What’s struck me recently about Mexico — apart from the usual beauty of its beaches, mysticism of its colonial cities, delectability of its culinary arts, and friendliness of its people — is how different the reality is from the perception.

In the United States, we’ve grown inured to hearing that you just can’t travel to Mexico, that it’s really too dicey these days. That message is enough to bring guffaws from the Americans I journey with south of the border. We laugh heartily, as we toast our hosts with another round of icy Coronas, while gazing out on an azure ocean from beneath the fronds of a palapa on a picture-postcard beach.

I was thinking these thoughts on a recent Friday afternoon, as I reclined and sipped a cool beverage at a sidewalk café in the artsy town of Tlaquepaque, just outside Guadalajara, Mexico. Sheltered from a brilliant sun by towering orange, lemon, palm, and eucalyptus trees, I watched as children frolicked in a public fountain, their voices rising in joy.

Not far away, young couples cuddled in the grass of a public square, and older men kibitzed on park benches. Tourists and locals alike window-browsed along a street lined with colorful pottery stores.

In short, the scene couldn’t have been any less threatening or scary if it had been lifted from a fairytale penned for preschoolers.

This wasn’t my first trip to Mexico, not by a long shot. I frequently have traveled there on business, to places like Ixtapa-Zihuatanejo, Cabo San Lucas, Acapulco, Mazatlan, Morelia, Taxco, Cuernavaca, Mexico City, and even less touristed spots like Patzcuaro, Saltillo, Poza Rica, and Tequesquitengo.

But this isn’t a travel story. It’s about personal finance. I hope to show why shrewd investors savvy enough to discard naysayers’ messages should put their vacation money into an undervalued investment in personal enjoyment.

The bases of a sound investment philosophy are well established. Good investors seek quality equities that are undervalued, but offer strong upsides. In so doing, they often disregard conventional wisdom, boldly going where others fear to tread. At payoff time, they’re glad they followed the road less traveled.

The lure of a bargain

Smart investors seek stocks that have been “beaten down,” or punished by bad news, but whose potential is not accurately reflected in that news. The stock price has fallen, and now offers a “buy low” bargain, and an opportunity for gains. That’s precisely what Mexico presents to those seeking affordable vacations.

Whether it’s an exclusive, modern hotel on a beach, a boutique hostelry built into a 17th century hacienda, or a simple bed-and-breakfast in a beguiling resort town, you’re likely to find prices and packages more affordable these days. Mexico is always less costly for Americans, given its proximity to the U.S., but fits budgets even better today, given the recent publicity it has unfairly endured.

What’s true of hotels is also likely to be true of airfare, restaurant meals, tour plans and all-inclusive deals. For a holiday that’s truly easy on the wallet, there may never have been a better time to consider Mexico than right now.

Investing in quality

I recently had the chance to chat with Alfonso Sumano, New York City-based regional director for the Americas for the Mexico Tourism Board. He told me something I didn’t know. “We have 14 AAA-rated, Five-Diamond resorts in Mexico, more than many other countries,” he reported.

“In fact, that’s more than Hawaii, Canada, and the Caribbean combined. That tells you a lot about the quality of service you can expect in Mexico.” You don’t, however, have to stay at a top-dollar hotel to enjoy quality in Mexico. And when you blend this quality with the affordability cited above, you get value, which is exactly what wise investors seek when picking investments.

Seeing opportunity where others perceive risk

Many Americans, accepting the word of the media with the same child-like obedience they do all media messages, express fear about traveling to Mexico.

Aware of that, on a recent trip to Mazatlan, the Western port city justifiably dubbed the “Pearl of the Pacific,” I asked an official of the city’s convention and visitors bureau whether thought had been given to comparing rates of violent crime in top U.S. cities with those in comparably-sized Mexican cities. I was betting, I said, Mexico would be shown safer in such comparisons.

It turned out that officials of Mexico’s travel industry were way ahead of me. Right about that time, such comparisons began being publicized, showing, for instance, crime rates in Mexico City are half those of Washington, D.C. While traveling to a well-populated resort in Mexico, it seems, you’re cocooned in greater safety and security than on jaunts to many major American cities.

Remember, too, that safety concerns are limited to a few border states representing a geographically tiny fraction of the huge country of Mexico. If you were a non-American, would you avoid the U.S. if skirmishes were confined to Michigan’s Upper Peninsula and far northern Minnesota and North Dakota?

Most American media worshippers aren’t aware of these facts, but you can leverage this wisdom as you plan your investment in your next vacation.

The takeaway is this… Many people put their money into an investment, then begin to worry that the value of that investment will head south.

I’m urging you to simply head south.

The post Investing in Mexico: Risk or opportunity? appeared first on MexConnect.

There is a way to protect yourself from currency fluctuations that may increase the cost of your property.

The worldwide foreign exchange market is huge, with average daily turnover totaling approximately $3.2 trillion. In this industry, around 95% of all currency transactions are purely speculative, with the majority of trades being made by banks and institutions looking to capitalize on currency fluctuations. The remaining 5% of currency transactions are for physical delivery, i.e. corporate repatriate overseas revenue, individuals purchasing a home abroad, importing a vehicle, going on vacation, etc.

Speculators pay close attention to economic data that is made public, and will buy or sell currency depending on what they think the future value of the currency will be. This creates a highly volatile market that can cost individuals buying property abroad significant amount of money if they aren’t careful with the timing of their transaction.

Pay close attention to the rates

If you are thinking of buying a property in Mexico, you will most likely need to exchange currency at some point. In most situations, property is sold in U.S. dollars, so if you are American you may not need to do an exchange until you pay for living expenses in Mexican pesos (MXN). However, if you are Canadian you will need to buy U.S. dollars up front to purchase the property. Canadian buyers should pay close attention to the USD/CAD exchange rate, as volatility in the currency markets can have drastic repercussions on the final Canadian dollar (CAD) cost of the Mexican property.

Let’s look at an example. If you had been looking to buy a property in Mexico priced at $300,000 USD at the beginning of August 2006, it would have cost approximately $330,000 CAD, due to the exchange rate. Only six months later, in February 2007, the same property would have increased in cost to $355,000 CAD. In other words, in six months, the property became $25,000 CAD more expensive!

Fortunately, there is a way to protect yourself from currency fluctuations that may increase the cost of your property by locking in the rate of exchange ahead of time with a ‘forward contract.’ Some currency exchange specialists can lock in an exchange rate for up to two years. This service is especially useful if you have a lengthy closing period or future property payments. With a ‘forward contract,’ you will have locked in the cost of the property in CAD and will be unaffected by any volatility in the currency market. One currency specialist, HiFX, provides a ‘forward contract’ free of cost and requires only a 10% deposit.

‘Retail’ Exchange Rates vs. ‘Commercial’ Exchange Rate

When it comes time to do a currency exchange, the fact is that many individuals will simply use the exchange rate offered by their personal bank. Most banks will make a profit on this transaction by adding a “spread” to the rate of exchange, in other words, buying the currency at the “market rate” and selling it to the client at a “retail rate.” The “spread” that the bank charges individual clients is usually much higher than what it charges its commercial clients, because the size of the transaction for individual clients tend to be much smaller.

Currency specialists can offer more competitive rates and help individuals save money. First of all, currency specialists can offer individuals exchange rates that are typically available only to the bank’s best commercial clients, because currency specialists have much lower operating costs. In addition, currency specialists will not charge any wire transfer fees, commissions, or bank receiving fees. Unfortunately, many individuals do not realize that these better alternatives are available.

Therefore, it always makes sense to shop around and see who can offer the best rate of exchange to make your money go further.

For example, currency specialist HiFX has seen an average savings of 1%-4% of the transaction amount for its clients, and in addition will transfer funds free of charge. On larger transfers such as for property purchase this savings can translate into thousands of dollars.

Canadians have amazing purchasing power today

Fortunately for Canadians, now is a very attractive time to look for a property in Mexico. The CAD has strengthened heavily against the USD over the last few years, making property in Mexico even less expensive. On September 20, 2007, the Canadian dollar reached parity against the US dollar for the first time since 1976. This means that Canadians have more purchasing power now than they have had in the last thirty one years.

For example, if you were looking to buy a $300,000 USD property in Mexico today, it would cost you approximately $300,000 CAD. If five years ago you had been looking to buy the same $300,000 USD property, it would have cost you a staggering $485,000 CAD. In other words, the same property is now $185,000 CAD (almost 40%) cheaper than it was five years ago!

If you have any questions about the currency exchange rates, or would like to learn more about HiFX fee-free currency exchange services, please e-mail, phone the author +1 (415) 678-2770 or visit his home page

The post The impact of currency exchange rates on your Mexican property appeared first on MexConnect.

Foreigners can buy or invest in real estate in Mexico without any restriction, except in the coastal and border areas. There, foreign individuals and branches of foreign corporations can have 100% control of property through a real estate bank trust. Mexican corporations with foreign capital are allowed to buy directly if the property is to be used for profitable purposes.

*Definition and Mechanisms of Trust:
A ‘Fideicomiso’ or bank trust is defined for real estate purposes as a transaction between a Mexican bank and foreign individual or firm investing in areas otherwise restricted to foreign investment, with the bank serving as a trustee or legal owner with respect to a certain real estate property interest and the investor serving as the legal beneficiary of the trust. The bank holds the title to the property in trust for the beneficiary who retains the exclusive right to use and control of the property.

As a trustee, the bank acts on behalf of the beneficiary in transactions involving the property, including the decision to transfer, assign or otherwise dispose of his or her interest in the property. The trust is essentially a contractual arrangement which, in most respects, is identical to the type of trust used in North America. Trusts are established for an initial 50 year periods and can be renewed.

*Investment in Real Estate through Trust:
New rules governing foreign investment through Real Estate Trust were put into effect in 1993. These rules provided the stability and protection of legal certainty for foreign investments. Mexican law now expressly provides that at the end of the 50 year term of the trust, upon request, the Mexican government will issue a new permit which provides for a new 50 year term no matter how much time remains on the original trust.

While a Mexican bank holds title to the property in these transactions, the bank is legally obligated to follow terms outlined in the trust documents that comply in all areas with the request of the foreign investor who is the trust beneficiary.

As the beneficiary, the foreign investors have a personal and exclusive right to use, occupy and possess the trust property, including the right to build upon it, subject to applicable construction and zoning regulations. In addition, the beneficiary may transfer or assign his/her beneficial interest to any person and may keep the profits from the sale of the property according to the instructions given to the trustee, subject to applicable tax laws and expenses of sale.

Foreigners that decide to invest in real estate in Mexico agree, because of such action, not to invoke the protection of their governments with respect to such properties.

The following article is reproduced with the kind permission of
the Consul General in Austin Texas.
It first appeared in their  Gaceta Consular September 1996 – Austin, Texas – Year IV, Number 25

The post How foreigners can purchase real estate in Mexico’s restricted areas appeared first on MexConnect.

Intercasa

Aug 7, 2014, 11:07 AM

Real Estate Appraisals in Mexico.

Here in Mexico we have three types of real estate appraisals. They are Tax (Catastral), Bank (Bancaria) and Commercial (Comercial). All appraisers must be licensed and most are engineers or architects who have postgraduate courses and state licenses and are also “peritos” or experts.
TAX OR CATASTRAL APPRAISAL
The Tax or Catastral appraisal is used to calculate transfer taxes and fees as well as notary fees. In years past they used to only use this value as the sales price on the deed instead of the real sales price that the buyer paid to the seller.
This had certain consequences such as the value being low the buyer paid less in closing costs and less in property taxes but with changes in the tax laws in 2010 people could only exempt capital gains once every 5 years.
Furthermore notarios became stricter and required foreigners to have an FM2 immigration document and later a residente permanente (now one can have either a temporary resident or permanent resident to qualify for the capital gains exemption 8/2014). Some people could not qualify for the new documents. This meant paying capital gains on the gain. Many people did not have a real gain but had a “phantom” gain due to upon sale they would use the lowball catastral tax appraisal value and for sale use the new real value. In many cases people actually had a loss, i.e. paid $2,500,000 pesos for a home in 2006 and in 2014 sold that same home for $2,000,000 pesos while the original deed shows they paid $800,000 pesos or the amount of the catastro tax appraisal. While technically selling at a loss, they would have a paper gain of $1,200,000 pesos and pay tax on that gain amount of 20-30%.
The catastral appraisal is based upon tax tables published by the municipality where each city block is assigned a value per square meter for the land. Then there are tables to value the square meters of construction depending on age of the property, style and condition.
THE BANK APPRAISAL OR AVALUO BANCARIO
The bank appraisal or avalo bancario is used when someone is buying a piece of property with a bank loan. It is similar to the US with comparable sales and a justification for the sales price.
THE COMMERCIAL APPRAISAL OR AVALUO COMERCIAL
The commercial appraisal or avaluo comercial is not widely known about but has many tax advantages when used properly.
One objective of this type of appraisal (Avaluo Comercial I.V.A) is to attack and modify the value of commercial construction on a property to save on the IVA sales tax.
Another objective of this type of appraisal (Avaluo Comercial I.S.R. Adquisicion) is to justify that the property has a lower market value than that obtained in the catastral or tax appraisal. This is usually necessary for properties being sold under value. If someone purchase a property for more than 10% under its value then the purchaser pays the I.S.R. income tax as they are receiving a benefit. This is the one exception to the rule where the seller always pays income tax in a sales transaction. Typical cases where this may arise are foreclosed properties, fire sales, vandalized properties or properties being constructed and not finished where some tax offices consider a property with a roof finished while there are no walls or anything else inside.
Here the appraiser tries to justify the lower value showing that the value really is lower due to the aforementioned circumstances thereby reducing or eliminating the I.S.R. income tax that a buyer may have to pay.
The last type of commercial appraisal is the Avaluo Comercial, con Mejoras I.S.R. Enajenacion. This appraisal is underutilized and can be a great way to lower your capital gains liability. Many people have done remodels to their properties but do not have official tax facturas to justify the work. This type of appraisal can be used to justify the work done on the property to raise your tax basis and lower or eliminate your I.S.R. tax liabilities. You will only get benefits from remodeling and improvements done to your property, not simple repairs because something broke. They will take 80% of the value of the improvements for purposes of calculating the I.S.R. (capital gains) tax liability.
Items your appraisal will need
1) Copies of your property deed with registration receipt
2) Copy of most recent property tax bill / receipt
3) Copy of most recent water bill / receipt
Mexican licensed attorney (Cédula #7928026) and official court translator (Perito Traductor). Mx 376-765-7553, USA 805-683-4848

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The real estate market can be divided into five distinct zones. The most northern zone, in the STATE OF NAYARIT, is approximately 45 minutes from central downtown Puerto Vallarta. The mega-resort in Punta de Mita is under way and this area will become one of exclusivity, anchored by the Four Seasons Hotel. Returning toward Puerto Vallarta are the towns of Destiladeras and Bucerias which are fast becoming desired residential areas. Next is Nuevo Vallarta which is desired by those seeking privacy and yachting facilities. There are plenty of buildable lots and large parcels available, but the choice pieces along the ocean are beginning to dwindle and prices are starting to firm. For residential properties, there is a myriad in all prices ranges, but choice pieces begin in the mid-$200s.

MARINA VALLARTA is the next most northern area, located close to the airport and 15 minutes by taxi from downtown. This is a master-planned community with a marina, golf course, residential units, hotels and vacation clubs. The 465-unit Bay View Grand condominium complex has just initiated a 3-year sales program. There are still buildable lots available. Complete buildout of this area should occur by the end of the decade. The marina environment looks and feels like “home” back in the States, but with a Mexican flair of flora and fauna. Buyers choose this area because of its ambiance, golf, pricing, and American development similarity. Prices and rental income for residential real estate are still somewhat soft and will remain so until this area is entirely developed. Lots can be obtained starting from the mid-$50s, condominiums from the low $100s, and homes from the lower-$200s.

The DOWNTOWN ZONE stretches from Marina Vallarta to the edge of “Old Town” south side Puerto Vallarta. Stores and restaurants are within walking distance. This area is practically totally build out although buildable lots are still obtainable. There is a variety of homes and condominiums in all price ranges. Real estate is of typical Mexican architectural style appealing to the lower-end buyer. No large-scale residential or condominium projects have recently been undertaken except for Marbella appealing to the budget-minded (starting in the low-$60s). The residential area of Las Gaviotas attracts middle-class Mexican buyers with homes starting in the upper $200s. Above downtown is the residential area of Gringo Gulch, so named because many foreigners purchased homes here close to where Elizabeth Taylor and Richard Burton resided. This area is typified by narrow winding streets, density, and older homes emphasizing Mexican architecture, appealing to buyers looking for residences in the older, central section of Puerto Vallarta. Prices here are firm for the premier properties and demand has not waned since Richard and Elizabeth first chose to reside here. Home prices begin in the low $300s.

South of the River Cuale is the is “LOS MUERTOS” Zone, a 10-minute walk from the Malecon. The area has gone through “regentrification,” becoming an eclectic blend of restaurants, gift stores, art galleries, and traditional Mexican tiendas. Basillio Badillo is “restaurant row,” offering fine dining establishments. The atmosphere is less hectic than the Malecon. The mix of people gives this area a relaxed atmosphere, from well-heeled international tourists to local residents doing their daily shopping. The area is totally built out, comprised mainly of condominium buildings. Located along the public beach are some very well designed and maintained condominium buildings. This area and the southerly contiguous Amapas area are highly in demand. Rental income is all but guaranteed, and resale prices are firm for better quality condominium buildings. Condominiums start in the mid$100s and homes in the Amapas area start in the high-$400s.

The Conchas Chinas portion includes some of the most beautiful villas in all of Mexico. This area from the beach, winding up into the hills, is probably the most coveted in all of Puerto Vallarta. It is purely residential (the majority are homes) bordering on the exclusive, which is a major attraction. Property values are very firm, rental income is guaranteed. Since this is a low-growth area, price speculation is a certainty. Buildable lots are available, but those remaining will required higher construction costs due to the hillside location. A new 10-unit project overlooking the Bay (Villas Banderas) has just opened its doors priced in the mid-$300s. Other projects are anticipated, but the beach area is, essentially, all built out. Recent building ordinances enacted within the last three years have added to the cost of construction, additionally firming the price of choice real estate. A new proposed condominium project on the hillside is still in the planning stages (La Vista). Homes in this area begin around $400,000.

The last zone, stretching from Old Town south to Mismaloya, is the SOUTH SIDE. This area is tranquil and has the feel of seclusion, yet is close to downtown activities. Generally, a 10-15 minute taxi ride is required. There are condominiums, villas, a few time-share projects, 4- and 5-star hotels, buildable lots and acreage within this zone. Purely residential , the sweeping views of the Bay, lush jungle backdrop, and tranquility are very much in demand. The last new project in this area, Los Palmares priced from the upper-$200s, has met with success. Remaining beachfront vacant land is suitable for casa/villa development. Rehab projects of existing condominium buildings are in progress. Further new construction in this area will have to wind its way up the hillside. Residential real estate prices are firm and should remain so. Lots can be obtained from the low $40s, condominiums from the low $100s, and homes/villas from the low $300s.

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