Owning Property in Mexico, Baja California & Cabo San Lucas

by DAVID MANDICH

One of the first questions I often hear from visitors to Los Cabos in Baja California Sur is: "Can foreigners own property in Mexico?" The answer is a definite "Yes!" and has been for decades. First a little history here: Mexico has been invaded by the French, British, Americans, and various groups of adventurers since becoming free of Spanish rule in 1810.

Mexico gave up 1/3 of its territory in the Mexican-American War and Gadsden Purchase in the 19^th century. In response to pressure from its citizenry - the Mexican government created a foreign exclusion zone that forbid foreigners from owning property within 50 km. (31.05 miles) of the ocean, 100 km (62 km miles) from its borders and the entire Baja peninsula. But there was a caveat - in favor of foreigners....

Even after enactment of this self-protective law - foreigners could still own land Fee Simple throughout the vast majority of the country (the same as back home in the States). Guadalajara, San Miguel de Allende and many other charming and interesting options in Mexico were (and still are), available for fee simple ownership by foreigners.

Fast forward to 1971. The Mexican government recognizing a need for more foreign investment, created the Fideicomiso (fee-day-com-eeso) - or ownership for foreigners via a bank trust of properties in the Foreign Exclusion Zones (read prime coastal areas).

This involves a bank as the trustee who takes title to the property with the foreigner the beneficiary of the trust. The foreigner was now able to purchase property in the foreign exclusion zones for a period of 30 years (automatically renewable). The foreigner could mortgage, will to his heirs, sell, and improve the property as though he owned it.

These original 30 years bank trusts written in the 1970's are now maturing and guess what? In 1993 the Mexican government changed the law to renew them for another 50 years instead of the 30 as originally conceived - and again making them automatically renewable. But here's the real news - There is debate in the government of ending the foreign exclusion zone entirely and doing away with the fideicomiso requirement. Currently new fideicomisos are written for 50 years, with the old 30-year ones being renewed automatically for another 50.

This opening up of Mexico's beautiful coastal areas to foreign ownership coupled with the maturing of America's Baby Boomers has created a land rush for ocean front and ocean view property in Los Cabos and other coastal resort areas of Mexico.

Mexican and American real estate companies, title insurance companies, appraisers, home inspectors, Mexican, Spanish, Asian, American banks and private mortgage lenders are all involved here in growing numbers. American and Mexican developers have developed world-class resorts, golf courses, luxury condo developments and new marinas where a few years ago only cattle and burros roamed.

Mexican banks never became involved in sub-prime lending so real estate values haven't plummeted as they have in the USA. The Mexican economy (and real estate market in general) has remained relatively tranquil compared to the USA. Foreign real estate investment has slowed due to tightening of credit in the States, but Mexican (and some American) banks and brokers are still making loans to foreigners at favorable rates.

Buyers from the States wanting to get in on what many see as a repeat of what happened to Southern California property values over the past decades - often buy a condo, for investment, future retirement, or as a 2nd home. Canadians buy condos here to winter over each year, returning north when the snow melts back home.

Some put their condos into rental pools for weekly rental to tourists earning them up to 4 times as much income vs. long-term rents. With short-term rentals they retain the flexibility to use the property when they choose to visit during the year. I can't remember the last time I saw income property pay for itself from the get-go back home.

David Mandich, has been living, writing and selling real estate in Cabo for 10 years. A local expert on Condos, Villas and Gated Communities, he can be reached at Cabo's Century 21 Paradise Properties: (From the USA) 520 204 1604, Local: 130-4094, Cel. 044 624 132 8919 or email at: davidm@century21baja.com