Land in Mexico?

[mydogsarelazy]

I have a friend who is looking at ocean view lots in Mexico.
He is interested primarily in an investment over time, and also in eventually building.

Does anyone have opinions, experiences, strong views that they would like to share with him?

I assume one can’t get construction loans there, right?

Does anyone feel strongly that a big decline in California real estate will hit hard down there?

Any comments are welcomed.

JS

[no_such_reality]

This has been covered in the LA Times and other publications. The Baja area, particularly, Cabo and surrounds has had an identical price explosion to SoCal. In fact, it’s completely fueled by the US explosion.

[powayseller]

My landlord has invested in beach condos in Mexico, which will be completed in 2 years. He’s expecting a very large return on his investment, based on current high rates of appreciation. Sounds like a bubble,, but am not sure.

Can you get a history of prices in the area he’s considering, to see if a bubble developed?

[SD Realtor]

My friend Gordon Kane who owns the Poway Help U Sell bought a lot (or shall I see obtained a 99 year lease) south of Rosarita and is building a home there. I do not know if he paid cash for the new construction of got a construction loan for it. He is a super good guy and if you called him at the Poway Help U Sell office he would be more then happy to give you details. Powayseller knows him as well.

[PerryChase]

I’d love to learn more about Mexico — real estate and culture. Some Americans would never set foot there but many others simply love it in Mexico.

I’ve traveled some in Mexico and my experiences were always great, even in Mexico City (supposedly a dangerous city but I never saw anything of concern).

[barnaby33]

My dad lives there, south of Rosarito as well. He bought/ leased a lot there and built a house in 02. There are potential benefits to it, but very real risks. Financing for mortgages is available, but its much more expensive. Title insurance is available as well. The problem is that the Mexican legal system is heavily stacked against you as a foreigner. You really need find a good lawyer down there to talk to before buying. There are land ownership issues, such as ejido’s that you need to be wary of.

As JES mentioned the boom down there is just an echo of what is happening here. I suspect the bust will as well. Things are very slow in my dad’s development. They have had their house on the market for some time. Lots of lookers, no offers.

The main problem as I see it is that getting across the border is a pain in the ass. I have a sentri pass and its still painful. You need to be prepared to put up with alot of inconveniences to live there, but it is much more affordable if you want to live on the ocean.

Josh

[davelj]

Yeah, there’s a bit of a bubble going on down there. Construction between Playas and Puerto Nuevo is absolutely incredible. The majority of the buyers are Californians financing with home equity from their primary residence in the U.S., as this is cheaper than getting a loan through a Mexican bank or U.S. finance company. There are, however, a couple of finance companies that now offer semi-reasonable rates (say 2.5% above LIBOR) because they’re funded with a line of credit through GE Capital, which gets AAA-rated funding itself. So the funding options are getting better. And, yes, you can now get construction loans there no problem as long as the title issues are clear.

I think there will be pretty sharp declines in prices over the next few years as home prices here decline and as the speculators down there move out of the market (yes, there are lots of speculators operating in the coastal Mexican properties). Having said that, you can buy a 15th floor 2BR/2BR condo right on the ocean with a pool, gym, etc. for about $250K these days. The same thing would cost you $750K+ in San Diego, depending on where you are of course. My guess is you’ll see a 30% or so decline in prices down in Mexico. They’re just building like mad down there – and only a fraction of the units are pre-sold.

[PD]

We contemplated buying an ocean front lot about a year ago. It was unbelievably beautiful. I think the lot was about 250k at the time. It was going to cost about $90 a square foot to build (if I remember properly). We decided not to do it as we felt that that the price explosion was directly related the CA bubble. When it collapses here, it will collapse there. You know when there are property investment tours with busloads of Americans that there is a craze going on.
Now is a BAAAAAD time to buy. The prices sure are cheap compared to here but they are much more expensive than they used to be. They are going back down.

[Anonymous]

Most or all of the Baja beach contruction is geared towards Americans so obviously the bubble is going to burst down there soon after it bursts here.

I think the lots down there are ugly and in general Baja is boring and ugly place, don’t see the appeal. Mainland Mexico has much more beautiful cities and interesting sites, both on the beach and inland.

[anxvariety]

I’ve stayed in Mexico for a week before and it starts to get old.. for each his own.. For the most part it’s pretty crappy down there in Baja.. I’ve been from Tijuana to Cabo San Lucas.. if you’re waiting for Mexico to change I think that’s going to be a long wait.. Anyone that cares about change just jumps the fence and comes to the US.. everyone else down there seems to be fine with corruption and living in the lower class not challenging the rich.

Try renting a place down there for a few months see how many times you visit.

[Anonymous]

I want to thank John for asking this question for me (I am the friend he is referring to). I would have to agree with all of the comments that I have heard. All of the agents down there insist that prices are going up, yet 5% of the agents I talk to say they personally own or have bought anything for themselves. I also notice that sales agents at the developments say that their products are going fast, yet they have only sold a small amount of inventory after a month’s time.

I am looking down there for a place to surf, take my dog out on the beach, and ride my quad. It seems that Mexico allows all of this.

Since I think the prices will crash there as well, unless the border is removed completely, I am going to wait until the cost of a place down there is less than the cost of two weekend trips a month. Then it would be cost effective because that’s about how often I would use it.

Since I think the prices will crash there as well, unless the border is removed completely, I am going to wait until the cost of a place down there is less than the cost of two weekend trips a month. Then it would be cost effective because thats about how often I would use it.

[desmond]

This is like asking if you were to get kicked in the head with a steel-toe boot would it hurt? There are so many horror stories about Americans losing their property (that you can only lease and not own) in Mexico.

[davelj]

The “horror stories about Americans losing their properties” is old news. Most Mexican property foreign ownership issues have been ironed out over the last few years with dramatic improvements in and expansion of the use of bank trusts, which effectively grant permanent title to the buyer. That’s one of the reasons building has really taken off over the last 5 years down in Baja. That’s not to say that you don’t have to be careful – you do – but fraud vis-a-vis foreign buyers has declined dramatically. If you’re buying a piece of land, however, you need to be much more careful (that is, use mexican and u.s. counsel) than if you’re buying into one of the myriad condo complexes going up, for which ownership transfer has been pretty standardized.

[JJGittes]

The horror stories may be old news, but history has a way of repeating itself. Did you see the paper today with the story about how the leftists in Mexico City would not allow Fox to give his speech? Now, what do you think would happen if some hardcore US hating leftists took power down there? You think maybe they might just consider reappropriating some of the special seaside real estate that all the gringos have been buying up on the coast? Then what, you think the US military would swoop in to protect your mexican property ‘rights’ when the federalies come knocking? Don’t forget, Mexico is still basically a third world country (don’t believe me, just take a whiff next time you cross over into TJ). Be careful about making big $ bets on such places. For me, someone who goes there 3 times a year to fish and vacation,I’d rather rent/lease down there and keep my nest egg in a US bank.

[davelj]

Correct me if I’m wrong, but I’m probably more familiar with Mexico than you are – I’ve lived there and speak spanish fluently. In addition, I have Mexican business partners. But perhaps you’re Mexican?

Having said all that, you’re correct in that there’s always a risk of reappropriation at some point down the road. Property ownership in third world countries always presents certain political risks. (And Mexico isn’t “basically” a third world country – it is CLEARLY a third world country.) And personally I’d hope that the US military would NOT “swoop in” to protect anyone’s property rights. These are the risks that individuals and corporations should bear on their own.

However, it’s important to make a distinction between Baja and mainland Mexico. Baja’s major governments – Mexicali/Tijuana/Rosarito/Ensenada/Cabo, etc. – have always been more US-friendly than the mainland because of the relative importance of tourism, and thus gringos and the US dollar, to their economies. And Baja’s politics are somewhat removed from the mainland. Again, that’s not to say that something untoward couldn’t happen at some point in the future, but based on what my partners tell me, it’s highly unlikely, even if a leftist government won the general elections. But to a large extent this risk is already priced into Mexican properties – that’s one of the reasons they sell at a 70%+ discount to comparable properties in California.

Would I take an enormous risk on lots of Mexican property? Nope. But is buying a modest vacation property down there a big risk for the average person? Nah. After all, if you spend time worrying about the relatively small risk of leftists reappropriating your Mexican vacation home, I’d hate to imagine what other things keep you up at night. At that level you have to acknowledge that merely getting out of bed in the morning is a substantial risk.

[Author]

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