All Forum Posts by: Mike Lambert

@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.

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?