% gross annually for well-positioned properties, making it one of Mexico's strongest vacation rental markets as of September 2025. Short-term vacation rentals consistently outperform long-term rentals, with premium oceanfront properties achieving the highest returns when professionally managed and marketed to international tourists.
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Cabo San Lucas rental yields range from 4-6% for long-term rentals to 6-12% for short-term vacation properties, with premium oceanfront locations generating the highest returns.
Property purchase prices average $727,000 USD with 7-10% closing costs, while annual carrying costs typically run $10,000-$30,000 including taxes, HOA fees, and management expenses.
| Property Type | Location | Gross Yield | Typical Rent (High Season) | Purchase Price Range |
|---|---|---|---|---|
| 2BR Condo | Medano Beach | 8-10% | $3,000-$5,000/month | $500,000-$800,000 |
| 2BR Condo | El Tezal | 6-8% | $2,000-$3,500/month | $250,000-$400,000 |
| 4BR Villa | Pedregal | 10-12% | $10,000-$20,000/month | $1,000,000-$3,000,000 |
| 3BR House | Cabo Corridor | 7-9% | $4,000-$8,000/month | $600,000-$1,200,000 |
| 1BR Condo | Marina Area | 6-8% | $2,500-$4,000/month | $300,000-$500,000 |
| Luxury Villa | Oceanfront | 12-15% | $15,000-$30,000/month | $2,000,000-$10,000,000 |
What are the current average rental yields in Cabo San Lucas by property type and location?
Cabo San Lucas rental yields vary significantly based on property type and location, with short-term vacation rentals delivering the strongest returns as of September 2025.
Short-term vacation rentals generate gross annual yields of 6-10% for well-located properties, with premium oceanfront condos and villas achieving 12% or higher when professionally managed. Long-term rentals typically produce more modest gross yields of 4-6%.
Premium locations including Pedregal, Medano Beach, and the Marina area command the highest nightly and monthly rents with top occupancy rates, generating 6-10% gross yields. Emerging areas like El Tezal and the Cabo Corridor offer more affordable entry points with upward yield potential, often producing 6-8% returns. Inland or non-tourist areas deliver lower yields due to reduced demand from international visitors.
Luxury villas in oceanfront locations represent the highest-yielding segment, with some properties achieving 12-15% gross yields when positioned for premium short-term stays and group bookings.
How do rental yields change based on property size and surface area?
Larger properties with 3+ bedrooms and villas consistently achieve higher total rental income and often deliver stronger yields due to their appeal to group travelers and luxury bookings.
Condos with 1-2 bedrooms generate lower absolute income but can achieve similar yield percentages if located in high-demand areas. The key factor is optimization for the target market rather than size alone.
Larger properties scale yields effectively when occupancy is optimized for families, wedding parties, and corporate groups willing to pay premium rates. Small studios and one-bedroom units face capped nightly and weekly rates, which limits their yield potential regardless of location.
Surface area data is rarely reported directly in Cabo San Lucas market analysis, but properties over 2,000 square feet typically command higher per-night rates that translate to stronger yields when managed for luxury short-term rentals.
What is the typical total purchase price including all fees and closing costs?
The average property price in Cabo San Lucas reached $727,000 USD as of September 2025, with significant variation across property types and locations.
Entry-level condos range from $250,000-$350,000, while premium condos cost $500,000-$800,000. Single-family homes typically price between $500,000-$1,500,000, and luxury villas start at $1 million and can exceed $10 million for oceanfront properties.
Closing costs add 7-10% to the purchase price, including notary fees, acquisition taxes (3% of purchase price), agent commissions, fideicomiso trust setup ($2,000), appraisal costs, and HOA documentation. For a $500,000 condo, buyers should budget $35,000-$50,000 in additional closing costs.
These closing costs are significantly higher than typical U.S. real estate transactions due to Mexico's fideicomiso trust requirement for foreign buyers and higher transfer taxes.
What are the main property taxes, ongoing costs, and mortgage expenses owners should expect?
Property ownership in Cabo San Lucas involves several mandatory annual expenses that significantly impact net rental yields.
Annual property taxes range from 0.1-0.25% of assessed value, typically costing $400-$2,500 per year for properties valued between $500,000-$1,000,000. Fideicomiso trust fees for foreign owners cost $500-$1,500 annually and are required for properties within the restricted zone near the coast.
HOA fees vary dramatically from $200-$2,000 monthly depending on amenities and gated community features. Luxury developments with beach clubs, golf courses, and 24-hour security command the highest fees. Lodging taxes on short-term rentals add 2-5% of gross rental income to annual tax obligations.
Mortgage financing is limited for foreign buyers, requiring 20-40% down payments with interest rates of 7-12% and maximum terms of 20 years. Annual carrying costs for a typical home total $10,000-$30,000 including all fees, taxes, insurance, utilities, and management expenses.
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How do short-term rental yields compare with long-term rental yields?
Short-term vacation rentals significantly outperform long-term rentals in Cabo San Lucas, though they require more active management and higher operating expenses.
Short-term rentals through Airbnb and VRBO generate 8-15% gross yields for the best properties, with typical returns of 6-10%. However, these properties incur higher management fees of 20-25%, plus cleaning costs and seasonal income variability that can impact cash flow.
Long-term rentals produce lower gross yields of 4-6% but offer more stable income streams with fewer management hassles and lower maintenance costs. These properties attract retirees, snowbirds during winter months, local professionals, and long-term expats.
The yield premium for short-term rentals reflects the strong demand from U.S. and Canadian tourists who represent 60% of vacation rental guests, plus wedding and event groups that drive premium pricing during peak seasons.
Can you provide specific rental yield examples for different properties in various neighborhoods?
Real-world rental yield examples demonstrate the performance variation across Cabo San Lucas neighborhoods and property types as of September 2025.
A 2-bedroom condo in Medano Beach generating $4,000 monthly rent on a $500,000 purchase price achieves 9.6% gross yield. The same property type in El Tezal earning $2,500 monthly on a $300,000 investment delivers 10% gross yield, showing how emerging areas can outperform premium locations on a percentage basis.
A 4-bedroom villa in Pedregal commanding $15,000 monthly rent on a $1.5 million purchase achieves 12% gross yield when managed for luxury vacation stays. Properties in the Marina area and downtown locations benefit from the highest occupancy rates and nightly rate premiums.
The best-performing properties combine ocean views, luxury amenities, large group capacity, and professional vacation rental management to maximize both occupancy and daily rates throughout the year.
What are the main renter profiles for each property type and location?
Cabo San Lucas attracts distinct renter segments that drive demand across different property types and price points.
Short-term vacation rentals primarily serve U.S. and Canadian tourists (60%), destination wedding and event groups (20%), digital nomads and remote workers (15%), and Mexican nationals (5%). These guests seek proximity to beaches, nightlife, and tourist attractions.
Long-term rentals attract retirees and snowbirds during winter months, local professionals and families, and long-term expats seeking year-round residence. Premium properties in gated communities appeal to affluent travelers, executive getaways, and high-end destination weddings.
Emerging areas like El Tezal and the Cabo Corridor attract digital nomads, young couples, and second-home owners seeking value while maintaining access to Cabo's amenities and lifestyle.
What are the current vacancy rates broken down by property type and rental duration?
Vacancy rates in Cabo San Lucas vary significantly between short-term and long-term rental segments, with prime locations achieving the highest occupancy levels.
Short-term rentals in prime areas including Medano Beach, Marina, and Pedregal achieve high season occupancy rates of 46-73%. Overall Airbnb occupancy averages 36% annually, with many properties available for more days than actually booked, indicating optimization opportunities for property management.
Long-term rental vacancy rates are not widely published but remain lower for entry and mid-price units due to steady demand from local professionals, retirees, and expats. Premium long-term rentals face higher vacancy periods due to limited tenant pool.
Seasonal variation significantly impacts short-term rental occupancy, with peak demand during winter months (December-April) and lower occupancy during summer hurricane season (June-November).
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What is the complete breakdown of expenses for calculating gross and net yields?
Accurate yield calculations require comprehensive expense tracking beyond the initial purchase price and basic operating costs.
Gross yield calculation divides annual rental income by property value, while net yield subtracts all annual expenses from rental income before dividing by property value. The difference between gross and net yields typically ranges from 2-3 percentage points in Cabo San Lucas.
Annual expenses include property acquisition tax (3% at purchase), annual property taxes (0.1-0.25%), fideicomiso fees ($500-$1,500), HOA fees ($2,400-$24,000), utilities, professional management (20-30% of gross rent for short-term), maintenance and repairs, lodging taxes (2-5% of gross rent), mortgage payments if applicable, and insurance premiums.
Short-term rentals incur additional costs including cleaning between guests, higher utility usage, increased wear and tear, marketing expenses, and guest supplies that must be factored into net yield calculations.
What are the smartest investment choices in Cabo San Lucas based on today's market conditions?
September 2025 market conditions favor several specific investment strategies that maximize both yield potential and appreciation prospects.
El Tezal and Cabo Corridor properties offer the strongest value proposition with below-beachfront pricing but significant appreciation upside as infrastructure develops. Pre-sale and new developments provide discounted pricing with potential value growth during construction phases.
Golf and eco-community homes attract rising demand for amenities and sustainability features while generating attractive rental income. Well-located condos in established areas provide high yield potential with solid occupancy rates and lower management complexity.
Prime luxury villas require steep entry investments but deliver top yields when managed for premium short-term stays targeting affluent travelers and destination events. The key is professional management and marketing to international luxury travel markets.
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How have rental rates and yields changed compared to one year ago and five years ago?
Cabo San Lucas rental market performance has accelerated significantly over recent years, with 2024-2025 showing particularly strong growth across multiple metrics.
From 2024 to 2025, rental income increased 25% year-over-year in the best vacation rental segments, while property prices rose 9.91% for condos. Transaction volume jumped 25%, and luxury homes appreciated over 100% in top areas, indicating robust market momentum.
The five-year trend shows consistent long-term appreciation across most property segments, with especially strong performance in well-located, amenities-driven properties. Short-term rental growth has been particularly robust in popular tourist areas as international travel rebounded and remote work trends increased demand.
These appreciation rates significantly outpace inflation and most U.S. real estate markets, reflecting Cabo's emergence as a premier international vacation rental destination with limited developable land supply.
What are the rental yield forecasts for the next one, five, and ten years, and how does Cabo compare to similar destinations?
Cabo San Lucas rental yield forecasts remain optimistic through 2035 based on infrastructure development, tourism growth, and constrained land supply driving continued appreciation.
One-year forecasts predict continued strong yields of 6-10% in vacation rentals with annual property appreciation of 3-7%. Five-year prospects include ongoing infrastructure projects that should boost property values and yields, especially in inland and emerging areas currently under development.
Ten-year forecasts align with Mexico's vacation rental market projected to reach $7 billion by 2030, driven primarily by Los Cabos demand. Sustained returns are expected as the destination matures and international tourism continues expanding.
Regional comparisons show Cabo San Lucas yields and prices consistently outpacing Puerto Vallarta, Tulum, and Playa del Carmen due to luxury tourism demand and infrastructure quality. Puerto Vallarta condos average 2.2-3.5% net yields compared to Cabo's consistently higher performance across all property types.
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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.
Cabo San Lucas continues to demonstrate exceptional rental yield potential with gross returns of 6-12% depending on property type and management strategy.
The combination of strong tourist demand, limited developable land, and professional vacation rental management creates a compelling investment opportunity for both domestic and international buyers seeking consistent returns in Mexico's premier resort destination.
Sources
- The LatinVestor - Cabo San Lucas Property Analysis
- The LatinVestor - Cabo San Lucas Price Forecasts
- The LatinVestor - How to Buy a House in Cabo San Lucas
- Cabo O Group - Purchasing Property in Mexico
- Cabo Real Estate Services - Property Taxes
- Cabo Real Estate Services - Closing Costs
- Alen Fabjan - Annual Costs of Luxury Home Ownership in Cabo
- The LatinVestor - Complete List of Property Taxes in Mexico
- The LatinVestor - Mexico Real Estate Market Outlook
- The LatinVestor - Cabo San Lucas Real Estate Market