Investor · San Diego, CA · Member since 2015 · 89 posts · 89 votes
Hi All,
My husband and I are in beautiful Oaxaca, Mexico and are currently in the process of buying a home.
Here's the details:
It's a 3 x 2 home, in a beautiful neighborhood called La Cascada about 15 minutes walking from the center of town. It's a fixer upper. It has ugly interior and we will be rehabbing it to live in eventually.
It has a small studio house in the back which can be Air B and B.
We put down 50k and the owner is financing the rest for us. We convinced her that seller financing was a great way to go. She doesn't need the cash right away, and she gets to earn 10% on the rest of the loan.
We have a loan out currently and will pay off the seller in about 6 months.
Rental income is about 1000k per month in the front house and we will use the back house as a vacation rental until we permanently move to Oaxaca in 1 to 2 years.
Any comments or suggestions? Questions? We still haven't signed the final papers with the notario!
We are happy to share our experience with anyone who might be interested.
Specialist · San Diego, CA · Member since 2018 · 2 posts · 3 votes
7y
@Trudy Pachon Greetings Trudy, my family is from Oaxaca and own a house about 20 minutes from the City of Oaxaca in San Lorenzo Cacaotepec. I'm new to real estate investing but eager to invest in México especially in Oaxaca México. I'm curious to know how one can get a loan down in México or do you find financing here in the states and take your money down there? Any advice is highly appreciated! You are very brave to invest in México and yes Oaxaca México is one of the most beautiful states in México.
Realtor · Austin, TX · Member since 2018 · 52 posts · 32 votes
7y
Why Oaxaca?
I've heard nothing but good things about that city, and the Chef's Table episode featuring Chef Enrique Olvera and his restaurant Pujol in Mexico City was enthralling when they traveled to Oaxaca.
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
7y
I have never been to Oaxaca, Mexico and do not know much about it as an investment for RE but I do know that Mexico has a lot of greasing the palm to get things done. This accepted extortion hurts the country in so many ways from unfinished projects to less tourism. Expect it and budget for it. I say this not knowing how bad it is in Oaxaca but knowing how bad it can be in parts of Baja.
Are you planning on keeping your San Diego and Escondido rentals when you move?
I would be interested in reading posts about the successes and challenges. I have thought about trying to do a STR from out of country in either Punto Chivato, Mulege, or Loreto but am leery (love those locations but do not love the corruption).
Oaxaca is a charming city with tons of art, culture, and tradition. And the food! OMG. My husband and I can see ourselves using our house here as a base for more adventures in Mexico and beyond. The cost of living is inexpensive, and you really lack for nothing here. I just got back from the Home Depot doing some shopping for the house! We have American and great Mexican chain stores.!
Yes, it's weird, but we are OK with weird. We know there are loads of things we'll need to budget for, and corruption may be one of them, but so far, we haven't had any overt issues with that. Southern Mexico is a bit different because of the land use laws here (lots of communal land), and there are always strikes (usually land use and labor issues), which slows everything down. But we are fine with the pace of things. We don't plan on selling the house anytime soon, and can be patient while the process slowly grinds along. We think we have a good lawyer and notario.
I am thinking of starting a Mexico blog, mostly around food, but I think I'll add a tab to talk about the real estate purchase process and the rehab we do.
And yes, we have our family and friends in California so when we move, we'll be visiting often. We are keeping our rental properties, at least for now. They have been wonderful and are great for a "just in case" scenario! Especially the Escondido property!
Rental Property Investor · Friendswood, TX · Member since 2010 · 663 posts · 508 votes
7y
@Trudy Pachon Sounds interesting . I dont have anything to offer but have some questions. Will you be doing the rehab yourselves? What do the numbers look like for purchase total ,and the rehab. For rents, are you going to rent it out yourself? Who will the tenant be? ( ie local or long term vacation rental?) Are there lenders that will finance something like this or all or owner financing. What are your thoughts on the higher interest rate on the home? How did you find the deal?
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
7y
@Trudy Pachon That sounds great. How much are you paying for the property and what are the terms of the seller financing?
@Trudy Pachon@Dan H. There are plenty of foreigners buying pre-construction in Mexico without legal or other problems. I have been doing it for years now, as have many connections of mine. This is a well-oiled machine, although you still need to do what you're doing and deal with people who you know or who can be trusted.
When you buy an existing property, do NEVER buy a property with communal title, also known as ejido property. You need to have a clear title. If you don't, your property can be repossessed. Some uninformed people mentioned that it's dangerous to buy property in Mexico because there have been repossessions. They're talking about this type of property. If you're buying a property with clear title, it won't happen. If you have a cloudy title, it could happen. That's the case everywhere in the world.
Otherwise, investing in Mexico can be very lucrative and enjoyable. Just know what you're doing or deal with people you know.
Real Estate Agent · Annapolis, MD · Member since 2017 · 109 posts · 82 votes
7y
Hi @Trudy Pachon thank you for sharing your journey, I'll be following! Do you have any photos you can share? Perhaps you share on IG or other social media platform?
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
7y
@Trudy Pachon I always wondered how that worked as far as property rights. Are there any differences between Mexico and the US? Any differences for foreign nationals owning property there versus locals? Is the title process similar? How about taxes, do you have to pay Federal taxes in Mexico on top of the US taxes?
Congratulations on your purchase and I assume future retirement spot.
Specialist · San Diego, CA · Member since 2018 · 2 posts · 3 votes
7y
@Trudy Pachon Greetings Trudy, my family is from Oaxaca and own a house about 20 minutes from the City of Oaxaca in San Lorenzo Cacaotepec. I'm new to real estate investing but eager to invest in México especially in Oaxaca México. I'm curious to know how one can get a loan down in México or do you find financing here in the states and take your money down there? Any advice is highly appreciated! You are very brave to invest in México and yes Oaxaca México is one of the most beautiful states in México.
CTO of BiggerPockets · Seattle, WA · Member since 2019 · 168 posts · 178 votes
7y
@Trudy Pachon from the responses here I’m sure blog posts on your experiences would be well appreciated! I’ve researched early retirement abroad and Mexico comes up high in the lists for cost of living, quality and cost of health care, and acceptance of expats. Would love to hear how it all works out for you.
@Trudy Pachon I always wondered how that worked as far as property rights. Are there any differences between Mexico and the US? Any differences for foreign nationals owning property there versus locals? Is the title process similar? How about taxes, do you have to pay Federal taxes in Mexico on top of the US taxes?
Congratulations on your purchase and I assume future retirement spot.
Yes! I have these questions, too. I don't imagine you can just go get a bank loan as a non-citizen? I've always liked seller financing. That's probably it for us, cash or SF.
Do you buy in Pesos or USD? Is there currency exchange risk when you buy/sell? I'd considered investing in Mexico with the exchange rate the way it was/is but couldn't find the answer to which currency is used. Thanks for any clarification on that and Joe's questions.
Investor · San Diego, CA · Member since 2015 · 89 posts · 89 votes
7y
@Account Closed
Maybe you can get a loan here, but we couldn't. We tried in the states, and then looked at a few loan brokers who said there was no money now. Even if you could get a loan, I think it's a terrible deal. They want 11 to 14% on their loans with fees etc. Really expensive.
I made a spreadsheet to share with the owner and gave her a choice of several offers. The offer she accepted was 25% down, 10% apr on the remaining balance for 3 years. Interest only payments. No points or fees of any kind and no prepayment penalties. Interest payments can change monthly depending on how much the principal balance is. We will pay off the loan in about 6 months.
We were both happy with the arrangement. I found the key to this and another owner finance deal I did was to have the numbers all set up in a spreadsheet so they can see exactly how much extra money they'll make, rather than the bank!
I forgot to mention the weather here. It's one of the biggest reasons we chose Oaxaca. It's very dry, but kind of cool, at least compared to California. We have mountains surrounding the valley where there's pine forest and streams, and then here in the valley, it's warmer but we're at around 1,600 meters, so cooler than other places and not so many bugs (we do have them though!)
The road to Huatulco and Puerto Escondido is mostly finished, and when it's done it will supposedly take us about 2.5 hours to get to the beach (if it EVER gets done!). Right now it takes us about 6 hours. But the beaches are absolutely stunning!
We like visiting the beaches but would never want to live there. It's too hot, and too boring. The city life is right for us, and we love all the action here. Movies (actual cinema with indie films, documentaries, etc), art, culture, dancing, fine dining, we even have an opera house! Oh yeah, and the protests and road blocks. There is a lot of civil unrest here, but we support the protesters. It's never boring.
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
7y
Hi everyone, I have been investing in Mexico over the last two years thanks to connections in the local real estate world so I follow all things Mexico on here I know a thing or two about investing in real estate there. Therefore, I will allow myself to set the record straight on a few things that have been mentioned in this thread.
I love what does and it makes total sense, although there's another way she could have done things. I've never been to Oaxaca but $200,000 for a fixer upper sounds an awful lot there, unless it's very big of course. I'm also not sure why she paid in USD given that Oaxaca is not one of the internationalized markets where properties are traded in USD.
What Trudy does makes sense because she wants to move to Oaxaca and live in that very house that she most likely carefully selected to suit her tastes.
As a pure investment though, it wouldn't make any sense. Let's assume the best case: the renovation costs are 0, the costs to hold the property are 0 and the property is rented continuously from day 1.
You put $50,000 and you get seller financing for $150,000. You'd be levered 3 to 1 in Mexico. That sounds awesome at first glance but when you dig a bit you realize that this is not seller financing. At least not as we understand it in North America. The whole idea of seller financing is to limit the amount of cash that has to come out of your own pocket since the loan from the seller is going to be paid by the cash flow of the property. In this case, you would make $15,600 in rental income, which would just pay for the interest on the loan. Therefore, the whole $150,000 to repay the loan will have to come from your own pockets.
So basically, you have to pay the whole $200,000 price tag in cash. The seller just gives you 3 years to pay but none of the cost of the house will come from the income it generates. This is a 100% cash deal, not a seller financing deal.
Finally, the deal doesn't clear the 1% rule. With $200,000 in the US, you can easily get more than $1,300 in rent and then you can put on leverage to get a much higher return. Why would go through the headaches and take the risks of investing in Mexico for making much less money than at home. I invest in Mexico only because I can make much more money than at home.
@Trudy Pachon in your reply to @Joe Splitrock, you rightfully mentioned that, if you want to buy property along the coast, you need to do it through a fideicomiso (you can actually also use a Mexican corporation) and then you say no thanks. There is nothing wrong with buying through a fideicomiso. It's exactly the same as buying in your own name. I know you don't want to be on the coast but those who do shouldn't refrain from buying because they have to do it through a fideicomiso, especially since the real money in Mexican real estate is done on the coasts.
Which leads me to an alternative strategy you could have followed. I've been buying pre-construction luxury condos in the Riviera Maya with investors there for less than $200,000. We get "real" seller financing that will get paid out of the cash flow from the property but I won't even go there since most people cannot get that. People have been renting similar condos part time for $60,000. This is 4 times what you'd make in Oaxaca and you don't even have to pay for rehab. Granted, most people wouldn't be as good with short-term rentals but you could reasonably get your invested money back in rental income over 5 years. I know you wouldn't want to live there but then you could pay for a similar house in Oaxaca with that rental money. You would then live in the property in Oaxaca and get the rental money from the big cash flowing property on the coast.
I can see I need to clarify! I am buying the home in pesos, but converted it for here, so people could understand. It's also not a money play. We are renting it out for the next year or two simply to have someone there and to earn a little bit of money. We had no intention of it needing to follow any rules at all! I put this out there to give a little info to people about buying property in Mexico. I am no expert! I just love Mexico, and hope to share about that. I never see anything about inland Mexico, and especially not Oaxaca. This purchase is going to be my home, and I will also be making a little money off of the STR.
The city center here in Oaxaca is ridiculously overpriced, in my opinion. It's hard to find properties in the city with a nice patio and STR potential for less than around 5 million that are reasonably habitable. We have seen some real losers for loads of money. We scored this one for 3.8 million because it's not in the exact centro historico. I do think it's pricey, but we love it and will be happy there. We can walk to Santo Domingo from our house in 15 minutes and it has a green area in front where we can plant and have a garden. This is hard to find in the city! We plan on making the home as "green" as possible and having an organic garden and fruit trees in front.
I have absolutely no interest in investing on the coast. I spent a lot of time in Tulum and Playa del Carmen in my youth (I'm an old timer!). I backpacked all over Mexico "back in the day". The last time I went to the coast I literally cried at what I saw. Even little Puerto E is getting to the point of being depressing, but I get that things change. It's just the environmental destruction is hard to stomach. It's better for my mental health to remember it the way it was and find new places to play.
My parents and I used to own a condo in Cantamar, Baja about 35 years ago, way before the fideicomiso system. My family used it for many happy years. We sold it around 2004 after the kids and grandkids were grown and my parents were too old to use it. There were no problems with the sale, and I would say we broke even with inflation.
As far as my house, I didn't have enough cash to pay for it, so I had to convince the owner to carry it for me. She was asking 4.2 million, so I offered the 3.8 with the owner carry for the three years. It was just to buy the property. I couldn't have done it otherwise! I don't plan on selling anytime soon, but I expect with the upgrades the home will hold it's value or increase its value a little bit over time. We will retire there next year or the year after.
Living here in Oaxaca will solve some of our retirement issues since the house will be paid for, and our medical expenses will be very low here. Our living expenses are also super low here, so we can afford a lifestyle here that we couldn't in the states. We love to travel, so we need extra money for our travel "bug" affliction. So, we think it's a good money move for us to have a free and clear home to live in, with a small income from the STR and with virtually zero tax costs. But definitely not a great pure money investment!
Way different goals than you have, but I thought might be worth sharing.
Different people tolerate different levels of development. I think Cancun is too much but I like Playa del Carmen and Tulum. The thing is, when a nice place gets discovered, it's hard to keep it off tourists and developers. Actually, the local governments in Playa del Carmen and Tulum have been taking action to preserve their city to a certain extent and avoid them becoming another Cancun. Playa del Carmen initially allowed only 4 floors, then permitted 5 and then went back to 4. In Tulum, it's maximum 3 so big hotel chains are de facto banned. These cities have been the fastest growing in the world and are still in the top so there inevitably are environmental issues.
What about Zipolite? I have friends who want to semi-retire there. It's supposed to be beautiful and still undeveloped.
Rental Property Investor · Friendswood, TX · Member since 2010 · 663 posts · 508 votes
7y
@Trudy Pachon thanks for the info. So then it sounds like this is your retirement plan. Is this something you have been taking about and planning for a while or something you came across recently?
@Mike Lambert Thanks for the additional comments. Is what you are talking about Vidanta or is it a different company ( If you are not trying to say the name that is fine as well , just curious) .
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
7y
@Account Closed
Vidanta is a company that sells timeshares. I have nothing to do with them and I would never invest in timeshares. I you are referring to the developer(s) I'm working with, I don't disclose them in public forums because the investors who invest with me and myself are getting special terms and the developers want to keep that confidential. While you'd pay more than I would if you were dealing with them our any developer, the alternative strategy that I outlined would still work.
Investor · San Diego, CA · Member since 2015 · 89 posts · 89 votes
7y
@Account Closed
Thanks for the question. We want to retire early, and don't want to stress on it, so we had to find low cost and good medical care.
We have been travelling for about one year now on sabbatical and have been checking out places we thought might work for us. SE Asia this time. In previous years we have visited Central and South America and Africa. We kept coming back to Mexico because of proximity to family and friends as well as our deep affection for the country, it's culture, natural beauty, and ease of transition. Oaxaca is a special place where the culture is still intact, despite many foreigners. There are also many Mexicans who vacation here, loads from Mexico City. It's a popular cultural destination, so says Culture Trip! https://mexiconewsdaily.com/news/oaxaca-city-tops-list-of-cultural-destinations-for-2019/
Realtor · Austin, TX · Member since 2018 · 52 posts · 32 votes
7y
@Trudy Pachon I really enjoy the blog and look forward to reading about Oaxaca more in the future! It sounds wonderful. I have a good friend here from Vera Cruz, he keeps talking about taking a trip there and I may take him up on it!
Aurora, CO · Member since 2016 · 3 posts · 0 votes
6y
@Trudy Pachon Congratulations on your new house in Oaxaca! and thank you for sharing your experience. This type of information helps a ton when one is considering similar plans in the near future. I was born and raised in Chihuahua, Mexico but have lived in Denver since 1994. My husband and I are pretty much rookies in this new concept on REinvesting and we are trying to learn the ropes. We rent a condo in Denver and started construction in the city of Cuauhtemoc (~65 miles West from Chihuahua city) in 8 little apartments for College students. We hope to finish and have them ready to rent by the start of fall semester in August 2020. I have never been in Oaxaca but I'd love to visit one day. My favorite mexican dish is chicken mole and Oaxacan gastronomy has probably many, many variations of chicken mole I'd love to try!
Aurora, CO · Member since 2016 · 3 posts · 0 votes
6y
@Mike Lambert Hi Mike, I appreciate your post and commenting on your experience investing in Mexico. I'm originally from Mexico but have lived in Denver CO since 1994. I'm not familiar with investing in Mexico but my husband and I just started learning how to invest there when we bought our first lot (with clear title) and right now going through a construction project to be finished, hopefully (if COVID-19 allows..) by the end of July, 2020. I have been reading about your posts in the thread and would love to hear more about your experiences.