Onward, the Mexican land rush.
Lured by beachfront vistas, quaint colonial
backdrops and a historic construction boom, thousands of Americans
are heading down Mexico way to snap up vacation homes, retirement
villas and investment properties.
Heartened by wide-sweeping reforms in the country's
judicial and foreign-investment systems over the past decade
or so and heightened interest from investors, many Yanks have
watched the values of their south-of -the-border properties
head north in surprisingly short order.
"The market has just become prolific in
Mexico, with about 1.5 million Americans now owning property
there," says Mitch Creekmore, vice president of the Stewart
Title Guaranty de Mexico office in Houston and one of
America's foremost experts on Mexican real-estate acquisition.
"Values in some markets have tripled in five years --
far exceeding the rates of return you find in the United States."
Yet foreigners are still paying a premium to finance such
deals, either through developer/seller financing that requires
at least 30 percent down, or pricey, hard-to-get mortgage
loans at Mexican banks that can hover well above 15 percent.
That's why several U.S. institutions are gearing
up their own lending programs to cater to the growing niche.
Only a handful of banks, including Houston-based Conficasa
Holdings; Birmingham, Ala.-based Collateral
International; and Phoenix-based Marshall
& Ilsley now provide mortgages to U.S. buyers and
developers in Mexico.
Richard Brinkley, a real estate broker with
Lionhead Realty Services
of Palm Beach Gardens, Fla., has sold numerous residential
resort-area properties in Mexico. He says while financing
is available, buyers may find it more cost effective to use
or additional credit lines in the U.S. to pay for Mexican
Brinkley said Mexico is really like Florida was 40
years ago when the American dream was still attainable. And
Mexico has lower property taxes and total cost-of-living expenses.
You will pay $500 in annual property taxes in Mexico for a
property you'd pay $20,000 on in Florida. And for people
on fixed incomes, that's very important.
Collateral announced its "Mexico -- My Dream" program
in late 2004, focusing on the vibrant Cancun and Riviera Maya
markets. The company plans to step up its program in 2005,
says Creekmore, whose firm, along with a few other U.S. companies,
offers title insurance in Mexico.
Previously, American banks were reluctant to
lend monies for Mexican real estate because of unreliable
foreclosure laws and the potential for corruption, says Jeronimo
Gomez del Campo, partner in the Phoenix office of Bryan
Cave LLP, who specializes in the representation of U.S.
companies and financial institutions investing in Mexico.
"But it is next to impossible now for corrupt
officials or other individuals to mess with the chain of title
or encumber properties for no legitimate reason," says
Gomez del Campo. "Under NAFTA and other reforms, the
Mexican government can't discriminate against foreigners in
terms of property ownership."
Hence, Mexican haciendas are becoming hotter
and bigger targets for many Americans and Canadians, especially
those who have been priced out of U.S. resort areas, he says.
Rules, restrictions remain
However, Mexican real-estate laws still differ substantially
from the American system and there are many crucial nuances
to consider before cutting a deal for Mexican property, say
While foreigners can purchase real estate in
their own names throughout the country's interior, they can
only buy property in Mexico's "restricted zone"
-- within 31 miles of its coastlines and 62 miles of its borders
-- as the beneficiary of a Mexican bank trust called a "fideicomiso."
In this arrangement, the bank technically holds legal title
to the real estate but its beneficiaries, who are known as
the "fideicomisarios," retain the right to use,
improve, sell, and will the property as they would if they
were fee-simple owners.