What it's really like to invest and develop in Baja Mexico

[AJ Wong]

If you're like me, you like a good deal. It's probably why you're on BP in the first place..hoping to learn, grow and gain an edge in your investment portfolio. My urge to find or create success is a bit more adventurous than most, so when it came time to sell my investments and home on the Oregon Coast, I found myself and my dog Mazzy traveling south to Baja Mexico, in the southern Rosarito area. 

At the time I had just sold another profitable property (a couple in fact) and things were uncertain. I couldn't quite find an investment worthwhile and rents were/are abhorrent so I figured I'd rent a space near the beach, surf, regroup and recalibrate. 

Fortunately I've been able to sustain, evolve and expand my real estate business in both Oregon and California business through exceptional networking and the incredible support of my co-brokers and assistance. I cover such a large geographical area it wouldn't be possible or efficient to physically be there to support my client's transactions, although I return as needed. 

Anyhow, six months into my $750 monthly furnished lease and the owners of my community of 'campo,' offered me a property for sale. In most areas within 50 miles of the Ocean a foreigner (those without Mexican citizenship or passport) ie: me, cannot generally own 'title' to the land beneath the home they own. This is changing somewhat andwith some asterisks as foreigners can own the 'right's but the property is held in a 50 year trust and renewed for another 50 years at the buyers choosing. The annual cost is essentially equivalent to and includes the annual property taxes. 

Personally my property is in a 'campo.' Or land on which the same family has owned the 10+ oceanfront acres for decades. Most of the 60ish homes began life as mobile homes because if you lease the land and the property moves you can take it with you when the lease ends. Once the structure is 'fixed' it is attached to the land and although the structure transfers, the land ownership always belongs to the land owners. In an nut shell it is similar to a mobile home park. You own the structure, the community continues to own the land. 

I have a 10 year lease renewable for 10 years. If the family sells, the new owner needs to compensate me for my 'dwelling.' No clue what that would mean but quite confident the family will continue to own the property beyond my tenure. 

My lease is $275 per month with security and water included. Next decade it can increase a maximum of 10%. This is an increasingly low and unique agreement. Many in the area and admittedly higher end communities can range from $5-700/month with much shorter durations. 

For me this allowed for a very minimum initial investment..I bought the existing structure on I'd estimate a .08-.10Acre piece of land with an ocean view for under $25k. Initially it was a 800SF studio home with a bathroom. It was poorly built, I probably could've utilized what was there but wouldn't. I demolished 70% of it and salvaged all the materials. I paid $1k for a phenomenal architect to build my dram vacation home/rental but ultimately abandoned the plans after a full feasibility and cost estimate from several reputable builders here.

The cost was surprisingly affordable but I ultimately decided to go slower and a much smaller scale. I figured it's Mexico. Much like the OR Coast, the visitors come, but the amenities and options for a 'quality' updated 2023 style accommodation it not. I know what I look for when I go on vacation or an extended stay, and I very often don't find an affordable option or even anything of value. And I'm all about value.

My investment strategy here was to spend a total of what I would've on a rental in Southern California in a year, and create a property worth having with investment potential that I 'own' here. 

Fast forward six months and my project is nearly complete. I can confidently say I can develop you a home here in northern Baja. I have a reliable crew, handle on costs, rules, materials and timeline.

The differences between developing and investing in Mexico vary considerably. It is certainly not for everyone, but for me it was actually more comfortable, natural and doable than in the PNW. I won't go too deep but here are some pluses and minuses that I've learned so far..full disclosure I work with a Brokerage here called Tera Realty. The owner is the cousin of the family that owns our community. She is beyond sharp, bilingual and welcomed me to formally join here brokerage. We should be on the first Mexican MLS soon. Here to help or connect you directly if anyone has any questions regarding MX.

Pro's:

- Cost. You can in fact 'own' and develop here for the cost of an annual lease in Southern CA or beyond. The average salary here is roughly $200USD and construction workers might make 2-3X that. A really good 'contractor' or team leader might make $1-1200. Either way they EARN it.

-Labor. Local work ethic is legendary and rightfully so. These MEN poured two tons of concrete in 5 hours. An entire house foundation and then some..in time for lunch. The amount you can accomplish in a condensed amount of time is astounding. 

-Rules. There are none..or close to it. If you need a septic you install it, if you want to demolish your home you do it and if you want to build go for it! Slowly regulations are coming online but for the most part you build to your standard. Vacation rental permit/licensing? lol 

-Proximity. I've traveled the globe and lived in Nicaragua and the OR Coast. There are a lot of nice places, but most involve getting on a plane or other considerable effort of time, expense and effort to reach and ultimately enjoy. We are 45-60 mins from downtown SD and three hours from LA with no traffic. You can come for the day. There is no shortage of tourists and others seeking value.

Con's:

- Laws and rules. The same rules that allow freedom also restrict potential. No septic rules are nice but where does the waste go? Standards are not high because they're not required to be. Due diligence as a result is essential. I paid for a local attorney just in case. 

- Language. Building in English is hard enough, I don't speak fluent Spanish yet but I'm learning. Thank goodness for Google translate. 

- Detail. Things get built but because the aim is usually to get the job done and not done 'right' or to code, certain things will turn out slightly different than you desire or anticipate or even instruct. Little details that they'll do 'their' way but without much logical reason sometimes. Let me say, these men are professionals! Experts at what they do and they do it ALL. But here and there they need a nudge. For example the didn't square my pool to the property line and it was just a few degrees off. It would have been about 20 degrees off if I didn't catch it early though. 

- Materials. The same selection of materials isn't quite as available. For example PEX or the flexible water lines/tubing/piping hasn't made it here yet. Not that you need it, materials are WAYYY cheaper (I suppose that's a positive!) and the crew will figure out how to keep the job moving, but if we're improving standards sometimes it involves importing and planning for certain items state side. 

All in all the building and development process here has been exceptional. Things get done, quickly and if you plan and supervise well, done well. The investment potential is considerable. There is a steady stream of visitors and many looking for extended housing. My neighbors are from WA, NV, CA, ID, TX, AZ and beyond. Many southern Californians and locals travel stateside weekly and daily for work and school. 

The value is still exceptional. Oceanfront homes or impressive large very very luxurious properties in the $4-500k range still. 

You can build a brand new dream home the land for $150-250k or a magazine worthy Bali bungalow type casita without the land for $1-125/SF. 

Or a more rustic, traditional tiny estate for $60-85k. I expect mine will generate at least $15-25k per year if it were full time. It's more for me to enjoy, and for less cost than most coastal annual leases or even many pickup trucks nowadays. I figure even $1k net per month makes my next purchase or rental more workable, but either way.. I 'own' a beach house in MEXICO!  

I'll try to post some photos and bookings metrics in the coming months.

Cheers.