Is This the Right Time to Invest in Mexican Real Estate? Mark Koba - CNBC.com
go to original September 19, 2012

Kathy and Ken Brady were looking to invest some money when their research took them to the town of Tulum on Mexico's Yucatan Peninsula.

The couple, who rent an apartment on New York's Upper East Side, paid about $320,000 of their savings for 2 hectares, or nearly 6 acres.

"We weren't out to buy land, but after talking to a local real estate broker, we decided to do it two years ago," said Kathy Brady, 61, who is about to take her exam to be an alcohol and drug abuse counselor. "He made it easy for us."

The land is covered in jungle overgrowth, Brady says, while she and her husband, 62, who works in construction design, wait for it to increase in value. And so far it has.

"I'd say it's appreciated more than 12 percent since we bought it," Kathy Brady said. "They're building an airport nearby, so it should go up even higher, and then we can sell it for development. Where else can you get that type of return these days?"

The Bradys, and others like them, are part of a move toward investing in Mexican real estate.

"We're starting to see purchasing again in Mexico," said Ron Hatfield, president of Del Mar Development in Los Cabos, Mexico, who builds higher-end housing there. "We sold around $67 million worth of homes so far this year. And other developments in Cabo are doing well, too."

While the real estate market in Mexico avoided the severe crash seen in the U.S. and other countries from the global economic crisis of 2008-2009, it did suffer a slowdown. Investment money dried up, while Americans and other foreign nationals sold their properties at low prices to cut losses back home.

But there's been a turnaround of sorts — with a slowly expanding Mexican economy coupled with the hope that recent presidential election results will provide internal stability — that's providing opportunities, analysts say.

"Prices in Mexico are going up slowly but are still low," said Alston Boyd, chairman of the International Committee of the Texas Association of Realtors, who has worked in Mexico. "It's a good time to buy there and a cheaper place to live."

With changes in the constitution over the years, the Mexican government has made it easier for foreigners to buy land.

"One of the biggest myths is that the government here can take someone's land. But that's not completely true," said Sean O'Neal, who was the broker for the Bradys and runs InvestmentPropertiesMexico.com out of Playa Del Carmen, Mexico.

What is true is that since 1995, foreigners can buy and sell property in Mexico through a Direct Property Deed. That gives them outright ownership — which means the land or home or both cannot be taken over by the Mexican government.

There is, however, a different set of rules for property on Mexico's coast line and borders. Foreigners can buy property within 60 miles of the border and 30 miles of the coast but must do so through what's called a "fideicomiso."

"Basically it's a trust set up through a local bank that holds the deed for a buyer, but they retain all the rights of ownership," said Jaime Zaga Hadid, a tax partner with BDO USA LLp.

Each trust lasts for 50 years but can be renewed after that. The property is not part of the bank's assets, and the owner can build, renovate, rent, sell or pass on the property to their heirs.

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