Mexican Myths: Buying Baja Real Estate
Posted by Cameron Boyle & Angie Potter on November 19, 2007 – 8:12 pm -In our time here doing real estate in Mexico, there are several questions that come up again and again. Two questions come up more consistently than the rest: Can foreigners own property in Mexico or is the land only leased? Are all transactions in cash or will US banks lend money for Mexican property?
The first question is loosely based on fact. It is true that the entire Baja Peninsula is considered a “Restricted Zone,” so foreigners can’t hold fee simple title. However, in 1971, Mexico established the bank trust (fideicomiso) to encourage foreign investment in Mexico. The bank trust is basically a work-around that allows foreigners to effectively own land in the Baja. The mechanics are fairly complex, but the result is that the title to the property is transferred to a Mexican bank with the foreign buyer as the beneficiary. The foreign buyer maintains all the rights of ownership, including the ability to buy, sell, lease, improve, transfer, etc.
Because of this legal construct, closing costs in Mexico are higher typicaly than they are in the US, usually adding between 5%-10% to the purchase price. But the bank trust has opened the Baja up for foreign investment, and business has been booming ever since. Cabo San Lucas is now home to a Wal-Mart, Sam’s Club, Costco, Home Depot, and Office Depot. There are over 400 realtors and hundreds of properties change hands daily in Cabo.
Will US banks lend in Mexico? Until recently the answer to this question has been, No. Most transactions since 1971 have been cash transactions with some builder financing. Fortunately, that has changed. Now, not only will US banks lend, but they will also cash-out refinance and loan against land for construction costs. Additionally, programs that have been staples in the US are gradually migrating south of the border. Currently, you can purchase with as little as 20% down. No-doc and stated income programs are also available for those with qualifying credit scores (typically above 650).
Cabo is golden, both aesthetically and for the investment-minded individual. Foreigners usually find they have significantly more buying power in Cabo and the options have never been more prolific. Don’t let some old rumors keep you from looking into things for your self. Find a credible Realtor and book a trip. You’ll be glad you came.
Cameron Boyle and Angie Potter are realtors for Prudential California Reality Cabo Gold Division. You can visit their website at www.goldencabo.com
Cabo San Lucas Real Estate!
