Is the Mexican Real Estate Market the Right Place to Invest

By Daniel Smith, April 8, 2013

real estate marketIs it a good idea to invest in Mexican real estate? There is no sure way to ascertain that the value of real estate would increase in the future. However, certain factors do have an impact on the market conditions. Before you decide to invest in real estate in Mexico, you need to understand these points.

Market Conditions – Are they favorable?

The economic crisis of 2008-2009 did not crush the real estate market here; however, it slackened considerably. Foreign nationals sold off their properties at low prices to recover from their losses. No new investments were made.

Things have been slow; but the market has experienced a gradual recovery in the last two-three years. The situation is not quite as bad as it was back in 2010. However, it will take time to make a complete recovery from this impact.

As per real estate experts, the real estate market in Mexico is on its way to progress; though this will take time. Therefore, it is a good time to invest in this market, as the property prices are still quite low.

Fact or Fiction – Can the Government take away your land?

This is perhaps the most common myth you will ever come across about the Mexican real estate market. Just because the property transactions work in a different way does not mean they are used to take away your property!

Since the amendment of legal statutes in 1995, foreign nationals can buy or sell property in Mexico with a Direct Property Deed. You need not bother about the Government; it can only take away land if it is for a ‘public purpose’, a rarity. It also needs to include a payoff.

However, if you plan to buy land for sale in Cozumel, you may have to do it through a fideicomiso (a trust set up in a local bank to hold the deed for you). This rule is applicable if you want a property within 31 miles of the coast or 62 miles of the border.

Different Types of Properties – Which brings the most profits?

If your decision to invest in Mexican real estate is prompted by your desire to stay here forever or to build your vacation home here, you have to buy a house or a piece of land and build a house on it.

Market analysts agree that the prospects of commercial real estate are better than that of residential real estate. If your investment is in the commercial or retail sector, you may find it to be more profitable.

Another option is to buy a piece of land, which will be cheaper than a home, and build on it. You can sell it later for a better price. You may also buy an old, battered house, remodel it into something attractive and sell it for profit.

Taxes – Are they more than you bargained for?

The Property Taxes are quite low in Mexico; this makes it an attractive place for investors, especially if they want to keep the property for a considerable period. However, the tax issues may become complicated if you sell the property.

U.S. nationals have to pay capital gains tax in their country if they profit from a property sale in a foreign locale. Moreover, owners of Mexican real estate also need to pay capital gains tax in Mexico if they sell their property.

As an owner, you also have to pay a transaction fee for this. Make sure you consult a professional with knowledge and expertise in international tax issues. Otherwise, things may become too difficult for you to tackle.

Finances – Is help available for foreign investors?

The majority of the property transactions in Mexico are completed with cash. Whether you plan to invest in land for sale in Puerto Morelos or an apartment in Guadalajara, you may have to pay for it in cash.

However, you may also find financial help from U.S. institutions and real estate companies. Local financial institutions may also help you with the finances for your investment in Mexican real estate.

Another source of help with the finances is the real estate investment trust (REIT). The first such endeavor of Mexico was in 2011. The shares bought by the foreign nationals came in handy when they wanted help with the finances.

When it is the Right Decision…

By now, you are sure to understand that the real estate market conditions in Mexico are quite close to ideal now! The prices are low, thanks to the economic crunch; the properties are available, thanks to the changes in the laws; the taxes and finances are all in place! Al you need to do is find a real estate firm you can work with and invest in the right property.

The Mexican real estate market can provide quite a lucrative opportunity for an investor; all you need to do is plan it well, research the conditions and choose a real estate firm to partner with.

What do you think?

You must be logged in to post a comment.