Why Investors Are Looking to Short-Term Rentals in Emerging Markets

Could Emerging Markets Be the Next Hotspot for Short-Term Rental Investing?

As traditional real estate markets seem to tighten and cap rates compress, many investors are looking further afield. Emerging destinations like Mexico, Colombia, and the Dominican Republic can offer a powerful combination of rising tourism, affordable property prices, and investor-friendly regulations. In these markets, short-term rental investing is no longer fringe—it’s fast becoming a viable strategy for passive income, portfolio diversification, and long-term value growth.

1. Tourism Growth Fuels Rental Demand

Tourism is the lifeblood of short-term rental performance, and emerging markets are seeing significant, sustained growth:

• Mexico: International air arrivals increased 6–7% in early 2024, with ~13.8 million visitors by August, reflecting a steady rebound in global travel demand¹
• Colombia: Welcomed 6.7 million international tourists in 2024, a roughly 11% increase from 2023, generating US $9.5 billion in revenue and supporting over 1.3 million jobs²
• Dominican Republic: Exceeded 11 million visitors in 2024, marking a record year. 3 From January–April 2025, 4.37 million visitors arrived, 64% via Punta Cana Airport ⁴

These growth trends are often paired with strategic infrastructure investments—major airport expansions, highway improvements, and hospitality development—further bolstering tourism.

Why it matters:
High, and rising, tourist numbers create a reliable base of visitors. When tourist demand outpaces available rental supply, short-term rental properties gain pricing power and favorable utilization rates.

2. Lower Entry Costs, Higher Cash Flow Potential

Emerging markets offer a compelling financial profile:

• Acquisition costs: We believe well-located luxury properties in Tulum, Medellín, and Punta Cana often range from $500K–$1.5M—typically 40–60% lower than comparable villas in U.S. resort destinations.
• Average daily rates (ADRs): We believe premium short-term rentals in global tourist destinations can command $300 to $3,000+ per night depending on property features, location, and seasonality.
• Cash-on-cash returns: Professional management can drive consistent yields in the 10–13% range due to efficient operation and strong ADR.

Lower entry costs combined with strong rental rates can accelerate payback and yield scalability.

3. Professional Management as a Differentiator

Historically, short-term rentals in emerging markets have operated like side gigs—managed by part-time local hosts or small owners. This often leads to inconsistent guest experiences and unoptimized revenue.

• Professional operators, by contrast, provide institutional-grade execution:
• Dynamic pricing and demand forecasting
• Thoughtful staging and marketing for premium positioning
• Full-service local management: check-ins, cleaning, 24/7 support

Why it matters:
In fragmented markets, professional management isn’t just beneficial, we believe, it’s essential for realizing full income potential and building scalable, high-performing real estate portfolios.

4. Legal Frameworks Favoring Foreign Ownership

It is our understanding that these markets offer transparent legal structures that enable direct property ownership by foreign investors:

• Dominican Republic: 100% foreign ownership allowed, unrestricted profit repatriation, and up to 15 years of property tax exemption in qualifying zones5
• Mexico: Foreigners can purchase property in non-restricted zones outright.
• For properties within the “restricted zone” (within 50 km of the coast or 100 km of borders), the fideicomiso (bank trust) allows complete beneficial ownership. The Mexican bank holds legal title; the foreign buyer retains all normal rights, including sale, lease, and inheritance, for a 50-year renewable term6
• Colombia: Foreign nationals can purchase and hold real estate just as locals do—no residency or visa required, and no restrictions on ownership type⁷
• Mexico: Foreigners can purchase property in non-restricted zones outright.

For properties within the “restricted zone” (within 50 km of the coast or 100 km of borders), the fideicomiso (bank trust) allows complete beneficial ownership. The Mexican bank holds legal title; the foreign buyer retains all normal rights, including sale, lease, and inheritance, for a 50-year renewable term⁶

Colombia: Foreign nationals can purchase and hold real estate just as locals do—no residency or visa required, and no restrictions on ownership type⁷

Tax and registration requirements exist, but all operate within clear and functional compliance frameworks.

Why it matters:
Simple, direct ownership with full legal clarity reduces friction, making investing easier, safer, and more appealing than in many other international markets.

5. Digital Nomads & Long-Stay Travel Expand Booking Stability

The rise of remote work and flexible travel is fueling demand for longer stays:

• Guests stay for weeks or months
• Booking volume shifts toward private homes with amenities and workspaces
• Reduced turnover improves unit profitability and owner revenue stability

Why it matters:
Extended stays often improve margins, reduce seasonal swings, and strengthen rental income predictability, which is a strategic advantage for investors.

6. Limited Supply of Premium Rental Stock

While demand continues to grow, supply of high-end short-term rental properties remains limited:

• Zoning and permit constraints limit new developments
• Rising local construction costs are slowing new builds
• Well-positioned villas and condos are increasingly rare

Why it matters:
When demand outpaces supply, premium assets gain pricing leverage and appreciation potential over time.

Final Thoughts

Emerging markets such as Mexico, Colombia, and the Dominican Republic are stepping into the spotlight—offering rising tourism, accessible pricing, legal clarity, and rental demand tailwinds. For accredited investors, these markets can deliver a strategic pathway to global diversification, passive income, and asset appreciation, all without the scale or capital barriers of U.S. alternatives.

About Bona Vita Properties

Bona Vita Properties is a turnkey short-term rental investment platform dedicated to accredited investors. We work to source high-potential properties, manage them to global hospitality standards, and deliver ongoing performance. Our goal: offer you consistent income and growth without operational complexity or local oversight.

Get Access to Our Offerings Here

Sources:

1. Mexico international arrivals H1 2024: +6.2–7.0% YoY (Jan–Aug 2024) https://tourismanalytics.com/latestnews.html 

2. Colombia 6.7 million tourists + US $9.5 billion revenue (2024) https://www.riotimesonline.com/tourism-rises-as-colombias-second-largest-economic-engine/ 

3. Dominican Republic 11 million visitors (25 9.rkdm024); 4.37 million arrivals Jan–Apr 2025 (64% via Punta Cana) https://www.travelweek.ca/news/destinations/dominican-republic-tops-11-million-visitors-in-2024 

4. Mexico foreign ownership https://www.globalpropertyguide.com/latin-america/mexico/buying-guide 

5. Colombia foreigner real estate ownership right https://thelatinvestor.com/blogs/news/colombia-real-estate-foreigner