Your home in Mexico: to rent, buy or build?
Updated May, 2009
Are you renting in Mexico or did you buy? Why? Can you own your house outright? These are questions I’m frequently asked. Generally, my recommendation is to rent for at least six months until you get the "lay of the land". That being said, I bought a house after only 3 days in Ajijic and I’m happy with that decision. I’ll discuss the pros and cons of each alternative.
Advantages of renting:
1. Try first and then decide.
There are many unique areas in which to live along the lakeside. Some folks choose to live within the traditional Mexican villages, more isolated from the foreign community. Others choose high-security gated communities. Some prefer the energy and hubbub of the downtown areas; others want a more quiet, secluded location. Some rely on local transportation and others bring their cars with them, allowing more options in choice of location. Some prefer to be down by the lake and others prefer a hillside view. Some even prefer to live in Guadalajara -- a city of six million people.
Many people I know who rent, have moved at least once if not twice before settling in to their ideal place. Others come down here for a few months and decide they don’t like it and move back to the States or Canada. Different strokes for different folks!
Renting keeps your options open -- that’s always been one of my life rules.
You can get weekly and monthly rentals or a longer term (up to five years) lease. If you decide Mexico living is not for you, there’s no need to sell your property back home. If you decide you want to travel for an extended period of time, you can often sublet your home or apartment.
3. Minimum initial investment
This is obvious. Generally, the first month’s rent is required along with a deposit. If there is a telephone in the rental, then a telephone deposit will also be required. Many rentals include the gardener. The renter is typically responsible for the maid and utilities.
Rental prices typically vary from $350 to $1200 per month depending on what you want and where you want to live. Rentals are at a premium during the two high seasons (November to April and July to August).
Disadvantages of Renting
Almost all rentals come furnished. The furniture and decor may not be to your liking. If you rent during the high seasons, choice is limited and you’ll probably have to settle for less than you want.
2. Rental management/landlords
Some rental management companies are difficult to work with -- even difficult to find. Others do a fine job. See if you can talk to previous tenants or neighbors to check before you sign on the dotted line. Older houses often have maintenance needs which a new renter may have difficulty managing. It may be advisable to hire a third party to check out the plumbing, electricity, appliances and water.
Advantages of Buying
1. Getting what you want
There are more homes available for purchase than for rental. And, if you find a home you like in an area you love, it is very inexpensive to have improvements made to your home. You can furnish the home and landscape the gardens to your taste. Often, existing homes are sold furnished, so you can move right in and take your time refurbishing and redecorating. Other homes can be "bare bones" and will require some investment before you move in.
2. Ease of purchase
You need to be careful purchasing property in Mexico. Work with a reputable notary and a reputable real estate firm. (In Mexico a Notario is much like a senior lawyer in the States or Canada. They are lawyers especially appointed by the government to handle property transactions, after additional training and examination.) Do your homework. Get recommendations. Locals typically know who is honest and who is not. You can buy property either through a bank trust or directly with a Deed of Trust. I signed only two papers -- an offer and a limited Power of Attorney. I gave power of attorney to my realtor to sign the final papers and simply had to wire in my funds. My deed was mailed to me about two months later.
3. An investment?
The economy is reasonably stable and both home and land prices have steadily increased over the past few years. Even with the drastic devaluation of the peso, homes purchased in American dollars lost only about 10% of their value. Since then, owners have more than made up that loss. Property taxes are almost non-existent and you can sell without paying Mexican capital gains if you own the home for 24 months while having an FM3 or FM2 Visa.
I bought an old, deserted house; gutted it and rebuilt with new electricity, plumbing, doors, windows, fixtures and additional rooms. I have a house I love and might possibly sell it for 50% more than my investment in it. Since it is in a desirable neighborhood I believe that when I’m ready to sell, it will not be difficult. My property taxes are $72 per year -- compared to $4,000 per year in California!
Disadvantages of buying
1. Large investment
Homes here are usually purchased with cash. Until recently, financing a home was not an option because of the high interest rates. Some owners (Americans or Canadians) will offer terms; but this is uncommon. Homes range from $30,000 to over $1 million. Most foreigners purchase homes in the $60,000 to $250,000 range. Like anywhere else, the higher the price, the better the view, amenities and quality of construction. These prices may seem very cheap to Californians, but not necessarily to Mid Westerners.
2. Lack of flexibility
Homes tie you down. Depending on the market and time of year, it may be difficult to sell your home and recoup your investment. If you buy a house and then discover you don’t like the location or your neighbors, your options are limited. If you travel frequently, you’ll need to find either renters or someone to look after your property. I don’t think it’s a good idea to leave a nice, furnished home empty. As in any country, a vacant house is an invitation to robbery.
3. Buyer beware!
There are very few consumer protection laws here. You buy a house "as is". There are no disclosure requirements. There are no mandatory inspections. Get the picture? You are responsible to become an informed buyer. Don’t count on your realtor to point out any of the negatives. We all learn painful lessons through this process. Do your homework! And, be ready to accept the fact that you’ll learn as you go. Don’t let a few surprises sour your attitude. It’s a beautiful country with kind people. Just be careful and get good help.
Advantages of building
1. A good investment
Like anything else, if you buy low and sell high, it’s a good investment. Land values have been skyrocketing, but with diligence it’s still possible to find fairly priced lots and build your own dream house. You’ll go through the agonies of the building process, but you’ll likely have a home which will be worth much more than you paid. The construction process is very different in Mexico; but there are good contractors and good architects to help you.
2. You get exactly what you want
This is a no-brainer. Go on tours of homes and understand what you want. Depending on your skill and background in building homes, you can do-it-yourself or hire competent people to assist you. Make sure you are here while the work is being done. It is absolutely necessary to supervise the work on a daily basis. There are no short cuts here.
Disadvantages of building
Because Mexico is a different culture, things just don’t get done when we believe they’re supposed to. It always takes longer. Be prepared for delays in getting materials and labor. I have a lot more patience now than I did when I first moved here. Slow down, relax. Go with the flow.
2. You don’t always get what you pay for
Although I didn’t build from scratch, I basically gutted my house, added a few new rooms and rebuilt from bare walls. I trusted in some wrong people, got a contractor (an American!) who absolved himself from any responsibility for things when they went wrong and had a maestro (brickmason) who took great pride in cutting corners. I knew nothing about building in the States and even less about building in Mexico. I do, however, know a lot more now. At the risk of being repetitious, do your homework. Most important, talk to several references and look at the quality of work.
Bed & Breakfasts
Two other options for short term living lakeside are Bed and Breakfasts. I have friends who lived there and very much enjoyed it while their home was being built.