NOPALΣ, Mexico Slowly but surely, acre by acre, Mexico's Baja Peninsula is becoming an American colony.
"For Sale" signs are sprouting all over the 800-mile-long peninsula, offering thousands of beachfront properties. Americans are snapping them up. They have already created communities where the dollar is the local currency, English the main language and Americans the new immigrants transforming an old culture.
"Everything's for sale, every lot you can imagine," said Alfonso Gavito, director of a cultural institute in La Paz, the capital of Baja California Sur, a state with 400,000 citizens and some of the last undeveloped beaches in North America. "It's like 20 years of changes have happened in three months."
This new land rush, involving billions of dollars, tens of thousands of Americans, and hundreds of miles of coastline, is gaining speed despite the fact that Mexico's Constitution bars foreigners from directly owning land by the sea.
Mexico's government wants foreign capital as much as Americans want a house on the beach maybe more. So it worked around the Constitution. In 1997, it changed the law to allow foreign ownership through locally administered land trusts. A Mexican bank acts as trustee, the foreigner its beneficiary.
It took about four years before that new system worked smoothly. But now, most often, it does. One result has been a boom in migration, speculation and permanent vacation. "It's human greed it's human nature," said David Halliburton, who owns a hotel outside Cabo San Lucas, on Baja's southern tip, where uncontrolled growth already strains the social fabric. "The amount of money coming in here through overzealous developers and buyers is staggering."
Baja is closer by land and air to the United States than it is to the rest of Mexico; state officials recorded more than 30 million trips by Americans who spent well over $1 billion last year. They say they have no idea how many Americans are living in Baja today, because a certain number are illegal immigrants who never register their presence. Anecdotal and statistical evidence suggests that the number is more than 100,000, probably far more, and growing fast since the Sept. 11 attacks and the souring of the economy in the United States two years ago.
"Since 2001, we have seen a boom in real estate sales, and the full-time population of Americans is growing rapidly," said Tony Colleraine, an American in San Felipe, about 160 miles southeast of San Diego. He said about one-quarter of the town's roughly 30,000 residents were Americans, many of whom want to "get away from the regulations and rhetoric, and get out of the bull's-eye" in the United States.
In Rosarito, an hour's drive south of the United States border, about one-quarter of the 55,000 residents are Americans. "An increasing number of Americans are moving here to escape their government's policies and the costs of living," said Herb Kinsey, a Rosarito resident with roots in the United States, Canada and Germany. "They find a higher standard of living and a greater degree of freedom."
At least 600,000 Americans again, an acknowledged undercount based on government records are permanent residents of Mexico. That is by far the largest number of United States citizens living in any foreign country.
Americans living throughout Baja say their new neighbors include professionals in their 30's and 40's putting down roots, not just retirees in recreational vehicles. In Rosarito, the new home buyers include lawyers and members of the military who commute across the border to San Diego, where housing costs are about five times higher. A pleasant house by the Pacific in Rosarito can cost less than $150,000; property taxes are about $75 a year.
Continued...
[ edited by Helenjw on Oct 26, 2003 04:07 PM ]
posted on October 26, 2003 04:18:27 PM new
I used to spend a bit of time in Baja around San Felipe (on the Gulf Coast). It was beautiful from Sunday afternoon when the North American tourists would depart until Thursday when they reappeared with their RV's and all terrain vehicles. There's nothing quite like being on the beach in the middle of nowhere to have 5 year olds driving their 4 wheelers through your campsite at 6AM.
There are also large colonies of ex-pats in Costa Rica and Belize. There are specific programs set up by the governments of these countries to help these pensionados relocate as their influx of dollars is welcomed.
Republican, the other white meat!
posted on October 26, 2003 05:00:50 PM new
A large number of the undeclared llegals are retirees and others whose only form of income is Social Security benefits that are not sufficient to support a lifestyle that includes both rent AND food in the US. The only plce they have been able to gfind affordable housing is in Mexico but if they declare their reidency the lose what income they have. A lot of property owners court American renters because they feel that they are more able to consistantly pay rent and so make sure that utilities that would be difficult for undeclared residents to obtain are taken care of.
As for the new devolpments, they are not as cheap as some would think. A friend of mine is looking at one now with a pricetag of 250K.
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If it's really "common" sense, why do so few people actually have it?
posted on October 26, 2003 06:27:53 PM new
One would have to be an idiot to buy real estate in Mexico. Because when a non-Mexican national does so, they don't really own the property. It's illegal for non-Mexicans to own property there. Americans who have bought property in Mexico, moved there legally and thought to live out their lives there, have found themselves out on their ear with no recourse. Censorship, like charity, should begin at home; but unlike charity, it should end there --Clare Booth Luce
posted on October 26, 2003 06:55:24 PM new
Bunni - you are right about owning the land and given the price, I think that my friend is being niave in trying to purchase this home (100K down, 50 year financing on the balance - and not even a jar of vasoline to go with it). The way these developers are getting around the land issue is thru these bank secured trusts however people need to be very careful - these trusts are often non transferable so if the buyer passes away, beneficiaries do not get right to the land that home that mom and dad poured their savings into is built on. There are going to be some interesting controversies over many of these properties down the line.
I keep telling my friend to just marry a mexican and apply for dual citizenship but she just looks at me like I'm nuts.
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If it's really "common" sense, why do so few people actually have it?
posted on October 26, 2003 08:14:50 PM new
bunnicula, let me clarify. It is not legal for a non-Mexican citizen to own land within 30 miles of the coast or border. Elsewhere, fee-simple title for foreigners is legal. The way around the 30 mile law is to acquire a property with a bank trust on the land. Instead of paying the landlord rent, you pay the bank, which is the owner of record of the land. This system was specifically designed to protect foreigners from the abuses of the past, wherein unscrupulous landlords leased lots to foreigners, waited for them to improve the property , and then took it back. The bank trust is guaranteed for 30 years, can be passed on to heirs, and is renewable 3 times. It is quite secure, and the 90 year time frame is a non-issue as there is strong support in the Mexican congress for changing the constitution to allow fee simple title on land to foreigners throughout the country. We owned (outright, I am a Mexican citizen) some beach lots in the community of Bahia Kino Sonora. In order to sell them to an American couple, they paid a trust fee to the bank, and they pay yearly lease payments on the property also to the bank. The bank bought us out of the property at a price we negotiated. We are not the landlords, we are out with our money and no encumberance. Mexico is encouraging foreign development of it's coasts and has gone to great lengths to secure the investments of individuals buying into those developments. It knows that most of this money is foreign, and is interested in keeping that cash flow coming in. There were some awful abuses in the past, but you don't hear of many now. It has become much safer, and when the constitution is amended to allow real property ownership along the coast, it will be very safe.Of course, developments fail, just like they do in the US, and when that happens, somebody is left holding the bag. That's usually the buyer, just like it is here. That doesn't make buying property in Mexico foolish. We know many US citizens who live part or full time in Mexico, and haven't heard any horror stories in years. Many of the ones we used to hear had more to do with misunderstanding of rules and procedures than they did with abuse.
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In this world of sin and sorrow, there is always something to be thankful for; as for me, I rejoice that I am not a Republican. -- H.L. Mencken
posted on October 26, 2003 08:19:12 PM new
I should add, US Title insurance companies are now writing title insurance policies, and US mortgage bankers are now making loans on Mexican bank trust properties. It is actually legal to deduct the interest on Mexican property on your US income tax, if the financing is through an American firm. You don't suppose title insurance brokers and mortgage bankers, who are NOT in a position to repossess property in Mexico, would loan on and insure the titles to properties that they thought were a foolish investment, do you?
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In this world of sin and sorrow, there is always something to be thankful for; as for me, I rejoice that I am not a Republican. -- H.L. Mencken
posted on October 26, 2003 09:15:04 PM new
Good to hear that things have changed. Though I still don't think I'd be willing to buy a home or property in a country where the bank holds the title in "trust" for me. I may have to pay the bank for my mortgage here in the States, but the title is in my name, not theirs. In Mexico, then, a change in government or law can still find you out on the street if property values go up and envious eyes turn toward you & yours. Censorship, like charity, should begin at home; but unlike charity, it should end there --Clare Booth Luce
posted on October 26, 2003 09:44:52 PM new
Prof - thank you for clearing up the transfer aspect. My friend was told that it was not transferable. Personally I think she is being taken advantage of by whoever is trying to sell her this property or she just is not getting her info right because I still haven't been able to figure out what the interest rate is on a 50 year mortagage of 150K that works out to a $800 a month payment..... She ends up paying nearl half a million. She can buy a beautiful inland house outright for what this company is asking for as the down payment.
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If it's really "common" sense, why do so few people actually have it?
posted on October 27, 2003 05:15:48 AM new
fenix, is your friend represented impartially, or is she dealing only with sales agents? Real Estate licensing in Mexico was almost non-existent in Mexico 10 years ago, and is now not well regulated. Basically, a sales agent can tell prospective buyers anything and get away with it. Your friend needs a Notario Publico who speaks English and spanish. Mexican notaries are specially trained lawyers who deal almost exclusively with real estate negotiations. NEVER go into a deal without one.
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In this world of sin and sorrow, there is always something to be thankful for; as for me, I rejoice that I am not a Republican. -- H.L. Mencken
posted on October 27, 2003 08:08:29 AM new
The only way you can legally deduct mortgage interest against US income is if you own the property.
In this case a trustee actually owns the property, and you, the beneficiary, have only certain listed and there-by limited rights from the property.
The creation of the trust must actually have a title delivered and passed to a trustee.
If the language and operation of the trust do not infact pass title to the trustee, it is an illusory trust.
In any event, "buying" property in this manner in a foreign country is nuts.
It is even ify buying property in Mexico under the terms of fee simple. Situations that can defeat a fee simple title in Mexico are different than in the US.
US property rights are born out of English common law and well understood and defined. Latin America has quite different nexus and interpretation of property law. In fact an award winning Latin American economist has a book and lectures about the lack of property rights in Latin America holding back economic development.
In any event, if you look how corrupt and incomprehensible the justice system is in Mexico, you'd be nuts to "buy" property there.
"Restricted Zone: Foreigners may not directly own realproperty located in the Restricted Zone. Instead, foreign-ers may obtain renewable fifty-year beneficial rights toresidential property in the restricted zone through aMexican bank trust (fideicomiso). The Restricted Zonecomprises all property within 50 kilometers (31 miles) fromthe coast and 100 kilometers (62 miles) from the interna-tional land borders."
Even if you are comfortable buying through a trust, you must pay fees to the bank to maintain the trust -- and you have no control over how much those fees may rise --- and you need permission from the government to rent the property.
Also, even if a US title insurance company risks writing a policy for a property in Mexico (which I doubt many would), if you read the terms for title insurance, it is only good as against claims that are entered in the public record before the date of the title research as dated on the policy. Any claims against title in the property that were not in the record prior to the policy date are not insured risks.
"Article 27 of the Mexican Constitution discusses the ownership of lands and waters. The Article grants to the Mexican Nation ownership of the land and water within the national territory, and provides that the Nation shall have the power to transfer ownership rights to such properties to private individuals, thereby creating private property.
Section I of the aforementioned Article 27 grants the right to acquire the dominion of land and water only to Mexican individuals and companies, and grants to the State the discretionary power to grant the same right to foreigners, subject to the condition that the foreigners agree with the Ministry of Foreign Affairs to consider themselves Mexican nationals with respect to the property acquired and not to invoke the protection of their home governments with respect to the same. If said covenant is breached, all rights to such property shall revert to the Nation."
As you can see, the Mexican government owns all land and water, and only by political fiat can you own land in Mexico. There is no constitutional right to private property, nor is there an established body of law that protects the landowner from the political whims of whoever may be in power. Why do you think the property reverts back to the Mexican government should you invoke your rights under American law and/or jurisdiction ? If owning property fee simple in Mexico was no different than in the US, why is this conversion clause in the constitution ? It is absolutely clear, property ownership in Mexico is at the political whim of the government. Mexican fee simple is good only until socialists or communists are back in power.
[ edited by reamond on Oct 27, 2003 08:38 AM ]
[ edited by reamond on Oct 27, 2003 08:47 AM ]
posted on October 27, 2003 09:58:08 AM new
Helen - you can always rent : ). Rents vary - Prof can probably give you an idea of the northeastern areas. I was offered a 3 bedroom with a pool in Otay (eastern Tijuana area) for $450 a month. One of the people I have been dealing with in Guadalajara is paying $150 for that same house. If you are curious just do a little reasearch regarding the climates and such that you are looking for and take a vacation. There are discussion groups with American living in Mexico where you can find people in different areas you may be curious about that can give you advice, tell you what types of things they have encountered, even little tips and tricks once you get there (like if you order cable internet access don't bother ordering cable too - they haven't split the signals).
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If it's really "common" sense, why do so few people actually have it?
posted on October 27, 2003 10:38:46 AM new
fenix - That sounds like a great deal for you...especially since you know the language. I was just attracted by the ocean front property for only 150,000 with taxes at 75.00 per year..Wow and LOL! In Maryland, a deal like that would start at over a million. The county real estate taxes on my little house and a small commercial lot are over 9,000 per year.
posted on October 27, 2003 10:48:19 AM new
After what happened to Mexico after they let Americans move into Texas, N Mexico, and California, I can see why they have these draconian property laws.
History has shown them that after enough of us move there, we will revolt and declare a republic, and become a territory of the United States.
Perhaps not a bad idea. It would certainly solve the immigration issues.
