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