Pre-Construction Real Estate in Cabo

 

 

As of 2025, the pre-construction market in Los Cabos has shifted dramatically compared to the post-COVID boom years. Back in 2020, demand far outpaced supply, making pre-construction a popular and lucrative option. This rush attracted both eager buyers and a flood of new developers. Fast forward to today, and the landscape has changed—there is now more supply than demand. Despite this, developers continue to launch ground-up projects, making it essential for buyers to fully understand the risks and rewards before moving forward.

 

In many cases, it may actually be safer, smarter, and more cost-effective to purchase a resale property instead of a presale. For example, recent MLS data from the Tezal area in Cabo San Lucas shows that the average 2-bedroom resale condo under $500,000 USD is listed for around $353,000 USD, while the average pre-construction unit is listed at $358,000 USD. That’s a negative spread. While every project is different, and there are exceptions, this trend suggests that a built, finished condo may offer better value.

 

Buying pre-construction is ultimately about balancing risk and reward. Since the property isn’t complete, you should be compensated in the form of price appreciation, newer design, or a better location. However, the price gap—or delta—between pre-construction and resale inventory has tightened significantly. With the current oversupply of resale inventory, it’s often possible to purchase a completed unit for the same price as one still under construction.

 

Work with a vetted real estate agent who knows the market and can help you evaluate your options. Each project has its own dynamics, and an experienced agent can guide you through what’s real and what’s just hype.

 

 

Payment structures in Mexico vary widely in pre-construction deals. Typically, you’ll begin with a refundable deposit for 2–3 weeks, followed by a first payment of around 35%. Many developers use your funds to finance construction, so progress payments are often required. I highly recommend negotiating milestone-based payments—payments tied to construction phases rather than arbitrary calendar dates. This ensures that your money is tied to real progress and not promises.  I have heard many people argue which payment structure is better.  The reality is that each project is different and I have seen some payment structures work better than others.

 

For example, I’ve seen buyers and agents claim that a 35% down and 65% at completion payment structure is ideal. While I understand the logic, I’ve also seen this approach backfire. In one case, no one wanted to release the final 65% until their unit was fully completed—but the developer needed those funds to finish the project. While the development was eventually delivered, I believe all the buyers could have received their condos 6 to 12 months earlier if payments had been made progressively during construction. The point is: payment structure is just one part of the puzzle and shouldn’t be the sole factor when judging the strength or reputation of a developer.

 

 

Another important factor to consider is the exchange rate between the US Dollar and the Mexican Peso. In markets like Los Cabos, foreign buyers typically pay in US Dollars, but developers cover most of their costs—construction, labor, materials, permits—in Pesos. If the Dollar weakens significantly, it can jeopardize a project. For example, if a development was planned when the exchange rate was 20:1 and it drops to 16:1, the developer's projected margins can quickly vanish.  This can also cause the developer to cut corners, many times, in areas that you can't see. This financial strain is compounded by rising land values, which push up starting price points. These risks should be evaluated before making a purchase, not after.

 

 

In 2025, we’re seeing more delays due to municipal processes, including the creation of condo regimes (which provide formal ownership and title) and connections with CFE (electricity) and municipal water. These delays are another good reason to consider resale inventory, where these challenges have already been resolved.

 

Also, be cautious about buying the first units delivered in a new development. These early owners are often “guinea pigs,” dealing with incomplete HOAs, ongoing construction, and a developer more focused on finishing the project than managing the property. Always get a third-party inspection before making your final payment so you have leverage to correct any issues.

 

If you are buying a new construction property in a ground up development right now, I would recommend planning on a 6 month grace period in this market.  It is rare to see projects delivered on time.  Investors who are not planning on living in the unit tend not to care as much, but in the case you plan on living in the unit, it would be wise to plan on delays rather than be disappointed if and when delays do occur.  There is a large demand for construction right now.  Cabo is very isolated from the rest of mainland Mexico, so you need to factor that in for materials, labor and timelines.

 

 

Despite a strong economy over the past few years—the S&P 500 rose 52% from the two year stretch from 2023 to 2024—we’ve still seen pre-construction projects delayed, halted, or abandoned entirely. Competition has increased, risk is higher, and market conditions are not as forgiving as they once were. In a downturn, the worst place to be is in a ground-up pre-construction project.

 

There’s a big difference between buying into a well-progressed development with proven sales and buying into a concept that’s just land, renderings, and promises. Your agent should check the sales velocity of any project you’re considering. A strong project should show steady and verifiable sales, not just clever marketing.

 

 

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If you'd like more information on the pre-construction market in Cabo, reach out to Fletcher Wheaton at

fletcher@remexico.com or  624.229.5228.

 

We also have a 40-point checklist for vetting real estate developers in Mexico. I’ve received some shocking phone calls from buyers who were misled or disappointed—and I wouldn’t wish that experience on anyone. Reach out if you’d like help properly vetting any pre-construction project before you buy.