Over the past year and a half, many of us have watched our investment income and net worth diminish significantly due to the woes of the U.S. stock market. Historically, Wall Street has been a pretty good long-term investment vehicle. Unfortunately, we cannot make that claim at this moment concerning our stock and investment portfolios unless they have remained principally in cash. Investing in real property also has been an excellent investment option.
Throughout history, great personal wealth has been attained through real estate ownership, but for most of us, it has been limited to investment in a primary residence. While Mexico real estate also can be a viable investment venue, Americans have had a great deal more trepidation considering properties "south of the border." And for good reason, considering the problems with some acquisitions.
However, given today's investment climate, Mexico provides an alternative, attractive arena for potential investment. Real estate in Mexico should have a similar appreciation "upside" as does real estate in a U.S. development – coupled with the advantage of use and enjoyment of the property as a vacation residence. In fact, some Mexican projects have significantly higher internal rates of return with greater near-term value escalation, due to higher demands and less supply considerations given within a respective market or Locale. However, interested buyers must nonetheless be savvy and educated because acquiring real estate in Mexico is not like buying property in the United States.
Never before has there been more information available to the buying public concerning real estate in Mexico. Web sites have become more plentiful, with real estate agents displaying more pertinent information and available property listings. In some beach markets, a local multiple listing service (MLS) is available, and more agents participate in the Mexican Association of Real Estate Professionals (AMPI) at the municipal, state and national levels. The state of Sonora has created the first-ever real estate agent registry, and now requires that all who endeavor and earn commissions in the sale of real property be registered and comply with specified guidelines on education and professional ethics. There is greater awareness of property conveyance, tax and legal matters, and greater attention is being placed on safeguarding foreign investment through the use of neutral third party escrow agreements.
In addition, agents are now recommending that buyers obtain a commitment for title insurance, acquire coverage at the time of closing, and follow through with the subsequent title insurance policy once the deed (escritura publica) is recorded. Snell, Fair & Barnes in Los Cabos and Coldwell Banker La Costa Realty in Puerto Vallarta are two of the real estate companies at the forefront of this important initiative.
The Real Estate Task Force on Mexico was created by Arizona Gov. Jane Hull in participation with the Governor and Secretary of Tourism for the state of Sonora. In November, the group will introduce the first-ever Mexico Property Buyer's Checklist and a comprehensive Buyer's Advisory, A Guide for Foreigners Buying Property in Sonora, Mexico. The Task Force also will recommend to the Arizona-Mexico Commission that developers and sellers of Sonora real estate be required to fill out and make available the task force-created Property Disclosure Form on their projects or properties.
The disclosures will be required on vacant land and lots, residential subdivisions and condominium projects, as well as individually owned residences of all types. Arizona Public Reports are also mandated for any project that is advertised for sale in the state of Arizona. Though this has been the law for some time, many Sonoran developments have not complied with Arizona Department of Real Estate requirements until recently. The task force hopes to provide a framework of public disclosure and to be a source of information for the other Mexican real estate markets.
It would appear that no one's "crystal ball" has been too clear nor has anyone predicted much positive movement affecting our recessionary economy and Wall Street worries. We're already in the fourth quarter of a year that has seen few positives. Lately, the smart money has been on "cash isn't all bad these days, better than the other alternatives." However, real estate still represents a strong investment opportunity. For this reason, if one has an interest in Mexican real estate, or has thought about the lure of a residence on the beach or that colonial villa in Mexico's interior, now just may be the time. With the U.S. and Mexican markets in transition, with fewer U.S. "players" who now must invest with real money and not the found money of the 1990s "go-go" stock market days, Mexico's real estate industry must embrace the inevitable. Simply put, Americans will invest in property if it's a secure and financially sound deal that makes investment sense. They will be less speculative and more risk adverse, they will want greater disclosure of material facts, their due diligence will be more thorough, and they will be less likely to make a decision based on a developer or agent's suggestion of "that's how we do business here."
Investors recognize they have a choice and they should not be in a hurry - there's no reason to be. To that end, all of us in the Mexico real estate market must safeguard foreign investment. It is the needed lifeblood of an industry that in some areas is already anemic. If we don't safeguard it, it will go elsewhere. Many Americans are still reeling from their U.S. losses - they don't need to lose more money or make a bad investment in Mexico.
