| It is common knowledge that many Americans | | | | communities, condominiums and golf courses and |
| are finding that investment property in Mexico | | | | are selling directly to the retirees and to those |
| may provide an interesting option. Is buying | | | | wishing to hold the property as part of their real |
| property for sale in Mexico still a good way to | | | | estate investment portfolio. |
| reposition equity from appreciated domestic | | | | On the negative side, there are a couple of |
| property? | | | | factors to keep in mind: |
| Trends show older people and retirees are looking | | | | First, if you are planning on using investment |
| for inexpensive places to live and enjoy the rest | | | | property in Mexico as a repositioning strategy, |
| of their lives and are finding places like Mexico | | | | remember you cannot use the popular 1031 |
| very attractive. Should you be the one who sells | | | | exchange approach because the rules limit |
| or rents this property to Americans? Is this a | | | | replacement properties to domestic replacements |
| good way to put some of your appreciation from | | | | (i.e. land in the United States). |
| your property in the United States to work? We | | | | Also, many land-seekers are encountering a |
| will explore some factors for you to consider: | | | | variety of obstacles with the investment itself, |
| Overall, the appeal of owning investment property | | | | including skyrocketing real estate prices and |
| in Mexico is evidenced across the country. For | | | | confusing laws. Under the Mexican constitution, |
| example: | | | | foreigners are allowed to own land outright |
| In the last couple of years there has been a land | | | | anywhere except within 50 kilometers (31 miles) |
| rush in the Riviera Maya, a small idyllic slice of | | | | of the coastline or 100 kilometers from a national |
| Mexico's Yucatan peninsula. It is this combination | | | | border. Within the restricted zone, they can hold |
| of beautiful beaches (or other geographical | | | | the property in a trust, or fideicomiso. While they |
| features) with inexpensive cost of living this | | | | don't officially own it, they retain the right to use |
| bringing Americans by the hundreds to this place | | | | it and sell it for a renewable 50-year period. For |
| and many others. | | | | example, in Tulum, several miles of virgin |
| From the long-time artists' enclave of San Miguel | | | | beachfront are claimed by an ejido--a form of |
| de Allende in the hills of central Mexico to | | | | communal ownership that's fairly common in |
| fast-growing sports-fishing and beach communities | | | | Mexico. Under current law, ejidos can be |
| of the Baja peninsula to Puerto Vallarta on the | | | | "privatized," subdivided and sold, subject to |
| Pacific coast, there is plenty to lure a sun-seeking | | | | unanimous approval by ejido members and |
| retiree. | | | | time-consuming government approvals. Until that |
| No place has boomed in recent years like the | | | | happens, foreigners are blocked from buying |
| state of Quintana Roo in Mexico's far southeast | | | | pieces of it. |
| corner. Anchored by the high-rise resort | | | | Finally, if you're interested in investment property |
| destination Cancun at one end and cosmopolitan | | | | in Mexico, experts say there are a few basic |
| Playa del Carmen an hour to the south, Quintana | | | | steps to help avoid heartache. First, ask a |
| Roo is the country's fastest-growing state, with | | | | prospective seller to provide three documents |
| over a million residents. An estimated 1,500 to | | | | before proceeding with any negotiations: 1) a copy |
| 3,000 American citizens live there more than six | | | | of the title, known informally in Spanish as an |
| months out of the year, along with a few | | | | escritura; 2) a certificate of freedom of liens and |
| thousand more Canadians, Europeans and South | | | | encumbrances; and 3) the latest tax statement |
| Americans. | | | | for the property. These documents will help |
| The hottest section is near Tulum, just down the | | | | establish that the seller really owns the property |
| beach from a massive Mayan fortress | | | | free and clear. Second, hire a reputable attorney |
| overlooking the Caribbean. While the area retains | | | | before signing any documents. The nearest U.S. |
| a funky 60's vibe (there's a nude beach--unusual | | | | consulate can provide a list of attorneys in good |
| for conservative Mexico), in the past several | | | | standing. Third, arrange for title insurance. In |
| years some swanky hotels and real estate | | | | recent years major U.S. players such as Stewart |
| developments have been launched. | | | | Title and First American Title have gone into |
| Indeed, with more than 70 million American baby | | | | business in Mexico and there is a thriving locally |
| boomers expected to retire in the next two | | | | based industry, as well. For a cost of about $5 |
| decades, many without adequate pensions or | | | | per $1,000 of property, a title insurer will protect |
| health plans, some experts predict a vast | | | | a buyer against prior liens by tax authorities in the |
| migration to warmer--and cheaper--climates. | | | | event that somebody else claims title. Finally, |
| Often, such buyers purchase a property 10 to 15 | | | | make sure to place the property in a fideicomiso, |
| years before retirement, use it as a vacation | | | | or trust. Fees run around $1,000 to $1,500 up |
| home, and then eventually move there for most | | | | front, plus about $400 a year, but that is offset |
| of the year. Developers are increasingly taking | | | | by the very low property-tax burden. |
| advantage of the trend, building gated | | | | |