Investing in Mexico / Quintana Roo

[Michael Brockway]

Does anyone have experience purchasing property or land in Mexico? I'm looking to purchase waterfront property (about one acre), and build at a fairly low cost (relative to the US) however I understand there are some risks involved. Would love to hear from other investors who are living in Mexico, investing in Mexico, have built in Mexico, or who are looking to invest there in the future! Thanks in advance!!! 

I'm specifically looking at areas in southeastern Mexico near the Belize border. Keywords: Quintana Roo, Chetumal. 

[Elizabeth Wilson]

@Michael Brockway - Following.   I searched for this topic a month or so ago and found almost nothing.  Wondering if there is a BP-equivalent in Spanish for for Latin America. :)

[Brian Bradley]

I started a similar topic. Here was my question. and then the one reply I got below. 

Q: 'My wife and I like to travel. And we like to invest in real estate. One of the places we travel to annually is Cabo San Lucas, Mexico. I always toy with the idea of investing in a vacation rental property in Cabo, but I am always hesitant to pull the trigger. I am just not convinced or sold on the safety of investing in real estate or land in Mexico.

I understand the process of owning your property either through a Fideicomiso (a real estate trust held by a Mexican bank) or through a Mexican Corporatoin. I am just hung up on how secure my ownership in the property really is, and having the Mexican Government take my property from me at any moment. And yes I do undertand that Mexico has the same eminent domain concept as the USA.

http://www.investmentpropertiesmexico.com/buying-safely#1 this site seems to have a good breakdown of property ownership in Mexico for foreigners. Not sure. It would be great to hear some personal experiences and advise from some USA investors with property in Mexico on BP. 

A: @francisco cimon replied "I have lived and worked many years in Cabo San Lucas, now located in the Caribbeans (i work in the hospitality industry).

Cabos San Lucas is beautiful destination (the tourist destination of Mexico). Great fishing, great golf and many (short) flights from the US and a very large new airport and convention center. There has been hundredes of new hotel rooms opened in the last couple of years and many hundreds more in the pipeline for the next 1-3 years. There will certainly be extra demand for rentals but it will be mostly for workers of the hotel industry and not so much for toursim. In fact, with all the new hotels opening up, there will be a huge supply of new and beautiful rooms available for toursits.

Your real estate investment is safe in Mexico. The mexican government will never be seize your property or land as long as its legally purchased and you pay your taxes. The issue, in my opinion, is not so much the safety of your property but the cost of buying (extra high fees when buy as a foreigner) and when you sell (other fees when you sell as a foreigner). There is alos HOA fees, poperty taxes, ect. Financiing is another issue. You will need to get your financing from a us institution..."

[Michael Brockway]

Thanks @Brian Bradley . This is helpful! I appreciate it. Did you end up pulling the trigger? 

I assume you would need a specialized attorney to help navigate the waters of purchasing. Did you happen to find one? 

[Brian Bradley]

NO. At the end of the day the numbers do not add up with all the extra fees. As an investment property. If it was just for me as a beach get away property then I would not care. But competing with all the resorts, taxes, special hoops to jump through, etc did not add up. 

[Francisco Cimon]

Brian: I came to the same conclusion many years ago when living in Cabo San Lucas. I seriously considered buying a multi family rental property and later a commercial/rental appartment building. The rents are relatively high and the property values do go up (but not if you choose the wrong area). Buying property/land as a foreigner means a multitude of fees (same goes to selling your land/propertiy). There was no way a canadian bank would lend me money to buy a property in Mexico (i am canadian) and mexican banks will lend you at 12% (!!!). That is if you can get a loan from them. 

What some of the "small"local mexcan investors do is hire a local construction team and pay them a little every month to build a house/appartments. 

[Mike Lambert]

I have bought a condo in Quintana Roo and am looking at buying more. That state is growing as quickly as China! There are great deals to be had but you have to buy at the right place at the right time and have the right connections and you have to know what you're doing.

@Michael Brockway The path of progress that started in Cancun is moving down the coast towards Belize. After Cancun and Playa del Carmen, now is the time for Tulum to shine. However it might still take a very very long time before it reaches the Chetumal area and the Belize border" But I heard that Mexico's president bought land in Mahahual and that the richest man in the world bought plenty of land in Bacalar. So I was thinking about it too although i'd think it's way too early.

I'm happy to answer any precise queries if I can.

[Tim Jones]

@Michael Brockway

My understanding is that you must be a Mexican citizen to own property within 7 miles of the coastline. Otherwise you can do a 99 year lease as a non-citizen. Also, check into squatter's rights...I believe it's 7 years. This might come into play if you're buying ahead of the curve (future development). Hope this is helpful (and accurate). It goes without saying that we all must do double-duty when it comes to due diligence in foreign lands.

TJ

[Account Closed]

It is possible to buy properties in the restricted zone in Mexico using either a fideicomiso which is a Mexican Trust or a Mexican Corporation.  Depending on how many properties you are planning on buying one will be easier than the other.

I would not currently be buying anywhere near Cancun.  The security situation has been getting worse in the area and rentals are on the way down.

You should probably consider the west coast of Mexico instead.

[Michael Brockway]

@Mike Lambert Thats very helpful! I agree on multiple levels. It may be too early for bacalar but I'd rather be early than late ;) Lets chat offline. I sent you a DM/colleague request. 

@Tim Jones do you know if the 7 mile rule applies to all waterfront or is it just the coastline? 

It sounds like overall a solid team you can trust is key along with an attorney who can help navigate the waters for those who don't have Mexican citizenship. 

[Account Closed]

@Michael Brockway   

The restricted zone, according to Article 27 of the Mexican Constitution, is all land located within 100 kilometers of any national border and within 50 kilometers of any ocean. Article 27 of the Constitution states that no foreigner will be allowed to acquire direct title to land within the restricted zone.

[Mike Lambert]

Michael, I responded to your message.

@Michael Brockway, @Tim Jones and @Account Closed there is no 7 mile rule. The rule is that foreigners are not allowed to buy property directly within 100 kilometres of the border and 50 kilometres from the coast. They can still buy such property in freehold through a trust or fideicomiso, which comes down to the same as buying the property directly. There is no such thing as a 99-year lease. The fideicomiso has to be renewed every 50 years but that has nothing to do with a lease.

[Francisco Cimon]

Mike,

Would you care to share the details of your condo purchase in Q.Roo? I am just curious... Information on the condo.... price, where did you get your financing, how much you paid in fees as a foreigner (fidecomiso), what are the yearly taxes, HOA fees, etc.

[Michael Brockway]

@Francisco Cimon I'm trying to purchase land on a lake and build on it. 

@Mike Lambert thanks again for the info!!! I hope all is well. 

[Mike Lambert]

@Francisco Cimon Sorry I forgot to respond to your email back then. In the meantime I bought a second condo from the same developer. These are pre-launch private sales and so the developer wants those to remain private. Since I'm not telling you the name of the developer and the name of the project, I can give you the following details.

I've been buying with an investor 50/50 at a heavily discounted price to the market and the project launch price. My partner puts down the 20% downpayment upon signing and then pays his remaining 30% part progressively during the construction period and upon delivery. My 50% is then due for payment on delivery but the developer is lending me the money for 5 years at a 6% interest rate. We repay the loan to the developer out of the cash flows from the rent, which should be more than enough to cover. After just 5 years, we own the condo free and clear 50/50.

The price of the condo we recently purchased is $198,400 (we're paying $222 per sq. ft. while the price in other nice buildings varies between $308 and $558). The fideicomiso fees about to around $550 per year, the HOA fees are around $250 per month and the property taxes are around $200 per year. We are hoping to make in excess of $50,000 rental income per year so the costs are negligible in comparison with that.

@Michael Brockway You're welcome. Hope that helps and all is well with you too.

[Michael Brockway]

That sounds like a great deal @Mike Lambert . Would love to get in on that! 

[Mike Lambert]

@Michael Brockway These are pre-construction condos. I bought mine a few weeks ago and generally the pre-sale allocation gets snapped up within a few days or even in a few hours! I've asked the developer if he's already done the retail launch.If he hasn't, I could try to convince want to do me a favor and give me a retail condo at a pre-launch price. On the one hand, I get these sort of deals from time to time and I suspect I might get another one this month. On the other hand, they might become more difficult to get as the prices on the Riviera Maya keep increasing.

[Mike Lambert]

@Michael Brockway Well it looks like I'm getting another of those deals shortly. Feel free to send me a message if you are still interested.

[Oliver Merino]

Hey everyone, investing in Mexico is easier than it seems,Happy to discuss

[Vivian Huang]

@Mike Lambert thanks for sharing your experience and your numbers! I am looking to invest in a condo in Tulum and I'm glad to hear someone successfully investing in the area. Would love to connect and pick your brains a bit more if you don't mind.

In the meantime, what are some other costs that I need to consider outside HOA, property mgmt, utilities, property tax fees. It sounds like the fideicomiso fees are about $550 a year. Do I need a Mexican lawyer to help me put the trust/fideicomiso together? What other fees would be associated with purchasing a condo? I would be purchasing cash, and would not need financing. Any thoughts are much appreciated!

[Mike Lambert]

@Vivian Huang  You're welcome. Yes, the fideicomiso fees are around $550 a year. You'll need a Mexican lawyer to put it together indeed. You need to have it set up for when you're getting the title on the property so you have time if you buy pre-construction.

The other costs are the closing costs, the commmissons for vacation rental management and the taxes on rental income if you rent and cable/internet.