Investment Property in Mexico

It is common knowledge that many Americanscommunities, condominiums and golf courses and
are finding that investment property in Mexicoare selling directly to the retirees and to those
may provide an interesting option. Is buyingwishing to hold the property as part of their real
property for sale in Mexico still a good way toestate investment portfolio.
reposition equity from appreciated domesticOn the negative side, there are a couple of
property?factors to keep in mind:
Trends show older people and retirees are lookingFirst, if you are planning on using investment
for inexpensive places to live and enjoy the restproperty in Mexico as a repositioning strategy,
of their lives and are finding places like Mexicoremember you cannot use the popular 1031
very attractive. Should you be the one who sellsexchange approach because the rules limit
or rents this property to Americans? Is this areplacement 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? WeAlso, 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 propertyincluding skyrocketing real estate prices and
in Mexico is evidenced across the country. Forconfusing laws. Under the Mexican constitution,
example:foreigners are allowed to own land outright
In the last couple of years there has been a landanywhere except within 50 kilometers (31 miles)
rush in the Riviera Maya, a small idyllic slice ofof the coastline or 100 kilometers from a national
Mexico's Yucatan peninsula. It is this combinationborder. Within the restricted zone, they can hold
of beautiful beaches (or other geographicalthe property in a trust, or fideicomiso. While they
features) with inexpensive cost of living thisdon't officially own it, they retain the right to use
bringing Americans by the hundreds to this placeit 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 Miguelbeachfront are claimed by an ejido--a form of
de Allende in the hills of central Mexico tocommunal ownership that's fairly common in
fast-growing sports-fishing and beach communitiesMexico. 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-seekingunanimous approval by ejido members and
retiree.time-consuming government approvals. Until that
No place has boomed in recent years like thehappens, foreigners are blocked from buying
state of Quintana Roo in Mexico's far southeastpieces of it.
corner. Anchored by the high-rise resortFinally, if you're interested in investment property
destination Cancun at one end and cosmopolitanin Mexico, experts say there are a few basic
Playa del Carmen an hour to the south, Quintanasteps to help avoid heartache. First, ask a
Roo is the country's fastest-growing state, withprospective seller to provide three documents
over a million residents. An estimated 1,500 tobefore proceeding with any negotiations: 1) a copy
3,000 American citizens live there more than sixof the title, known informally in Spanish as an
months out of the year, along with a fewescritura; 2) a certificate of freedom of liens and
thousand more Canadians, Europeans and Southencumbrances; and 3) the latest tax statement
Americans.for the property. These documents will help
The hottest section is near Tulum, just down theestablish that the seller really owns the property
beach from a massive Mayan fortressfree and clear. Second, hire a reputable attorney
overlooking the Caribbean. While the area retainsbefore signing any documents. The nearest U.S.
a funky 60's vibe (there's a nude beach--unusualconsulate can provide a list of attorneys in good
for conservative Mexico), in the past severalstanding. Third, arrange for title insurance. In
years some swanky hotels and real estaterecent 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 babybusiness in Mexico and there is a thriving locally
boomers expected to retire in the next twobased industry, as well. For a cost of about $5
decades, many without adequate pensions orper $1,000 of property, a title insurer will protect
health plans, some experts predict a vasta 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 15make sure to place the property in a fideicomiso,
years before retirement, use it as a vacationor trust. Fees run around $1,000 to $1,500 up
home, and then eventually move there for mostfront, plus about $400 a year, but that is offset
of the year. Developers are increasingly takingby the very low property-tax burden.
advantage of the trend, building gated