Yes you can
YES, YOU CAN OWN PROPERTY IN MEXICO!
Have you ever thought about retirement in México? …Owning real estate for retirement, snowbirding, or income generation is a very real and wonderful possibility here in Baja Sur at Land’s End, in a secure resort environment at the southernmost tip of Baja Peninsula.
The US Department of State estimates that out of the approximately four million Americans living overseas, between 600,000 and one million are in Baja and elsewhere in México – up from about 200,000 a decade ago.
What’s the secret? A simple family trust called a FIDEICOMISO that provides you with the same ownership rights you currently enjoy in your community.
In addition, the entry of additional American lenders and a number of American title companies into the local market is an indicator of ever-increasing investment security. From an investor’s perspective, because of the high demand in selected areas (especially along the coastline), Mexican real estate can be very attractive to hold as an appreciating asset, to generate rental income, or both. Each year prior to 2008, investors had seen an average appreciation of 18-30% and more.
In 2008, we began seeing a slight softening of the market, but this has only resulted in a ‘buyer’s delight’ as prices have steadied after years of constant growth. Savvy investors are seizing upon this opportunity to buy before prices begin to rise again with the expected stabilization of the US economy.
The economic woes in the USA have affected vacation traffic, and therefore to a small degree, investment traffic. However, those disappointed in the US market for investing their hard earned money are still bringing their investment dollars south of the border, where appreciation remains stable, pre-construction is still booming, hotel-vacation amenities are available in communities garnered to attract the northern tastes in housing, and it’s all within a few hours flight from all corners of the USA.
Put the old 99 year lease myth out of your mind. It has never been a ‘truth’. Though you will find commercial lease space in Centro and in new strip malls under construction, and even some ejido land for lease, those must be for 9 yrs 11 month increments or less. Anything over 10 years is not a legal transaction in Mexico. A commercial or residential lease is easily renewed in the 12th month, but you must enter these agreements understanding your limitations for ‘loss’, since anything you construct permanently on said leased land is no longer yours if the title owner opts to replace you. Hence, if you lease commercial space, build a restaurant/bar or sales shop, OR, should you expand an already existing building, you must consider each of those dollars as ‘lost’ at some point in the future. Of course, you can RESELL the structure, the business license, etc. if your lease allows, but you must disclose that the land it sits on is under lease by another owner. Always best to have a good representative, with working knowledge of the Mexican laws working on your behalf. Don’t attempt to navigate these waters alone.
As MLS paid members, brokers, agents, and associate representatives in Mexican Real Estate are held to a high degree of ethics and standards that eliminate any representation of leased, or ‘untitled’, and therefore ‘unsellable’ ejido properties. If there is no full ownership title, it cannot be represented by an MLS representative.
By engaging and trusting your Real Estate consultant, you can be assured that any property you are shown will come with a clean and clear title of ownership. Though your title must be held in a Mexican bank as a ‘foreign investment’, your deed of ownership is held in a bank trust very similar to a ‘Family Trust’ in the USA. It is ‘managed’ by the Mexican Bank as your fiduciary. In actuality, your bank trust, called a Fideicomiso if you are a foreigner (an Escritura if you are a dual citizen or Mexican National), includes not only your name as legal owner, but your pre-assigned beneficiaries’ names as well. Should anything happen to you within the next 50 years, your property is transferred to your assigned heirs.
This bank trust has an AVERAGE annual management fee of approximately $400 USD (the actual amount is found within your Fideicomiso), and an auto renewal of fiduciary management services every 50 years. Should something happen to you, your assigned beneficiaries will have the opportunity to build, manage, farm, divide, lease or even sell the property as they see fit. They also have the right and responsibility to renew the Bank Trust as applicable, and make the annual bank management payments as required. Any fees not paid will be deducted from proceeds at distribution of funds at closing of sale.
Because homes purchased here in Cabo are not usually ‘primary’ residences, you’ll find the financing rates a bit higher here, just as they are for secondary properties back home. Many future Baja residents are taking advantage of the lower rates on equity loans and second mortgages in order to take advantage of this year’s buyer’s market here in Cabo, but this year you’ll also find creative selling techniques being used to entice prospective buyers/investors, such as seller financing, or sellers paying closing costs or HOA fees for 6 months to a year to aid buyers in settling into their new surroundings. Considering just 6 years ago all purchases here were made in CASH, we’ve come a long way in a very short time towards becoming a truly viable and enviable marketplace, able to compete more ably with more prosperous countries.