South of the Border Real Estate Investing is Hot! Hot! Hot! Or Not?!
Poncho Via. Visions of donkeys laden with produce, headed for the local market. A man in a sombrero playing his guitar at dinner. A women in colorful native clothes with a baby on her hip pounding wash on a rock in the river.
Well, folks, that ain’t Mexico 2019. That is what we were taught in old history books, in stereotyped movies, and in our romantic imagination.
- The modern Mexico awaits
- Mexico’s is a major world economy and pretty healthy
- Mexico can be a good place to retire on a budget
- Mexico is being lauded as the mecca for millenials’ bodies and money
- Is Mexico a good place to invest in real estate?
- What the heck is a restricted zone for Americans and Mexico real estate?
- Life in Mexico 101
- Can I finance property or a house in Mexico?
- The changing of the guard has not been good for Mexico real estate
The modern Mexico awaits
Mexico is healthy, youthful world economy that has been growing by leaps and bounds, especially the last 20 years. A lot is broadcast about drug cartels and death in Mexico, and there are some issues, in small areas, and almost exclusive to drug gangs. Tourist areas and big cities have some violent crime – but hey, so do we.
39 million tourists came to Mexico in 2017 and the number keeps growing. Lots of somebodies are happily heading to Mexico.
Mexico’s is a major world economy and pretty healthy
Mexico is a major world economy, and it does not depend on us to be one. While the US is currently Mexico’s #1 trade partner, Mexico is the 2nd largest location for US exports and the 3rd biggest trade partner. It has trade agreements with 46 countries, a low national debt, has invested wisely, and is one of the only trillion dollar-plus economies in the world. A lot of work has been put into infrastructure, education, manufacturing, and foreign cooperative ventures. And Mexico is sitting on large oil, gas, mineral, and ore deposits. Their economy is healthy, and they intend to keep it that way.
Mexico can be a good place to retire on a budget
In many years past there used to be an ebb and flow of foreign nationals that moved in and out of Mexico every time there was a peso crisis. Not any more. Mexico has people moving in – to retire, to get a chance to work and improve their situation, to just go somewhere cheaper to live, including 1.5 million Americans (here-to-after referred to as expats). A lot cheaper, as in nearly 53% lower cost of living. Rent is 75% less in most areas (not the Mexican Riviera). And Mexico is respected and holds sway in many countries around the world. They have a thriving health and science core, grow a lot of the produce and cattle that feed parts of the world, and are respected for their strong macroeconomic outlook.
Mexico ought to be a really strong contender for real estate investment, then, right?
Mexico is being lauded as the mecca for millenials’ bodies and money
Millennials are a big economic factor now, even in Mexico, because they now outnumber Baby Boomers. It is interesting that even for all the conversation about them being broke and unable to live anywhere but Mom and Dad’s basement, Millennials applied for 47% of the jumbo/high ticket/luxury mortgages last year. Millennials are looking at vacation homes and luxury condos in Mexico, as well as the Mexico version of what we call an REIT – Real Estate Investment Trust, known as Fideicomiso de Inversión en Bienes Raíces, or FIBRAs there.
They are known for modern design desires and that many have champagne tastes in properties, as they see it as an investment that got their parents well situated financially. Some are arguing that Mexico real estate is a safer bet than the stock and bonds market for millennials, as it is a long term strategy without a huge investment and the unease or panicked stress response to its roller coaster nature.
Is Mexico a good place to invest in real estate?
What the investment houses are not discussing, is direct purchase must be weighed against a return based on what you could have saved and earned since childhood. For milennials, those savings ran about .025-.01 %. Americans are at the lowest rate of savings held in history, and it is pretty unlikely Mommy and Daddy put money away for them to go to college, let alone to move to Mexico. If that is what they are making comparisons to, there are some really slim, poor, profit margins in those numbers. I will not even settle on a lead gen site until it is making me over 80% ROI.
The investment firms want you to invest in FIBRA portfolios, a diversified fund of residential, condo rentals, commercial property, shopping centers, health care facilities. Wait a minute. Weren’t we just told the stock and bond market is unsettled and the reason to buy real estate is to lessen the stress? Isn’t portfolio a magic phrase for a stock or bond share?
One of the big challenges for millenials is a place to call their own, so to speak, in terms of career opportunities. There is a loud cry of “foul!” among them that boomers are staying longer in jobs due to the economic down turn, and opportunities for advancement just are not there. Couple that with high costs associated with education, home purchasing, and not everybody recovered from the recession, and they feel there is not a huge amount of blue sky in front of them. A lot of millennials are seeing places like Mexico, with strong economies and progressive business policy, as a place they might have an opportunity to launch a successful career a lot faster. And Mexico is easy to move to and live, especially if you are bringing in skills that they need to continue their growth.
What if I told you there is an opportunity right here and you don’t have to move, you can be your own boss, and you can work as hard as you want and not for “the man” any more? With tons of opportunity? Check out this link, no cost, no obligation, of how I did it at 25 https://www.bestrealestatedirectory.com/lead-gen/
There is a lot being written all over the net about the ten best and worst and just about anything else you want to guess on real estate right now, especially dealing with retirement. Millennials are not so ready to retire as invest in their future, and Mexico has some things going for it, including the strong U.S. dollar (dependent on oil prices and who we have a conflict with), easy access (well, maybe, that is to be seen), property values that will not depreciate (among the fastest growing economies in the world – which means that demand is far outstripping supply…which means overvaluation and inflation), and several other common threads I want to address briefly.
There is only one really big hairy problem…
A lot of the real estate investment groups will tell you to buy on the Mexican Riviera, the 80 miles along the Caribbean coast, and if you do, your return will be 8-14% profits. There is a slight problem with that thought. There is this little glitch called a restricted zone.
What the heck is a restricted zone for Americans and Mexico real estate?
According to the Mexican constitution, the restricted zone is any and all land within 100 km of any of the country’s borders, and within 50 km of any ocean. It further says that no foreigner is allowed to purchase land within the restricted zone and get a title.
And that has been the law for decades. It actually was eased in 1973, because before that, you could not own, period. In other words, you want a place in the Mexican Riviera, you have to be a born Mexican citizen. Or use another option, if you are comfortable with it. It is called a “fideicomiso” or bank trust agreement.
All is not lost, though, as you can sort of “own” property within the restricted zones, but you cannot hold the title. It is held by the bank trust, and you act as a trustee. And they usually do it for foreign investment companies. It is safe, legal, and common.
The bank has to do what you want, and you can transfer, sell, rent, as you please. You can also list an heir or multiple beneficiaries. It is a method for bypassing inheritance taxes and probate – there at least. The problem is that the Mexican government frowns on you holding retirement property that you live in and run through an investment company. Kind of protection for the money trail.
You can still own property and hold the title in the interior of Mexico. Be prepared to have the same responsibilities as a Mexican citizen, including taxes and annual fees, as well as a few challenges with local officials, haulers, and law enforcement who require “handling fees”.
Mexican Real Estate law is complete and detailed. It is designed to help both the buyer and seller be protected. It is, however, very specialized and different than in the U.S. or elsewhere. You simply cannot tackle it yourself, or even with a U.S. real estate attorney. Buying property in Mexico, especially beachfront or restricted property, has to be handled through professionals in Mexico that know every “t” that has to be crossed and “I” dotted so there are not problems or issues in the future. This is especially true if you are dealing in a restricted zone, which is where most Americans far prefer to live due to the available resources, shopping, climate, and infrastructure. And that is also where property has escalated the most in the past 15 years in Mexico.
Life in Mexico 101
Let’s touch on some of the realities of being in Mexico. Many people speak English there, some fluently. It is most common in the restricted zones, which area also the tourist and business centers for the most part. And it is understandable, since Mexico is the #1 U.S. foreign destination for vacations. 1.6 million Canadians also visit each year. English may not be available readily in the interior, or many parts of Baja, however. And if you plan to build a home, well, speaking fluent Mexican Spanish is a must. You have to be able to understand what is going on no matter now much faith and trust you put in the contractor or architectural firm
There is the little problem called hurricanes along the Mexican Riviera, and more recently, central coastal Mexico, including the Pacific side. Mexican property insurance doe not work exactly the same as stateside, and especially for foreign, non-resident owners. It is expected if you can afford to buy a place in Mexico, you can afford to fix it.
Infrastructure is a big issue you need to look into thoroughly when thinking about buying a piece of real estate in Mexico. You might think it would be fun to “camp out” some, but try it in retirement and you will find it tends to not be nearly as enjoyable. And if you are looking at is as a rental or for investment value, there is not a lot of hope for most areas to improve quickly enough under their new president to make a difference.
One thing about Mexico, unlike the U.S., is that it is easy to get residency, or a six month visa for problem free stays. Mexico is encouraging people who want to come there and bring something to the table. You have to be able to guarantee your income, and can use your 401(k) in most cases to help substantiate that. Oh, you wonder if millenials have a 401(k)?
Let’s hope so.
Can I finance property or a house in Mexico?
It is true that from a cost of living standpoint, Mexico is a better value. Real estate transactions in Mexico have been traditionally handled in cash. Doing some fuzzy math, with the current exchange rate and figuring a 1,500 sq foot apartment in a moderate location, you are looking at right at $147,000 USD average price. Taking that much cash in, or out, of a country creates questions and a great deal of planning. It might also raise some eyebrows and questions, since you are taking money into Mexico.
Some Mexican banks are now beginning to lend money to foreigners for real estate purchases, but it usually requires a large deposit on hold to secure the loan, and considerable background information. And some U.S. banks are tentatively adding in Mexican property loans, but they will take a hard look at you. You better have solid evidence of the use of the money, the market, and who is handling the purchase. And you better have a lot of collateral to back it or money in their bank. Foreign banks are not keen on holding titles in a foreign country on a real estate loan.
The wild card is how political stability and relations will affect that.
The changing of the guard has not been good for Mexico real estate
The political wild card is very important in any decision for investing in Mexico real estate. Ever since the current administration took office, commercial investors have laid low, especially after NAFTA was threatened. Now it is the anti-business policies of the new Mexican President. First he cancelled the new Mexico City airport, something economists said was essential to continue to fuel the fast growing Mexican economy, and then an extensive country wide public works program. Mexico’s investment crowd is sitting pretty quiet and a bit stunned. While supply and demand is keeping rentals fairly full and rental prices up, there are growing concerns as the cost of borrowing money to finance real estate has gone up considerably, slowing the market.
There is no end in sight for the beating business is taking down there, either.
Another challenge to the investment game is after 2008, Mexico quietly put a number of economic regulators in place, allowing internal investing of pension funds into real estate in-country. I think it made them nervous that more than $10 billion was sitting in a REIT run by Prudential. And we all know the history of mismanagement at Prudential when it comes to investments from their life insurance debacles. The uncertainty was enough that just in the first three quarters of 2018, investment in Mexico real estate funds was down 40%. And those bank-trust-investment groups you have to put your restricted property titles into? The ones that invest in property? Some have devalued by 41% in the last two years. That does not sound like a good investment to me
Honestly, I can not figure out why somebody would want to gamble with their hard earned money like this. The fact that the in-country investment houses are not investing, and are holding back and have for two years, tells me a lot. I can get a whole lot of bang for my buck reinvesting my profits from my lead gen business back into my business in two years. Since I average 80-90% profit margins, that give me a whole lot of capital to plug back into making me more money.
Sure, property in Mexico can be cheaper than in the U.S. or Europe. Taxes tend to be somewhat lower, and maintenance and upkeep cheaper since labor is cheaper. There are challenges though. Materials can be frustrating to come by. Local amenities may or may not be present. There are some areas where safety is an issue, same as in the U.S. But one big thing is you have to know the area and if the infrastructure is present. Mexico is a very large country, something we forget up above, over two million square miles. That vastness and centuries of poor people and a poorer economy means Mexico does not have the transportation, utility, available materials, retail, or other structures in many areas to support you or your rental property.
I am SMH at why people would want to go through this. Yes, go down and live there and enjoy the beach. But tie up a bunch of investment money in a country known for long bureaucratic red tape, where pay-offs are nearly mandatory, and you have to find reliable, trustworthy attorneys, bankers, and local officials to get things done. Let’s just hope theirs have a better reputation than a lot of ours do.
It is really interesting that the investment companies are trying to push the millennial avenue. Most the millenials I know, except those around my business hang out crowd, gripe every time I see them about not being able to make ends meet with their college degree and two jobs. I was one of those a while back. Not anymore since I started my lead gen business 4.5 years ago after hearing about Dan’s coaching program.
And modern luxury condos on the beach? The only millenials I know that can afford something like that are the ones I hang out with! Period. And it is because we all are making our own money in our own legitimate businesses helping businesses get more customers. And we are making good money. I will push 7 figures this year. Not bad for a not quite 30 year old who was making $35K a year working stupid hours four years ago while trying to run an at-home MLM and re-shipper business at the same time.
I regularly make 80-90% off my lead gen business. Let me explain some. I knew nearly as soon as I graduated from college and took a corporate job that I would never have anything but rent receipts if I did not get my own hustle going. So I started to research, trying to locate a good side business that fit into a 40-60 hr/wk schedule that I was already working (computers). I tried lots of things, and made some decent money, but not enough to really doanything. I wanted enough to buy a condo, or at least take a decent vacay without hitting my credit cards stupid. I was getting really frustrated, burnt out, and exhausted, besides being really discouraged. I knew I did not want to live like this.
One night I happened to run across a guy talking about the future of business on the internet. Well, I was already there, that was my job, and that was my second and third job. He started talking about how many small businesses had no clue and how much help they needed finding customers. I was intrigued. The guy gave a link to set up a meeting call about a training program for the lead gen coaching program he built.
I have to admit, I was pretty jaded by then. But there was no cost, the guy, whose name was Dan, came off as a pretty square shooter and he was working what he preached. That impressed me. It cost nothing but a little time, so I said “what the heck” and signed up for the call. When the call happened, I got all my questions answered, and I asked some tough ones.
All my questions were answered. No one tried to blow smoke up my skirt. They did not own a piece of me afterward I paid tuition, no commission, no nothing. Just lots of help and a free resources for help. I did some digging around and found out that everything this Dan guy said checked out. I signed up, paid my tuition, studied my butt off. And I never looked back.
In five months I burned the J-O-B. You read that right. Five.
I built my first lead gen site while going through the training:
Within the first week I had rented out the leads from the site. I still own the site, same company gets leads and pays me, for 4.5 years. I get $750 a month, direct deposit, rarely touch it. Once I take out a little for monthly expenses, and I have cleared over $36,450 profit on this site for about six hours of initial work. That is way better than not knowing if I even have a good title to a property in Mexico.
I continued to build sites out, and now, not quite 30, I am getting to what a lot of people would call really comfortable. I name my own hours. I travel when I want to. There are millions of businesses out there that need our help. I can only keep up with a handful of them, so there is plenty of opportunity to go around.
Yes, it is work, especially at first. Yes, you have to invest a little bit, but only a little bit, for the potential return. How much return are you getting from your 9-5? A watch in 25 years? I do not have to worry about layoffs or my job being outsourced. And best of all, I do not have to drive through winter weather any more to fight traffic to get to the office. I get up, take a swim, and wander out to the deck with coffee and my laptop. Such a tough way to have to run a business.
Are you tired of the rat race? Would you like an honest, proven, solid track record business of your own that does not require a six digit franchise fee? Would you like your hard earned money to go towards something you can leave a legacy behind for your family? Help out special concerns? If you do, stop the noise in your head for a short call to explain what and who we are. Click this link https://www.bestrealestatedirectory.com/lead-gen/ and sign up for a phone appointment.
There is no charge. We will not hustle you. You are free to hang up or say it is not for you at any point. And you will never, ever, hear from us again if you decide to do that.
When I think of Mexico real estate, I think of a nice cold beverage, the setting sun, and what club we are all going to go hit later, after a nice restaurant meal. Or maybe we will just stay here and have a heck of a fiesta in this gorgeous condo we rented for the week. Tomorrow is going to be tough day, we have to go windsurfing.
Tough to be your own boss sometimes.