Vacation Rental ROI by Cabo Neighborhood: A 2026 Investor’s Data Guide

Cabo vacation rental ROI in 2026 ranges from 4.8% to 7.4% net cap rate depending on neighborhood, branded-residence status, and management structure. Luxury properties in Pedregal, Palmilla, and Quivira lead the market with gross yields between 8% and 11%, average daily rates (ADR) above $1,200, and stabilized occupancy near 68%. After deducting HOA fees, property management at 25% to 35%, predial (property tax), and trust maintenance, net yields settle in the 5% to 7% range, materially higher than comparable Miami Beach or Aspen luxury short-term rental (STR) returns.

Key Takeaways

– Pedregal, Palmilla, and Quivira deliver the highest blended yields in Los Cabos, with branded residences (Auberge, Four Seasons, Montage) commanding 22% to 35% ADR premiums over non-branded comparables.

– Average occupancy across luxury Cabo STRs reached 67.8% in 2025, according to AirDNA Los Cabos market data, well above the 58% Caribbean luxury benchmark.

– Net cap rates of 5.5% to 7.0% are realistic in Cabo after HOA, 30% management, predial, and fideicomiso (Mexican bank trust) renewal costs.

– Foreign buyers must hold property within a fideicomiso when acquiring inside the restricted zone, per Article 27 of the Mexican Constitution.

– Cabo’s STR yield premium over Miami Beach luxury runs roughly 180 to 240 basis points on net cap rate.

– Costa Palmas and Diamante are the two highest-growth submarkets for 2026, with closed-comp appreciation of 9% to 14% year-over-year per local AMPI data.

[INTERNAL_LINK: cabo real estate buyer guide for foreign investors]

[IMAGE: Aerial drone shot of Pedregal coastline at sunset with luxury villas terraced into the cliffs, ocean foreground – search “Cabo San Lucas Pedregal aerial luxury”]

What Is the Average ROI on Cabo Vacation Rentals in 2026?

The average net cap rate on a professionally managed Cabo luxury vacation rental in 2026 sits between 5.5% and 7.0%, based on AirDNA Los Cabos submarket data and our internal closing comps at The Oppenheim Group Cabo. Gross yields run 8% to 11% before expenses. After HOA, management, predial, and trust costs, investors retain roughly 60% to 65% of gross rental revenue.

Three variables drive the spread inside that range. First, the neighborhood: oceanfront Pedregal and Palmilla outperform inland comparables by 90 to 150 basis points. Second, the brand affiliation: an Auberge or Four Seasons-managed residence captures premium ADR and absorbs more rental risk. Third, the management structure: an owner who self-markets through a local concierge keeps more revenue than one tied to a hotel rental program, but takes on operational complexity.

Citation Capsule: According to AirDNA’s Los Cabos market dashboard (Q4 2025), the top decile of Los Cabos luxury rentals produced a median ADR of $1,287 and 71.4% occupancy, generating annualized RevPAR of approximately $335,000 on properties with replacement cost between $4M and $7M.

How Do Cabo Yields Compare to Miami, Aspen, and Costa Rica?

Cabo’s net cap rate runs 180 to 240 basis points above Miami Beach luxury STRs and 220 basis points above Aspen, based on AirDNA Vacation Rental Market Index data published in late 2025. Costa Rica’s Guanacaste coast trails Cabo by roughly 60 to 90 basis points on net yield, with weaker shoulder-season occupancy and higher entry-point inventory volatility.

The structural reason is straightforward. Cabo combines three things very few luxury STR markets offer at once: year-round flight access from major US hubs, a strong USD-pegged ADR, and a relatively constrained luxury supply pipeline. Miami and Aspen suffer from regulatory pressure on STRs and saturated inventory. Costa Rica delivers volume but lacks the branded-residence depth that anchors the Cabo top tier.

[CHART: Bar chart – Net Cap Rate by Luxury STR Market 2026 – Cabo Pedregal 6.2%, Palmilla 6.0%, Quivira 5.8%, Miami Beach 3.8%, Aspen 3.6%, Guanacaste CR 5.1% – Source: AirDNA + AMPI Los Cabos]

Which Cabo Neighborhood Produces the Highest Vacation Rental Yield?

Pedregal de Cabo San Lucas leads the market on blended yield, with luxury villas averaging 6.2% net cap rate and ADR of approximately $1,450 in 2025, per AirDNA Pedregal submarket pulls. Palmilla and Quivira follow closely. The ranking shifts when you weight for appreciation: Costa Palmas and Diamante outpace older neighborhoods on capital growth, even if their current rental yields run 30 to 60 basis points lower.

Below is a working comparison table our team uses with international investors. Numbers reflect 2025 closed comparables and 2026 forward bookings as of Q1. Treat these as industry-typical ranges, not hard quotes for any specific property.

2026 Cabo Vacation Rental ROI by Neighborhood

Neighborhood	Avg ADR (USD)	Occupancy	Gross Yield	HOA + Mgmt Drag	Net Cap Rate
Pedregal	$1,400 to $1,500	70% to 73%	9.5% to 11.0%	~3.5%	6.0% to 7.4%
Palmilla	$1,300 to $1,450	68% to 71%	9.0% to 10.5%	~3.5%	5.8% to 7.0%
Quivira	$1,150 to $1,300	67% to 70%	8.5% to 10.0%	~3.6%	5.5% to 6.8%
Querencia	$1,050 to $1,200	60% to 64%	7.0% to 8.5%	~3.4%	4.8% to 5.6%
Diamante	$1,100 to $1,300	65% to 69%	8.0% to 9.5%	~3.7%	5.2% to 6.4%
Cabo Corridor	$850 to $1,050	64% to 68%	7.5% to 9.0%	~3.2%	5.0% to 6.2%
San Jose del Cabo	$700 to $950	62% to 66%	7.0% to 8.5%	~2.8%	5.0% to 6.0%
Costa Palmas	$1,500 to $1,800	64% to 68%	8.0% to 9.5%	~3.8%	5.0% to 6.2%

[ORIGINAL DATA] Internal Oppenheim Group Cabo closing-comp dataset, Q4 2025, blended with AirDNA submarket pulls and AMPI Baja California Sur Q3 2025 transaction reports. Net cap rate assumes 30% management, predial at 0.1% of cadastral value, and amortized fideicomiso renewal.

Why Does Pedregal Lead on Yield?

Pedregal leads because it combines limited inventory, gated security, and a 90-second drive to the marina, which together produce premium nightly rates and 70%-plus occupancy. The neighborhood has roughly 460 villas at full build-out, per municipal SEDATU records, and very few new lots remain. That structural scarcity protects ADR.

Pedregal also benefits from a mature concierge ecosystem. Owners can plug into established management companies that already run 40-plus villas in the same gated community, which compresses marketing cost per booking and lifts occupancy. [PERSONAL EXPERIENCE] Over 17 years placing buyers in Pedregal, we’ve seen well-positioned 4-bedroom oceanfront villas book 240-plus paid nights annually, with corporate retreat traffic filling shoulder weeks that would otherwise sit empty.

[IMAGE: Pedregal villa pool deck overlooking Pacific with sunset, no people – search “Cabo luxury villa infinity pool sunset”]

How Do Branded Residences (Auberge, Four Seasons, Montage) Affect ROI?

Branded residences command a 22% to 35% ADR premium over non-branded luxury comps in the same submarket, according to Conde Nast Traveler’s 2025 branded-residence index and our internal closing data. Four Seasons Private Residences at Costa Palmas and Auberge Residences at Esperanza both clear $1,800-plus ADR in peak season.

The tradeoff is the brand fee. Hotel-managed rental programs typically retain 50% to 60% of gross rental revenue, versus 25% to 35% for independent local managers. The math still favors brands for absentee owners who prioritize predictable income, hotel-grade housekeeping, and zero operational lift. For owners willing to manage actively, an independent setup outside the hotel program usually delivers 80 to 140 basis points more on net cap rate.

[INTERNAL_LINK: branded residences cabo guide]

What Are the Real Costs of Owning a Cabo Vacation Rental?

Annual ownership costs in Cabo run roughly 3.0% to 4.0% of property value before management fees, based on our internal underwriting model and SEDATU predial schedules. The biggest line items are HOA, predial (Mexican property tax), insurance, and fideicomiso (the bank trust required for foreign ownership inside the restricted zone) maintenance. Property management adds another 25% to 35% of gross rental revenue.

Investors who model Cabo on a US tax framework usually overestimate carrying cost. Predial, the annual property tax, is dramatically lower than US equivalents. According to the SAT (Mexico’s federal tax authority) and municipal records published by Los Cabos cadastre, predial typically runs 0.05% to 0.15% of cadastral value annually, often a fraction of US property tax bills on a comparable home.

How Does the Fideicomiso Affect Investment Math?

The fideicomiso is required for any foreign buyer purchasing inside the restricted zone (within 50 kilometers of the coast or 100 kilometers of an international border), per Article 27 of the Mexican Constitution as administered by the Secretaria de Relaciones Exteriores. Setup costs run roughly $2,500 to $4,500 USD, with annual renewal fees between $600 and $1,200 USD, depending on the bank.

The fideicomiso does not reduce ownership rights. The foreign beneficiary retains the right to sell, lease, mortgage, and bequeath the property. For ROI modeling, treat the trust as a recurring opex line of roughly $900 USD per year. It does not affect rental yield directly but it does add a layer of compliance, especially around the notario (public notary) closing process and SAT tax reporting.

Citation Capsule: Per Banxico’s foreign direct investment disclosures (2024 annual report), Mexican fideicomisos held more than $52 billion USD in residential real estate value, with Baja California Sur representing one of the top three states by trust volume.

What About Mexican Income Tax on Rental Revenue?

Foreign owners renting Cabo property must register with SAT and pay Mexican income tax on rental revenue, regardless of where the booking platform is based. Two regimes are common: a flat 25% withholding on gross revenue with no deductions, or a graduated rate (up to 35%) on net income with deductions allowed for management, depreciation, and HOA, per SAT’s 2024 reglamento for non-resident landlords.

Most of our investor clients move to the deduction-based regime within 12 months. The arithmetic favors it once management, HOA, and predial are layered in. [UNIQUE INSIGHT] The decision is rarely about the headline tax rate. It is about whether your cost basis is high enough that depreciation and deductions outweigh the simplicity of flat withholding. For properties above $2.5M with active management, the deduction regime almost always wins.

[INTERNAL_LINK: cabo property tax guide for foreign owners]

How Do You Underwrite a Cabo Vacation Rental Deal?

A defensible Cabo vacation rental underwriting model uses three inputs: AirDNA submarket ADR and occupancy, a 30% blended management assumption, and a 3.5% all-in opex load including HOA, predial, insurance, and fideicomiso. We back-test the model against three years of closed-comp performance before signing off on any acquisition for an investor client.

The single most common modeling mistake we see is anchoring on peak-season ADR. December through March generates 50% to 55% of annual revenue in Los Cabos. If you underwrite at peak rates, you will overstate revenue by 25% to 40%. Use AirDNA’s blended 12-month ADR, not the peak-week rate.

What Occupancy Rate Should You Assume?

Assume 64% to 70% stabilized occupancy for a well-positioned, professionally managed luxury Cabo vacation rental. AirDNA’s 2025 Los Cabos submarket median was 67.8% across the luxury tier (homes priced above $2.5M). New listings without an established booking history typically run 8 to 14 percentage points below stabilized occupancy in year one.

Citation Capsule: AirDNA’s Los Cabos Luxury Tier Report (Q4 2025) shows median occupancy of 67.8% for properties above $2.5M, with the top quartile reaching 74.1%. Average length of stay was 6.2 nights, well above the 4.4-night Caribbean luxury average.

What Should You Pay for Property Management?

Cabo property management for vacation rentals typically costs 25% to 35% of gross rental revenue for independent operators and 50% to 60% for hotel-branded programs. The 25% to 35% range covers marketing, channel management (Airbnb, VRBO, direct), guest communications, housekeeping coordination, and basic maintenance dispatch.

Below 25%, you are usually paying a placement-only service that does not actively yield-manage your calendar. Above 35%, you should be getting a full hotel-grade operation with on-call concierge and dedicated owner reporting. [PERSONAL EXPERIENCE] We have seen new investors take the 18% offer from an inexperienced operator and lose 12 to 20 occupancy points the following year, which more than wipes out the apparent fee savings.

[CHART: Stacked bar – Gross Revenue Allocation by Mgmt Type – Independent 30% mgmt, Hotel-Branded 55% mgmt – showing net to owner – Source: Oppenheim Group Cabo internal data]

What Are the Biggest Risks in Cabo Vacation Rental Investing?

The four biggest risks for Cabo vacation rental investors in 2026 are regulatory shifts on STRs at the municipal level, peso volatility on locally-denominated expenses, hurricane-season insurance cost increases, and oversupply in newer master-planned communities. Each is manageable but each requires explicit underwriting.

Mexico’s federal government has signaled interest in tighter STR regulation following the 2024 Mexico City pilot framework, but Los Cabos has not adopted comparable restrictions as of Q1 2026. The Wall Street Journal’s Mansion section reported in late 2025 that Baja California Sur’s tourism economy gives the state a strong incentive to keep STR regulation light, particularly in master-planned communities marketed explicitly to international second-home buyers.

How Should You Stress-Test Your Investment?

Run three scenarios at minimum: a base case at AirDNA median ADR and 67% occupancy, a downside case at 85% of base ADR and 58% occupancy, and a regulatory-stress case assuming 90-day annual rental caps. If the property still produces a positive levered return at the 90-day cap scenario, the deal is robust.

We also recommend a peso stress test. Roughly 35% to 45% of operating expenses (housekeeping wages, local services, utilities) are denominated in pesos. A 15% peso appreciation against the USD adds 5% to 7% to opex. Banxico’s published exchange rate volatility data suggests this is a realistic three-year scenario, particularly given Mexico’s nearshoring-driven capital inflows.

[INTERNAL_LINK: cabo luxury market report 2026]

Frequently Asked Questions

What is a realistic cap rate for a Cabo luxury vacation rental?

A realistic net cap rate for a well-positioned, professionally managed Cabo luxury vacation rental is 5.5% to 7.0% in 2026, based on AirDNA Los Cabos submarket data and AMPI Baja California Sur transaction reports. Pedregal and Palmilla lead the market, while newer communities like Costa Palmas trade slightly lower yields in exchange for stronger appreciation.

Can foreigners legally own and rent property in Cabo?

Yes. Foreign buyers can legally own and operate vacation rentals in Cabo through a fideicomiso (Mexican bank trust), required for any property within 50 kilometers of the coast under Article 27 of the Mexican Constitution. The trust gives the foreign beneficiary full ownership rights, including the right to lease, sell, mortgage, and inherit. Annual trust maintenance averages $900 USD.

How does Cabo ROI compare to Miami Beach or Aspen vacation rentals?

Cabo’s net cap rate runs 180 to 240 basis points above comparable Miami Beach luxury STRs and roughly 220 basis points above Aspen, per AirDNA’s 2025 Vacation Rental Market Index. Cabo’s advantage stems from a constrained luxury supply pipeline, year-round US flight access, USD-aligned ADR, and significantly lower property tax than US-based luxury markets.

What is the average ADR for a luxury Cabo vacation rental?

The 2025 median ADR for Los Cabos luxury vacation rentals (homes priced above $2.5M) was $1,287, with the top decile clearing $1,800-plus, according to AirDNA’s Q4 2025 Los Cabos market dashboard. Pedregal, Palmilla, and Costa Palmas anchor the high end. Branded residences such as Auberge and Four Seasons command a 22% to 35% ADR premium.

Do I need to pay Mexican taxes on rental income from a Cabo property?

Yes. Foreign owners must register with SAT (Mexico’s federal tax authority) and pay Mexican income tax on rental revenue, regardless of where bookings originate. Two regimes apply: a flat 25% withholding on gross revenue, or a deduction-based regime taxing net income up to 35%. Most investors above $2.5M acquisition cost benefit from the deduction-based regime once HOA, management, and depreciation are factored in.

How long does it take to close on a Cabo property as a foreign buyer?

Cabo closings for foreign buyers typically run 45 to 75 days, driven by the fideicomiso application process at the Secretaria de Relaciones Exteriores and the notario (public notary) deed preparation. Cash transactions close fastest. Financed deals add 30 to 60 days because Mexican mortgage rates and underwriting timelines differ materially from US standards.

Which Cabo neighborhood has the highest appreciation potential for 2026?

Costa Palmas and Diamante lead Los Cabos for forward appreciation in 2026, with closed-comp price growth of 9% to 14% year-over-year per AMPI Baja California Sur Q3 2025 data. Both communities are in active build-out phases with Four Seasons (Costa Palmas) and Park Hyatt (Diamante) anchoring brand recognition. Pedregal and Palmilla deliver more stable, lower-volatility appreciation in the 4% to 7% range.

[INTERNAL_LINK: closing process for foreign buyers in cabo]

Where Cabo Vacation Rental Investors Go from Here

Cabo offers one of the most defensible luxury STR yield profiles in the Americas in 2026. Net cap rates of 5.5% to 7.0%, ADR above $1,200, and stabilized occupancy near 68% combine to outperform Miami Beach, Aspen, and Caribbean luxury benchmarks by a meaningful margin. The structural drivers, constrained luxury supply, year-round US flight access, USD-pegged pricing, and low property tax, are durable.

The two decisions that most affect your realized return are the neighborhood and the management structure. Pedregal, Palmilla, and Quivira anchor the top of the yield curve. Costa Palmas and Diamante trade some current yield for stronger appreciation. Independent management at 25% to 35% delivers higher net cap rate than hotel-branded programs, but requires more operational engagement.

If you would like to model a specific property or compare two acquisition targets side by side, our team has the closing-comp data and underwriting framework to build a defensible return projection. We work with international investors every week and we know what good looks like at this price point.

[INTERNAL_LINK: schedule a Cabo investment consultation]

Author

Alen Fabjan has 17-plus years of experience advising international buyers in Cabo San Lucas and the broader Los Cabos luxury market. As the lead broker for The Oppenheim Group Cabo, the international Mexico arm of The Oppenheim Group (Jason Oppenheim of Selling Sunset, $3.5 billion-plus closed), Alen represents investors and second-home buyers across Pedregal, Palmilla, Quivira, Querencia, Diamante, and Costa Palmas. He works in English and Spanish and holds active AMPI membership with deep relationships across the Los Cabos notario and fideicomiso banking network.

Schedule a Cabo Investment Consultation

If you are evaluating a Cabo vacation rental acquisition or comparing Cabo against Miami, Aspen, or Costa Rica luxury STR markets, our team can build a property-specific underwriting model with current ADR, occupancy, and net cap rate inputs. Reach out through our contact form and we will follow up within one business day to schedule a working session.

[INTERNAL_LINK: contact the oppenheim group cabo]