By Joe Taylor
When clients come to me looking to buy in Cabo San Lucas, one of the first questions I ask is: What’s your primary goal? Are you buying a getaway for yourself and your family, or are you focused on generating income? Understanding the difference between a second home and an investment property is the key to making a smart, strategic purchase in this unique market.
Cabo offers opportunities for both. Some buyers want a personal retreat near the beach, while others are looking to tap into the thriving short-term rental market. And many want a bit of both. Here’s what sets them apart, and how I help buyers decide which approach fits best.
Key Takeaways
- Second homes are for personal use, while investment properties are primarily income-generating.
- Financing, taxes, and management needs vary depending on your purchase type.
- In Cabo, many buyers blend lifestyle and investment goals, but clarity up front is key.
- Understanding your usage plan helps guide location, property type, and ownership structure.
What Is a Second Home?
A second home is a property you plan to use primarily for your own enjoyment. It’s not your primary residence, but it’s where you spend holidays, long weekends, or seasonal getaways. Many buyers in Cabo fall into this category—they want a home away from home near the water, golf courses, or downtown, but don’t plan to rent it out heavily. Second homes are:
- Typically used by you and your family throughout the year.
- Sometimes rented short-term when not in use, but that’s not the primary purpose.
- Often located in lifestyle-rich areas like Pedregal, Cabo Bello, or the Marina District.
If you're looking for a place where you can unwind without worrying about rental turnover or guest management, this may be the right path for you.
What Is an Investment Property?
An investment property, on the other hand, is purchased with the goal of earning income, either through short-term vacation rentals or long-term tenants. These properties are run like a business, with a focus on occupancy, marketing, and returns. Investment properties are:
- Not intended for regular personal use.
- Typically rented out consistently to generate cash flow.
- Location, rental demand, and amenity-focused with ROI in mind.
In Cabo, high-performing investment properties are often found in areas with strong tourist demand, like Medano Beach, Cabo Corridor, or resorts with built-in property management services.
Key Differences to Consider
Primary Use
A second home is typically purchased for personal enjoyment. You may use it throughout the year for holidays, long weekends, or seasonal stays. An investment property, by contrast, is purchased primarily to generate rental income. While you can occasionally use it yourself, its main function is business-driven.
Time Spent at the Property
Second homes are meant to be enjoyed by the owner, so you’ll likely spend several weeks (or even months) there each year. Investment properties are usually not occupied by the owner and may only be visited occasionally, if at all, depending on how often they are rented.
Rental Frequency
Most second homes are rented out only when they’re not in use, and often just seasonally or for special occasions. Investment properties are typically listed full-time on rental platforms or leased long-term, with the goal of maximizing occupancy and revenue.
Financing Terms
Lenders often offer more favorable terms for second homes than for investment properties, especially if you’re financing through a U.S. institution. Investment properties may require different loan structures or higher interest rates due to the added risk of rental activity.
Management Needs
A second home may require minimal oversight, especially if it’s used primarily by you and your family. You can manage it yourself or hire someone locally for upkeep. Investment properties, however, often need full-service property management, including guest coordination, maintenance, and turnover, particularly if you plan to operate short-term rentals.
Tax Considerations
Owning a second home may involve fewer tax complexities if you're not earning income from it. But once you begin renting it out, your obligations shift. Investment properties, especially those generating income, are subject to both Mexican tax rules and foreign reporting requirements in your home country.
In Cabo, both second homes and investment properties involve navigating Mexico’s foreign ownership laws. Whether you purchase through a fideicomiso (bank trust) or a Mexican corporation depends on your goals, and I’ll help you make the right choice for your situation.
Blending Personal Use and Investment: Can You Do Both?
Yes, many international buyers in Cabo want a hybrid approach. They plan to enjoy the home several times per year and rent it out when they’re not using it. This model works well with proper planning and the right property.
- Choose a location that works for both vacation appeal and rental demand.
- Set realistic expectations around income and availability.
- Use a local property manager to handle bookings, maintenance, and guest services.
This flexible model is especially popular for buyers looking in gated communities with rental-friendly rules, resort amenities, and security.
FAQs
Can I use an investment property as a vacation home?
Yes, but you’ll need to balance personal use with your income goals. Blocking off too many personal weeks can reduce ROI.
Are second homes taxed differently in Mexico?
If you're not earning rental income, your tax obligations may be simpler. However, local property taxes (predial) and fees still apply, and U.S. citizens must report international holdings.
What’s the best location in Cabo for a second home and an investment?
For second homes: Palmilla, Pedregal, and the Pacific side offer privacy and luxury.
For investment: The Marina, Medano Beach, and El Tezal have high rental demand and accessibility.
For investment: The Marina, Medano Beach, and El Tezal have high rental demand and accessibility.
Contact Me Today
Whether you’re buying a second home to escape the winter or an investment property to generate income, Cabo San Lucas offers world-class real estate with long-term value. I’ll help you make the right choice based on your goals, and walk you through the process with clarity and local expertise.
Reach out to me, Joe Taylor, and let’s talk about the difference between a second home and an investment property, and which one is right for you in Cabo.
