All Forum Posts by: Mike Lambert

Hi Hannah, I hate to be a party pooper but you won't get any construction loan or any other type of loan in Mexico to finance the construction of a house there.

If you don't have cash, your only options would be to borrow in the US. Since lenders will not lend cross-border, you'll have to provide US collateral, like taking a HELOC if the collateral is real estate, or you'll have to use love money or pay cash.

But maybe it's not that a bad thing if your land has increased in value in case you'd want to sell it you can't get the funding. Indeed, I'm not sure why you'd want to own a short-term rental home in Cancun to start with.

People who land in Cancun (mostly tourists) generally either stay in a hotel / all-inclusive resort there or in the neighbouring Riviera Maya or they stay in a short-term rental in the Riviera Maya. Short-term renters generally don't like to stay in Cancun because there's not much to do there and the beaches are mainly occupied by the resorts, against which it's hard to compete and there are much nicer areas in the Riviera Maya.

Even though I've owned property in the Riviera Maya for many years and have landed in Cancun many times, I've never been to the city and I've never had the desire to go there. I've stayed in Cancun at the Club Med when going there with a group of friends but we never left the resort and I think most visitors (the many I've met at least) are in the same boat. In any case, you can always check the numbers by doing a market study if you haven't done so already.

To conclude, Mexico is a great place to invest but it's important to buy the right property at the right place at the right time and to have a plan in place for the financing, if needed. So, you're doing the right thing checking things out before submitting your construction plans.

Hope this helps

Hi Lisa,

Do you mean out of the ordinary compared to the US or compared to (the rest of Mexico)?

Compared to the US, the financing is different (if you need any), the legal system is different (you need to vet the parties), pre-construction works differently (if that's what you want to buy), the buyer/seller psychology is different, ...

It's important that you get the needed knowledge or work with people who have it and have their interests aligned with yours.

I have replied to hundreds of posts about investing in Mexico over the years so you might find some what you look for there. Otherwise, feel free to send me a direct message.

@Maria Murphy my # 1 idea for this is the Costa del Sol but it's not the only area. Did you have any specific area in mind? 

@Basit Siddiqi

@Joaquin Camarasa

@Bruce Lynn

A few observations/opinions on the topics discussed from a resident of the 51th state of the US (Canada - LOL) and investing in Spain:

1. I think most successful investors would tell you that, while you need to take tax into account in your decisions, you shouldn't make a decision based on that alone. Also, don't forget that, if you pay taxes, it means you're making a profit.

2. Like most countries, Spain will tax you on your worldwide income if you're a resident, as does the US in most countries (so maybe it's not a bad thing that Canada isn't the 51st state - LOL again). Yes, Spain has a wealth tax but it's above €2 million taxable income and the rate is low so it's not going to kill you.

3. Along with Eritrea, the US is the sole country in the world that taxes its citizens on their worldwide income based on residency and citizenship. So, if you're a US citizen and you move to Spain, you'll have to pay taxes in both countries. Thankfully, you'll be able to get deductions based on the bilateral treaty for the avoidance of double taxation but that means that you'll always pay the maximum of the tax rates between the two countries for each category and some items might not be deductible.

4. Yes, Spain is one of the countries in which banks will lend to non-residents (they generally don't) but Spanish banks are much more conservative than US banks so it's more difficult to qualify, especially if you don't earn W2 income. Also, banks normally only lend for holiday homes, not for rental properties but a holiday home can mostly be a short-term rental or become one later.

5. This last bank limitation isn't a bad thing in my opinion because the long-term rental yields are low and what are you going to do if a tenant doesn't pay? Go to court in Spain as a foreign owner? I invest almost exclusively internationally but I would generally never invest in long-term rentals, unless the rentability is very high, which it almost never is.

6. The withholding tax (on gross income) a problem if you:

a) The wealth creation part of that real estate investing is capital appreciation, not cash flow. So, yes, you'll get a lower percentage of the cash flow (which isn't that high anyway for long-term rentals like pretty much anywhere in the world, including the US) but you'll get appreciation and loan amortization.

b) You successfully invest in STRs and make enough money that you don't care that much about the higher taxes.

To conclusion, as a foreigner investing in Spain, with a few exceptions of specialized niches, I focus on areas that have (high) capital appreciation and short-term rental potential.

Hope this helps.

@Ella Volney

Typically, you can only find a lender in the country where the property is located and, if you're not a resident there, it will be more difficult if not impossible, depending on the country.

When it comes to investors, they need to be open to the idea and then you need to have opportunities that fit within their right risk/return profile. Not easy, especially given where you're investing and, if you can't do that, love money might be the solution.

Hi Angelo, I do but Europe is huge and very differentiated you need to understand the current local laws and regulations and appraise the risk of them changing (getting worse). Choosing the right location is the most important, as well as understanding its risk/return profile and decide if you're ok with it. Have a plan B if you're in an area in which ST rentals could get banned.

@Kumar R.

There is undeniably more red tape bureaucracy to deal with in Latin America than in the US. That's an inconvenience but there are many advantages, as you'd have probably figured out. So the question is how to get the advantages without the inconveniences? You let other people deal with the inconveniences. This is another application of the "Who Not How" book. If you couldn't find the right people, it made sense for you to give up indeed.

@Anne-Michelle Wand You're welcome. There's no question that Panama is a country that has done extremely well for itself. It's implemented smart policies and is very welcoming to foreigners, to say the least. It's a great place to live and/or retire for the right kind of people. That doesn't necessarily translate in high real estate investment returns but you can make some money investing in real estate there (like it seems you do) and so it makes perfect sense that you do that since you live there.

Those like me who don't live in Panama are likely purely looking at figures and comparing risk-adjusted returns with other countries where they can invest. We might consider the lifestyle aspect if it's a place where we want to go back regularly.

Speaking of Mexican cartels, I've been going to Mexico for more than 20 years, know a huge number of people who invest and work in real estate across the country and I've never heard about cartels taking over properties. I would always take comments like "I have friends who say..." and probably heard from someone else with the necessary pinch of salt. The rules in Mexico when it comes to cartels are pretty simple: 1) you don't go in the (well-known) areas that they kind of control and 2) you don't deal with them or with things like drugs in which they are heavily involved. If you plan to respect these rules, cartels shouldn't be a concern. If you don't, getting your property taken over might end up being the least of your worries, if you see what I mean.

@Yannick Vez

Pre-construction properties are sold everywhere, including in the US. In countries like the Dominican Republic, they can be the best deals if you select the right ones.

I'm not sure what kind of videos you're looking for. You "just" need to understand the risks and rewards and decide if that works for you.

@Anne-Michelle Wand I was replying to your question from a personal point of view and was in no way suggesting that you should switch investing in Panama for Mexico. To each their one indeed.

On another note, I'm surprised about your comment about the cartels, especially since you lived in Mexico and I don't see the connection with real estate investing. I don't deal with drugs and neither do the many investors and other people I know who live or spend time there, whether locals or foreigners. As a result, none of us has had anything to do with them and I don't remember ever having a discussion with anyone about the cartels when in Mexico. But I know many people who haven't invested over the last few years because of the cartels and who bitterly regret it given what the market has done there.

As to the government, I'm not sure what your issue is and when you lived there. Since 2018, Mexico has had its most leftist government in decades and yet it's been very friendly to foreign investors. Don't you love a country in which even the left (so basically everybody in total) supports and welcomes foreign investors? Moreover, Mexico recently has had one of the world's best economic performances, with an unemployment rate well below that of the US.