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