Lease/Option

Lease/Option

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Thanks to all of you who responded to my request for help in a potential lease/option in Todos Santos. Thanks to all the feed back we have backed off the decision and have declined the opportunity. We shall continue to look for housing, perhaps on the mainland. Each of you are really appreciated. Thanks for your truthful opinions.
Dr. Mike
Dr. Mike

http://www.smarthealthchoices.blogspot.com

There are hundreds of paths up the mountain,
all leading in the same direction,
so it doesn't matter which path you take.
The only one wasting time is the one
who runs around and around the mountain,
telling everyone that his or her path is wrong.

Hindu teaching

Feb 24, 2006, 11:13 AM

Post #2 of 37 (2415 views)

Re: [drmike] Lease/Option

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Dr. Mike,

Great! Proof that this website really does provide a seriously good service for folks and the small registration fee can quickly pay for itself in benefits provided...

One thing I want to recommend... regardless of where you chose to live, Todos Santos or elsewhere in Mexico, please start out by renting and live there awhile before actually buying a property. For one thing, you'll find that there's a lot more available that's not advertised and that the (true) prices are a lot (LOT LOT) less than advertised.

Plus, you'll find out if the reality of living in your chosen location is really where you want to be.

After a year or two you're going to know a lot more about Mexico, about a lot of nice places to live in Mexico that you will encounter, and about whether you really want to make a permanent financial committment in a particular location.

My advice: don't commit to anything too soon.

mexicomike

Feb 24, 2006, 2:07 PM

Post #3 of 37 (2383 views)

Re: [DoDi2] Lease/Option

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How true! While I am involved with financing Americans buying property, at the risk of cutting my own throat, I agree that waiting and looking and getting to know the market is the key to getting a good deal. Most of the people I deal with are paying way too much for their properties simply because they are new to Mexico and haven't learned to shop around. "In Mexico, the one who is in a hurry loses." -- from one of my books.

"Mexico" Mike Nelson
www.mexicomike.com
Writing about Mexico for 40 years.
Maps, Road Logs for drivers
Author of "Live Better South of the Border."
"Spas & Hot Springs of Mexico."
Mexico is a state of mind.

Feb 24, 2006, 2:48 PM

Post #4 of 37 (2375 views)

Re: [mexicomike] Lease/Option

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It is my opinion that those of you planning to move to Mexico in your retirement are being ill served by the notion that you should rent here until you are more familiar with the territory. One of two things is going to happen in Mexico:

(1) The country will become politically or economically chaotic and property values will decline - an unlikely event but possible.
(2) Property values in locations considered desirable by foreign investors and retirees will skyrocket and you will be forever priced out of the market for a retirement home that is reasonably priced.

The latter possibility will be driven not only be the desirability of Mexican properties but by the need for U.S. retirees to get out of the upward spiral of property values, taxes and the cost of living.

California and New Yorker Boomers will be moving here in droves and driving up property values. This is a virtual certainty. Rent for six months or so but procrastination will cost you big time. Add to that the fact that, as a renter here, you are a second class citizen subject to the whims of a merciless landlord and you are in danger of having to move to Bangladesh to find a home.

We know people who came here four years ago and lamented the fact that Californians had driven the value of properties they found desirable up to about $100,000USD. They refused to buy. Those same properties are now worth at least $250,000USD. Poop or get off the pot!

I hear you can buy a fine farm in Zimbabwe, an extraordinarily beautiful country, for under $30,000USD. Maybe Mexico is not for you.

(This post was edited by Bubba on Feb 24, 2006, 2:49 PM)

Feb 24, 2006, 2:56 PM

Post #5 of 37 (2369 views)

Re: [Bubba] Lease/Option

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OK. Let me add this disclaimer to what I posted above.

If you run into a property that's going to double in value over the next 12 months you should buy it right away. Or let me know about it so I can buy it.

Hahaha.

Feb 25, 2006, 6:54 AM

Post #6 of 37 (2315 views)

Re: [DoDi2] Lease/Option

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OK, I also have a disclaimer. Only invest as much money in a home down here as you can afford to lose. If you buy in a place popular with foreign retirees prices will be high but demand will likely drive proces even higher. If you buy in the country away from those popular destinations and larger cities with active real estate markets you have two major risks:
- Clear title risk
- Illiquid real estate market risk

Theses are serious issues down here and the buyer who is new to the country is normally blind to those risks at first.

CCarol

Feb 25, 2006, 9:34 AM

Post #7 of 37 (2286 views)

Re: [Bubba] Lease/Option

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Bubba, you are quite right. Renting anywhere is throwing money away and shouldn't be considered for very long. I do agree it takes time to get a "feel" for location, but after that, go for it. It doesn't really take very long to know if a place is right or not. I wish we would have bought property when we first read Mexicomike's book about living SoB. Now, we'd have to sell everything here to do so, as we've been priced out of the market otherwise. This would work for me, but my other half is reluctant to make a big break and call Mexico home. But if we'd jumped years ago, we could have the best of both worlds.

<sigh> Live and learn!
Carol

"Be kind, for everyone you know is facing a great battle." (Philo of Alexandria)

Ed and Fran

Feb 25, 2006, 9:39 AM

Post #8 of 37 (2286 views)

Re: [Bubba] Lease/Option

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Heck, it's probably time for my monthly "I agree with Bubba" post.

Not having any personal experience in expat popular areas, I can only say that imho I can't see prices going anywhere but north in areas like Ajijic and SMA. I'd suspect that demand will continue to increase faster than supply, at least for the forseeable future.

I have a lot more experience, as Bubba succinctly puts it, "..away from those popular destinations and larger cities with active real estate markets..". Or as I would normally say, out here in the "lesser provinces".

Maybe in the better neighborhoods here houses may sell a bit more rapidly, but even in Tuxpan's premier neigborhood "Jardines" (where I don't live by the way, but we do walk the dogs there) I've seen 'for sale' signs on houses that seem like they have been there forever. Turnover here is real slow, maybe slower.

Fortunately we're not planning on moving in the near future, because I can't even imagine how long I'd have to wait to find a buyer for our house.

Regards

Ed & Fran

Feb 25, 2006, 10:21 AM

Post #9 of 37 (2279 views)

Re: [Ed and Fran] Lease/Option

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Thank you Ed & Fran:

I know it kills you to have to agree with me but your comments are very important for people who are starry-eyed about moving down here.

It takes time to know another culture. I lived in Paris for quite some time then, years later, married a French woman in Alabama and became, as a result, a part of a French family. It is astounding what I did not know about France despite having lived there for about a year as a bachelor but I never would have understood my own ignorance if I had not married into the culture. If you think you are going to absorb Mexican culture by moving to some podunk without Mexican connections and walking around the plaza going "Bro!" in Spanish, let me tell you that the best outcome for you is that the locals will come after you with the butterfly nets. There are exceptions to this. I think Lerdo Rolly is one of those but always remember - wherever you go, there you are. After the move and furniture arranging - what then?

mexicomike

Feb 25, 2006, 11:28 AM

Post #10 of 37 (2264 views)

Re: [Bubba] Lease/Option

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Good points, Bubba. I agree that property values are escalating very rapidly -- the word crazily comes to mind. Some tales of property doubling in a year are true, depending on the area. If someone is sure that they want to live in Mexico and are sure that they have found the right place to live, then, of course, buying sooner than later is smart.

However, I have also spoken to many people who jumped into buying something before they really knew that Mexico was for them. From a financially speculative aspect, they came out okay, but there is more to it than that. Moving, whether from one town in the States or to a foreign country, is traumatic and not something to be done lightly. Bringing their household goods down and then having to ship them again cut into their financial rewards.

For those just seeking cheaper living, Nicaragua and Brazil (among others) are cheaper than Mexico. For those seeking the Mexican experience, Mexico is the only choice.

The housing market (generally) in the States is cooling off and I believe that this will eventually trickle down to expatriate housing prices in the States. But my skills as a financial prognosticator should be taken with large doses of sal. The availability of home loans for Americans will no doubt fuel a rise in prices in the short term and negate any tendency of the market to decline. I didn't buy in Pto. Escondido in the 80's or in San Diego, CA in the 90's, or come to think of it, anywhere in any decade, simply because I didn't have the money. I still don't.

"Mexico" Mike Nelson
www.mexicomike.com
Writing about Mexico for 40 years.
Maps, Road Logs for drivers
Author of "Live Better South of the Border."
"Spas & Hot Springs of Mexico."
Mexico is a state of mind.

Rolly

Feb 25, 2006, 11:30 AM

Post #11 of 37 (2262 views)

Re: [Bubba] Lease/Option

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No, Bubba, I am not an exception to the rule. Without my connections to a local family, I'd be dead in the water.

Rolly Pirate

slats

Feb 25, 2006, 12:12 PM

Post #12 of 37 (2252 views)

Re: [Bubba] Lease/Option

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Having just finished reading "Cashing in on a Second Home in Mexico," I'm now an expert on this subject (tongue firmly in cheek!).

That book, along with comments in this thread, have me chomping at the bit to get me some Mexican real estate, though. I agree that home prices are going to skyrocket as the boomers retire, especially as their corporations are taken over, and their pensions are slashed. I can't believe some of the prices I've seen online on attractive homes on the Pacific coast. Homes I know would cost 10x as much just NoB. Waterfront land is getting eaten up around the world.

As to titles, that book gave me a lot more confidence to buy in the restricted zones than I previously had. They specifically cite the advantage of taking advantage of US lending firms who'll now loan money for Mexican property. That they will do extensive title searches to protect their own interests, and that US title insurance can also be purchased. These are added expenses, but worthwhile ones when you're talking about the size of a real estate investment. Right?

I put these musings out there to either be informative, or be torn apart as a starry eyed loon in public. I welcome all comments.

Feb 25, 2006, 2:15 PM

Post #13 of 37 (2226 views)

Re: [slats] Lease/Option

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Dammit! There is so much misunderstanding about the issues of real estate investment liquidity and clear title conveyance that I must post again to try to clear up these misconceptions.

The issue of clear title conveyance is much more than a question of purchasing land under a trust in the restricted zone. You can come down here and purchase property anywhere using locally reputable notaries and real estate agents and 10 years from now they can still take away your property rights and kick your ass out of your sacred realm and you had better have a bandana and a stick to carry what belongings you have left in bro because you are gonna be riding the rails to Laredo and eating tortillas and beans when you can get them and, by God, I'm not kidding you about this and, furthermore, if you think that some shyster title insurance company which is - I promise you - just taking the notary's word on clear property conveyance - is going to actually reimburse you for your losses because they screwed up then you, my friend, know nothing about title companies which would litigate this crap until your great great granchildren are old folks even in the United States and down here they would not pay a claim if Jesus Christ himself came around and threatened the wrath of DAD and the Virgin of Guadalupe so get this brother. You are on your own down here and you had better be damned conservative when it comes to buying real property because you could be buying a pig in a poke no matter how nice everybody seems because, in Mexico (as well as many other places) screwing a bumbler out of his resources is considered an art form, especially if that bumbler is a foreigner.

I was sitting in the bar of the Beverly Hilton Hotel in Beverly Hills in about 1993 after having spent the last few hours as a banking consultant reviewing credit files of naive people who had walked into that environment with an open wallet and an empty mind and this obviously affluent Beverly Hills attorney sitting next to me at this mighty fancy lounge, who was. perhaps, a bit tipsy, said to me after proper introductory remarks, " I don't understand these wealthy rubes who come in here flashing their money and expecting to make a killing. They are dishonorable opportunists. We consider it the height of our art form to part them from their big ones. If they leave here in their underpants, they are the lucky ones."

If you expect sympathy from Mexico then stay in Duluth where you will still have some change to count.

(This post was edited by Bubba on Feb 25, 2006, 2:27 PM)

mexicomike

Feb 25, 2006, 5:28 PM

Post #14 of 37 (2195 views)

Re: [Bubba] Lease/Option

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Right you are Bubba! I always recommend people do their homework and not just take a real estate agent's and notario's word for things. Not all notaries are, shall we say, diligent in doing their research, or completely unbiased. The bank trust is not a guarantee of ownership. It's a guarantee that you will pay the bank a fee.

As far as title insurance, it sounds like a good idea, but it ain't like in the States. You are right that the title company is likely to just take the notario's word for everything.

Hire an independent notario. Find out the reputations of all parties involved. That's another reason for not rushing into buying something. In the Ensenada case a few years back, there were local attornies and notaries who knew that the title was not clear, but none of the people who bought the later disputed land contacted them. They lost everything. Well, the legiitmate owners did offer to sell them their houses back to them at today's prices, so I guess it's debatable that they "lost" everything, but they sure as heck didn't get to keep everything. The mayor of Pochutla recently sold property that wasn't his in Pto. Angel. And the stories go on.

As far as the writer "taking advantage" of the US lenders, my friend, they are a lot smarter than most of us. I work for one, and I don't think they are simpletons (well, maybe they had a lapse in judgment in hiring me). If things go wrong, believe me, they are the ones protected. There are a limited number of legitimate financial institutions offering loans to Americans. There are also some companies that are out-and-out dishonest. I spent three years contacting and investigating such companies and was, in a small way, part of the process that took place behind the scenes to get financing approved.

All that said, many people do buy property in Mexico and everything works out just fine. In fact, in the majority of cases things are fine. But, as I remember from my days as a Wall Street trader, greed (and speed) kills.

"Mexico" Mike Nelson
www.mexicomike.com
Writing about Mexico for 40 years.
Maps, Road Logs for drivers
Author of "Live Better South of the Border."
"Spas & Hot Springs of Mexico."
Mexico is a state of mind.

Jerry@Ajijic

Feb 26, 2006, 6:40 AM

Post #15 of 37 (2140 views)

Re: [mexicomike] Lease/Option

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I think some of you are talking about 2 different things. One is long or even medium term renting. The other is buying too quick. We lived in 3 differnt places here before we decided on the "perfect" place for us. You can and should live here for at least a couple of months to find out if you like Mexico, if you like your prospective location, etc. Are you going to be close to what is important to you or are you going to have to spend a contunuing fortune on gas getting from your less expensive location to the places you will be going. You woul do this even NOB so why do different here?

Feb 26, 2006, 6:48 AM

Post #16 of 37 (2141 views)

Re: [mexicomike] Lease/Option

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Right on, Mike.

I do try to keep up with local events by reading the local press and, this year alone, there have been two major articles about crooked notaries selling fraudulent deeds in local area developments or willing to forge deeds for a price. However, you can be pretty comfortable buying property here if you do your due diligence.

You'd be amazed at the reputable business people who came to me in the 80s asking to borrow money against Nigerian standby letters of credit that were so obviously phony that it was laughable. Then I saw our very own president's administration fall for that phony letter regarding yellow cake in Niger and starting a war over it.

PT Barnum had it right.

caldwelld

Feb 26, 2006, 7:47 AM

Post #17 of 37 (2132 views)

Re: [Jerry@Ajijic] Lease/Option

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Well, I must agree with most of what Bubba says on this subject. If, by the time you are old enough to move to Mexico, you don't know whether you like living in town or the burbs or the farm, you clearly were not paying attention in the earlier portion of your life. As for taking a few months to determine whether you "like" Mexico, trust me on this - it will take a lot more than a couple of months. You may well decide you cannot stand Mexico in a couple of months and to those in that category - good ridance. But it will take at least three and as many as five years for anyone to decide for sure that they "like" Mexico. That is enough time to buy and sell at least two properties even for those just "kicking tires" and renting would be quite silly.
dondon

drmike

Feb 26, 2006, 8:37 AM

Post #18 of 37 (2116 views)

Re: [caldwelld] Lease/Option

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This has been an excellent study in discussion. There are many good points that have been made by all parties and I think this thread will educate a lot of people considering the "big move" to Mexico. People have different opinions and experiences and I appreciate all who joined in the discussion and shared their knowledge. When deciding to move to Mexico, there is much to learn and discuss before making a decision. That is the beauty of this website. Those of us who have questions can ask and those of you who are willing to share your experiences and knowledge will do so. Thanks to each of you from all of us who are learning.
Dr. Mike

http://www.smarthealthchoices.blogspot.com

There are hundreds of paths up the mountain,
all leading in the same direction,
so it doesn't matter which path you take.
The only one wasting time is the one
who runs around and around the mountain,
telling everyone that his or her path is wrong.

Hindu teaching

slats

Feb 26, 2006, 8:49 AM

Post #19 of 37 (2109 views)

Re: [Bubba] Lease/Option

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This is the kind of feedback I'm looking for. Absolutely.

I will be doing all the due diligence I possibly can. I won't be retired for a number of years, though, and won't have huge chunks of time to spend in Mexico. I'm looking at areas where I think I'll enjoy not only living, but that I expect to balloon in price over the next decade. And preparing to take the plunge. I intend to visit those places, read the ads in the markets, and do the best deal. "Best" meaning value and safety of investment.

I wanna get in before all the boomers ruin another great something.

Feb 26, 2006, 9:10 AM

Post #20 of 37 (2101 views)

Re: [slats] Lease/Option

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Slats:

What is one to do. Our first choice in Mexico was San Miguel de Allende which we first visited about 1985. We considered buying there that year but prices seemed obscene at about $40,000USD for a beautiful home and one needed cash as one does today so we declined. Now, in our old age, we prefer the Lake Chapala area even though San Miguel is far more charming. Why? Well, it has a lot to do with the changes one experiences between 40 and 60. Now, in our sixties, we see San Miguel as too crowded and frenetic. Ajijic is more laid back and the lake front beaches and large garden we can afford here are more suited to home bodies such as we with our large dogs. However, that purchase in San Miguel would have been a fine investment and we could probably have sold that $40,000 home for around $800,000USD today. That means that we could have bought a magnificent home here at Lake Chapala and pocketed some nice change.

Here is what is amusing about life. At the same time we considered buying a home in beautiful San Miguel, we also considered buying a beachfront home on equally beautiful Ono Island on the Alabama coast which would, in all likelihood, have been blown to smitherenes by a hurricane by now. The Lord Works in Mysterious Ways as Reverend Billy Bob is fond of saying.

(This post was edited by Bubba on Feb 26, 2006, 9:13 AM)

morgaine7

Feb 26, 2006, 9:41 AM

Post #21 of 37 (2089 views)

Re: [slats] Lease/Option

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In Reply To

I wanna get in before all the boomers ruin another great something.

Don't we all ... but oops, I'M an early boomer, and I've bought a small property. Too late to save Mexico. Remember not to trust anyone over 30 ;-)
Seriously, this thread has been priceless, and I join Dr. Mike in thanking you all.

Kate <-- agrees with Bubba and Mexico Mike most of the time

Feb 26, 2006, 10:24 AM

Post #22 of 37 (2077 views)

Re: [morgaine7] Lease/Option

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Kate:

Do you really still live in Cairo? What a fabulous place to visit but living there might require some major bucks. This is a city I love but it's insane. I haven't been there since 1969 so perhaps I am being a fool.

How would you compare living in Cairo vs. Mexico City or New York?

Feb 26, 2006, 11:20 AM

Post #23 of 37 (2058 views)

Re: [Bubba] Lease/Option

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OK... let's see what would happen with say $200,000 that could either be invested in property or remain in one's retirement portfolio...

If invested conservatively in a 50/50 split between bonds and equities the $200,000 would generate an $8,700 (inflation adjusted) per year safe withdrawal rate over 30 years with a 95% historical success rate of never running out. In fact it's more likely that the original investment left in the account would be significantly higher than the original $200,000 even with the withdrawals. (www.fireseeker.com)

One could let those withdrawals on $200,000 pay the rent on a very nice place and continue to grow in a portfolio, or forgo the withdrawals, reinvest all the earnings, and let the $$$ really pile up.

IMHO, one's chance of good outcomes comparing speculating on Mexican real estate vs. investing in a balanced retirement portfolio, unless one is in the real estate business or knows a lot about the Mexican market and not someone who just arrived... I vote for the latter choice.

Of course buying a home is more than just a financial consideration. It has to do with happiness and lifestyle, having roots, a place one can call home. For that I stick to my recommendation that it's better to test the waters, getting to know the neighborhood, and waiting for that little voice that says yes, this is the place for me.

(This post was edited by DoDi2 on Feb 26, 2006, 11:33 AM)

Feb 26, 2006, 11:48 AM

Post #24 of 37 (2042 views)

Re: [DoDi2] Lease/Option

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Hold, it DiDo:

You are presuming a long-term return of 4.35% with no principal risk in a macro sense and this is nonsense . The brokerage industry wants you to put your money at risk because that's where their profits are. Also keep in mind that we are talking about time modified returns. As the door to eternity nears, the results become short term and one's goals change.

If I am retired in Mexico today it is because, in 2000 we saw the handwriting on the wall before the crash. Otherwise, today, I would be too busy flipping hamburgers to write to you and I think flipping hamburgers among fresh faced kids while adjusting one's colostomy bag is a no-win proposition.

Get off of this crap.

Remember this:

I and others who invested properly, own our homes debt free. We will always have a roof and some beans and tortillas if we need them.

When you are 28, you dream of traveling to Madagascar with your thumb. I know. I was a vagabond kid and put up with the cockroaches, rats and thieving customs agents all over the world. When you are 68 you dream of traveling to WalMart on a bus with 65 other old goobers looking to buy butt corks. Get used to it. That's life.

(This post was edited by Bubba on Feb 26, 2006, 11:50 AM)

Feb 26, 2006, 11:59 AM

Post #25 of 37 (2037 views)