Finding and Keeping that Second Home in Mexico

In 2003, the National Association of Real Estate Editors held its spring conference in San Diego. That conference included a bus trip southeast of the central core of Tijuana, Mexico, where Casas Geo, one of Mexico's largest residential developers, was building El Dorado, a 4,500-unit condominium project.

For $30,000 U.S., a buyer could get a 460-square-foot, three-room condo with the basics: overhead light and electrical outlet in every room, a kitchen, and a bathroom.

Casas Geo's target buyer -- a worker in a factory owned by a multinational corporation -- earned $550 to $1,100 a month. The typical monthly payment on a $23,000 mortgage is $150.
At the same time Casas Geo and other residential developers have been working overtime to bridge the affordable housing gap for Mexico's citizens, Americans began looking south of the border for a less-expensive warm-weather retirement than was possible in Florida or California.
What started as a trickle has turned into a flood, with a large percentage of the one million Americans who are buying second home in other countries heading to Mexico, not only Baja California, but Bahia de Banderas and Manzanilla and a number of other destinations.
Until about six years, it was easier and safer buying property almost anywhere else. There wasn't much information available to buyers, who tended to have to take the word of often unscrupulous real estate agents and developers, resulting in well-publicized cases in which Americans lost their money.

What has made ownership easier, according to the authors of Cashing In On A Second Home in Mexico (Crabman Publishing, $19.95) is that the Mexican market has become more accommodating to buyers north of the border.

Mexico's real estate markets have changed, real estate agents have developed a mindset favoring security and disclosure for purchasers and American buyers have become much better informed and educated," say veteran real estate writer and radio host Tom Kelly and Mitch Creekmore of Stewart International, a recognized expert in on Mexican property.

The changes have been brought about primarily by the Mexican dependence on tourism and foreign investment in real estate, Kelly and Creekmore say. Real estate deals have become more transparent, shifting from "that's the way we do business here" to using extended title searches, issuances of commitments for title insurance, third party escrow and closing rights, "and ultimately, title insurance policies guaranteeing one's right of ownership, whether fee simple in Mexico's interior regions or entitlement via the bank trust or a Mexican corporation for foreign purchases in a restricted zone."

The two men also think we've gotten smarter as buyers, owing to how important real estate is to our financial health and that of the economy.

Why is Mexico so attractive? Life can be laid back and relatively inexpensive. On the back jacket of the book, the authors quote AARP the Magazine: "For $600 a month, retirees can live in a three-bedroom home, with a gardener. For a cool thousand … well, you won't believe it."
But although buying in Mexico is becoming easier, the nuances aren't all that obvious. You may be able to speak high-school Spanish, but, as with English, words can have more than one meaning, and those meanings can reflect the effects of the culture.

That's why this book is as important to the first-time American second-home buyer as the Boy Scout Manual is to the tenderfoot.

Take the word "ejido," which means "communal." The ejido is an old communal farm formed when farmers in every Mexican village were given property to form a co-op. Under the Mexican constitution, the ejido is worked by everyone and owned by no one, which means that a foreign buyer cannot own it because the individuals who have a beneficiary interest in the land can't legally sell it.

A constitutional amendment allows the ejido to be converted to private land for sale that would benefit all of the users, or ejidatarios. The problems for American buyers occur when an ejido that hasn't been privatized properly is sold. The buyer has simply bought property that shouldn't have been sold in the first place, and the investment is lost.
Kelly and Creekmore guide you through the nuances of ejidos and other legalities peculiar to Mexican real estate investments. They also present real life experiences of American buyers, both good and bad, and serve as tour guides to popular destinations to help you make an educated decision.
It's true that much of this information can be found on the Internet. The difference is, of course, that Kelly and Creekmore have the kind of expertise that will help you sift through all of that information and make the kind of informed decision that will allow you to make a safe and sane investment in Mexican real estate..

After all, it is your money and you've worked hard for it. Spending $19.95 to protect your hard-earned cash is certainly worth it.

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Written by Al Heavens
November 10, 2005