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Buying Mexican real estate gets easier

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.

 

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"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."

Barriers falling
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 second mortgages or additional credit lines in the U.S. to pay for Mexican property.

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 experts.

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.

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-- Posted: Feb. 4, 2005
     

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