All Forum Posts by: Mike Lambert

Hey Alex,

I'm not sure what you mean by converting. You can do both at the same time. It's a matter of managing your calendar. In Mexico, as you know, when you rent to visitors, you generally don't do LTR. It's automatically MTR (by the month).

The best strategy is to do MTR in the low season and STR in the high season. Of course, if somebody wants to do an MTR in the high season and at a very attractive rate, you might as well take it. Similarly if somebody wants to rent for multiple months right away at an attractive rate, you might take it too, especially if it's in the low season.

 Sure. Happy to help if I can.

Nick, as you mentioned, Mexico's the best for that matter indeed. Pretty much all the banks in Mexico lending to foreigners offer better terms but there are other countries offering better terms as well. On the other hand, other countries, like Nicaragua for example, likely offer worse terms, if you can get a mortgage at all but I'm not sure anybody would want to buy an STR in those countries anyway.

@Nick Belsky

I'm not sure why you're generalizing the mortgage conditions in Belize to the rest of the area because they're very different. I've been investing in the area for years (not in Belize) and I haven't seen the kind of conditions you're describing so maybe they just apply to Belize. For example, in Mexico, you can put less than 40-60% down, interest rates are in the single digits and you can get 20- to 30-year mortgages (and you can't get anything shorter actually) and the right areas would fit within @Richard Foltys' criteria. As Nick mentioned, Airdna would be helpful here.

Hi Jake, the fact that you're a US citizen/resident has absolutely no bearing on the process. The rules are the same for everyone. You need to research/know the rules, laws and regulations (including HOA if applicable), like you'd do in any US city.

@Rusdianto Rusdianto

Leasehold isn't ownership and so you don't have control. And, then, as time passes, because the lifetime of the lease decreases, the real value of the property actually decreases towards 0 until the lease gets renewed and there's absolutely no guarantee that it will. The purpose of owning real estate is to have the value go up over time, not to 0. I'd never buy under leasehold but, if you want to "own" in Bali , you have to accept that. Otherwise, there are many other countries with high growth potential, tourism demand, and relatively affordable prices compared to Western markets that don't discriminate again foreigners that way.

What you mention about corporations is interesting. But that leaves me asking: If the Indonesian government indeed doesn't want foreigners to own/control land in the country, why would they allow for such an obvious loophole? In other words, what's the catch? There are other countries in which you can buy through a corporations but foreigners cannot own or control more than 49% of the company.

Yes, I've been investing overseas for years and help many others doing so but investing internationally differs from country to country so asking about international and specifically in Bali.

There can be fraud everywhere, including in the US, so you should always beware and the risk will be higher or lower, depending on the country. When it comes to taxes, it'll depend on the country.

I personally haven't and I won't invest in Asia because you almost never can own the land freehold. That's the problem because you have no ultimate control of your property and it's a sign that you're treated second class compared to the locals . I don't know about you but I don't want to invest money where I'm treated second class, with all the consequences that go with that.

@Camilo Restrepo, I don't have any opinion and, to be clear, I'm neither arguing with you nor trying to convince of anything. There are many opinions but there's only one set of facts. If you want to make a comparison, you can check Airdna. IMHO, your problem was not Mexico, it was Cancun. As I wrote in my first reply here, I'd never invest there in an STR. It makes no sense. I'm actually surprised you managed to get a 9% ROI but I guess that's thanks to you being a good operator and getting 95% occupancy as a result. You can't compete against the all-inclusives unless you offer complimentary food and booze or you're cheap, as you seem to be confirming.

This being said:

1) Properties in Mexico/Cancun trade in USD so you have no foreign exchange risk in Mexico while properties in Colombia are traded in COP, the Colombian peso, which has been tanking over the years, eliminating any hope for capital gains for American investors.

2) You can get a mortgage in Mexico but you can't in Colombia so even with lower revenue, Cancun would likely still be more profitable, even if you don't take capital gains into account.

3) The political risk is much higher in Colombia, especially at this present time.

Is Cartagena a bad investment? I don't think so if you're ok with the currency and political risks. But, like most people, I prefer Mexico. For the reasons I mentioned, there's no contest far as I'm concerned.

Anyway, the most important is that you seem to be doing well and be happy about it. Let's hope the COP stops to fall, in which case I'd be keen to invest more in Colombia.

@Camilo Restrepo

I see your point too, but you have to pay Airbnb, Booking.com and a property manager anywhere in the world you invest. That's not specific to Mexico. Also, regarding the 15% you pay to Airbnb replaces the commission your guests used to have to pay to Airbnb so you should be able to charge it through your guests through your pricing.

And, yes, operating short-term rentals in Mexico, while cheap compared to developed countries, is somewhat more expensive than in Colombia, Ecuador and the Dominican Republic because Mexico is more developed. This being said, in those other countries, you don't have the mass tourism that Mexico gets, which means you'll get lower occupancy which, alongside with a lower ADR, will give you much less income. Moreover, you won't get any capital appreciation close to what you can get in Mexico in those countries and you can't borrow in those countries like you can in Mexico.

So, personally, I rather pay SAT. As I always say when it comes to taxes, if I pay more taxes, it generally means I get more income and higher capital gains so I'm fine with that.

@Camilo Restrepo

I'm not sure why you'd have sold because of Mexico's tax regulations for Americans because they're not bad. While I'm Canadian and no US tax professional, I know a thing or two about it since I've had Americans invest with me in Mexico (don't just take my word for it and do the necessary checks though).

If you invest in your own name or through a fideicomiso, Mexico will withhold 25% of your gross income, as you indicated, but that will be all you pay. Granted, it's applied to the gross income but, for the typical Mexican STR, the difference between gross and net income is much lower than in the US given the lower expenses in Mexico. Moreover, you can credit what you paid to Mexico against your US taxes so, depending on your US tax rate, what you pay to Mexico might end up making no difference to you because you'd have to pay to the US what Mexico doesn't charge you. Still, if you want to be able to deduct your expenses before paying taxes in Mexico, you can always do so by investing through a Mexican corporation instead of a fideicomiso.

Seen from my side and as I mentioned earlier, the issue would be that the ROI in Cancun specifically is too low, although 9% would be considered great by many people. You can do much better than that elsewhere in Mexico, and, the more you make, the less bothersome taxation is given that your net ROI ends up still being high and I suspect most of the time higher than what you'd get in the US.

Finally and, most importantly, we're only talking income tax here. The property tax in Mexico is almost 0, even for very expensive properties.

So high income, low expenses and reasonable overall taxes. You could do much worse elsewhere IMHO and that might partly explain why so many Americans buy real estate in Mexico these days.