By Patrick Connelly
It is, ultimately, the point where the process of living in Mexico diverges into two distinct paths. The question of whether to rent or to buy – to purchase that clifftop villa on the Pacific or just rent a nice place in the nearby town – plagues many a prospective buyer in the U.S. and Canada. The decision has more variables in it than a college calculus class, but here are a few things to take into consideration if you are having the same quandary.
1. Renting keeps your options open
If you are like me and have a total fear of commitment (relationships, locations, etc. etc.) then renting is perfect for you. Well, that and if you are just not totally sure on living abroad for long periods of time or permanently, or don’t fancy investing money in a property in another country. Renting can be a great option for the certain type of person, especially those new to Mexico. Buying or building a house ties you down to that property. Renting does not. Simple as that. If you find out that you hate Mexico and want nothing more than to stay in the U.S., it is much easier to cancel or see out a lease than it is to sell a home. And if you want to travel around Mexico or Latin America for an extended period of time, it is usually easy to sublet your rented property to recoup some of the losses.
2. Buying a house is an investment
While the global recession has driven down home prices in Mexico in recent months, owning a home south of the border is still a great long term investment. The Mexican economy hasn’t been hit as hard as the U.S. has and the situation north of the border will recover in time. In fact, many real estate professionals are predicting a strong buyer’s market in the coming months in hotspots like Puerto Vallarta and Cancun. With a bit of shrewd cunning great deals can be found these days and when the markets bounce back – and they will – owning a property in Mexico suddenly becomes a very, very valuable commodity.
3. There is far less of a financial investment when renting
Well, duh. Financially speaking, it is definitely the “safer” of the two options. While you certainly get more bang for your buck in Mexico than you do in the U.S., buying a home is still a major financial investment.
4. YOU own the house and deal with no one else
Anyone that has dealt with landlords knows it can be a real headache. Its no different in Mexico. The fact that you do not own your rental property and have to answer to a higher up may lead to squabbles over anything from redecorating to rent to leases. Choosing a good rental management company can prevent conflict if you want to rent.
On the other hand, when you own a house, you decide what goes in it, what additions will be put on, etc. etc. You are your landlord.
5. More choices when buying
Odds are, you will find a property for sale in Mexico that matches your desires before a rental. There are just more options out there to choose from. Rentals are only ultra popular in certain areas frequented by vacationing tourists, while good homes for sale exist everywhere.
The choice ultimately comes down to you. Owning a home in Mexico can be the experience of a lifetime, but it isn’t for everyone. My advice would be to rent a house for a few months in your desired location….get to know the culture, climate, and lifestyle. If you fall in love with it, jump in. If you hate it, simply back out or try a different region of Mexico. This is by far the smartest approach to take – many a gringo have made impulse buys after a two week vacation in Cancun or Cabos and ended up with a house they later realize they don’t want.
photo provided by Ze Eduardo at http://www.flickr.com/photos/97968921@N00/756377225/
I think many of the points mentioned above are true for the property world in many other countries and not just Mexico.
It’s always nice to own a house if you have the money to buy one that is.
You should definitely mention the Capitol Gains Tax imposed by the Mexican Government on selling ones house – there are a lot of string attached to this law – but, the consequences are MAJOR!
a.d. Donaldson, would you mind elaborated on what you know about the Capital gains tax imposed by the Mexican Government? How much is it? How does it work?
Anyone with any info on mexico’s capital gains tax laws??
Thank you
Be careful about buying propety in Mexico
Hotel owners in Tulum are learning the hard way that Titles and deeds don’t mean a thing in Mexico if someone big and powerful wants the land you thought you owned
These articles read like something out of the wild west
http://www.ireport.com/docs/DOC-27544 (from 2008)
http://www.pressreleasepoint.com/violent-raid-paradise-tulummexico
(just this past November 2009)
Why are people so gullible? You never OWN anything in Mexico unless you are Mexican or married to one. You get a 99 year LEASE when you ‘buy’ a house. I lived there and I know. The real estate agents are greedy crooks who capitalize on the naivete of gringos. No non-Mexican can outright own a business or a house in Mexico. Impossible. The USA is stupid in that we let anyone in and let them own, own and own more of our country. Not so Mexico. It is a place of many laws but lawless at its heart, yet they are savvy enough to build a fairy tale about ownership in their country. They are adept at getting money out of gringos! PS they really do not like us or want us there but have no choice because their economy is zilch without foreign aid. But they have laid a big fat trap in their supposed impressive real estate deals. They have to keep up the illusion that all is well in Tacoville so gringos will keep coming there.
Dear Been There,
You seem so hostile to a land that hosted you. If it’s such a horrible place why were you there? You are right.. mexicans really don’t like your kind nor do they want you there. I seriously think that with your racist ignorant attitude the US is the place for you.
I only know about the 23% tax you pay of the profit you make when selling your house.
And who is actually living in a house they bought for 99 years???
Mexico has a lot to offer. And I enjoyed my stay many times.
I am looking to buy a home in Alamos, Sonora. Title companies are insuring homes in Mexico as “fee simple title” which implies ownership forever not as a “leased fee title” which would be a reversion to the seller after 99 years. I feel that this 99 year period is not correct.
Been There,
If you are not in a beach zone which can involve a Fidesco (a trust), then real estate is based on “fee simple” ownership which is the same as US home ownership. You can even get title insurance which will guarantee ownership for you and those for whom you will pass down ownership. There is no 99 year lease.
I suggest you stay out of Mexico, its not for you.
Hi, I’m a realtor based in Toronto, Canada. I am organizing several real estate buyer/investor trips to San Miguel de Allende in late 2010, and early 2011. During these five day trips there will be many cultural outings, social gatherings, presentations on buying Mexican real estate, in addition to daily viewings of the wide variety of property and real estate opportunities available in this stunningly beautiful town. Real estate values continue to be competitive here, and compared to property in the United States and Canada, one can purchase a beautiful property for much less than in other North American markets. Foreigners can own full Title to their properties (unlike in other restricted tourist and coastal areas), and there are mortgage brokers available for financing of one’s purchase. Please contact me for more information, and I’ll be making more information available as we get closer to travel dates. Upcoming information sessions will also be held in the Toronto area.
The cost will not include travel, so you’d be welcome to join this trip if coming from another area in Canada or the U.S. This will be a great opportunity to explore the San Miguel real estate environment, with the assistance and guidance of a variety of local experts.
In addition to daily home tours, the itinerary will include cultural events, visiting art and furniture galleries, delicious cuisine, the surrounding locales, and meeting with local professionals experienced in all aspects of purchasing real estate in Mexico. Please feel free to contact me for more information.
David Murray MacLean, Sales Representative
Royal LePage Your Community Realty, Brokerage
I don’t think I would want to do either in Mexico right now.
David: I came across this blog inadvertently while searching for other information. As one of the greedy, crooked agents in Mexico, I’m glad to hear a voice of accurate reason. Hoping your trips are successful, but wanted to reiterate for those with concerns that there IS NO 99 YEAR LAND LEASE HERE, and all real estate agents here will only sell titled property which is clear and transferrable. A word to the wise is, ONLY deal with an accredited agent, ALWAYS have an agent representing YOU (the seller’s agent’s job is to get the most money for the seller!),have the correct purchase price recorded in your Fido or Escritura (recording a lower price only saves the original seller a small capital gains, but when YOU sell at yet a higher price, that difference will bite you in the butt), and remember that capital gains CAN be dealt with by a few minor improvements verified by official facturas. The Notario Publico’s role is to ensure there are no liens, no problems, and clean sale-abililty so they can collect expected/fair revenues for Hacienda(the mexican IRS).
One other GREAT advantage I don’t see mentioned is the 2% acquisition tax required in your closing costs. This is why those closing costs are higher here. That sounds like a LOT of hard earned money, but on the opposite side of the coin, EVERYONE pays it upon closing-even Mexican Nationals. However; annual property taxes here are almost non-existent. I recently sold a home for $389k USD that had a whopping $16 USD annual property tax…and the government gives you a discount off that amount if you pay by the end of January each year and save them from additional tracking. Mexico is a beautiful place, with a staunchly catholic population that still believes in family values. Yes, you can be cheated if you are vulnerable and uneducated in Mexican law, but these issues are usually driven by investor’s greed to ‘obtain a steal of a deal’. It can be a steal all right, but are you the thief or the victim? Have you prepared yourself, and are you armed with accurate information? Like the 99 year lease myth…totally untrue, but far too many still perpetuate it based on ‘old’ knowledge.
If you just remember you’re in a foreign country, and you act accordingly to protect your interests and your investment, there are far more straight shooters and friendly locals than there are bad guys.
I love it here. We’re here permanently now, and we’re loving the view, the ocean, the weather. We’re only a 2 hr flight from the USA, health insurance, car insurance, life insurance, home/title insurance are all available here, and I’m just a phone call away from children and grandchildren.
Personally, I wouldn’t trade waking to the birdsong and crashing waves on the beach for anything. When the economy up north turns back around, our ‘resort’ pricing will rise with it. This is a buyer’s market only because owners from up north are selling off their ‘candy’ and vacation homes to supplement their financial needs due to the economy they live in. We don’t actually get the flu here when America gets a cold. We have buyers from all over the world…though we do have less foot traffic because of the media mis-hype, that’s just a political maneuvering between the US govt and the new Mexican president they’re trying to control.
Don’t cancel your trips, and don’t let the media hype stop you from travelling. You’ll have a great time, you’ll be treated well in Mexico because they need to reassure you enough for you to return again next year. You’ll love the awesome weather, flora and fauna here. It can’t be experienced anywhere else! Come to Mexico; see for yourself.