Lender needed for investment projects in Tulum, Mexico
We own three properties in Tulum, Mexico and would like to expand our investments there, but are having a very hard time finding funding. My husband and I have temporary residency in Mexico, and our rentals are all owned inside a Mexican corporation (S DE RL DE CV). We have LLCs in the US so can use a lender here if they're willing to lend for a project in Tulum, Mexico, but would also love to connect with Mexican lenders to establish a relationship. Currently we have two projects we need to quickly find funding for- 1 is a beach resort we intend to convert into luxury STR and the other is a multi-use building in town w/ STR units and commercial retail space. Do you have any ideas for who we could contact that would be willing to work with us? I would really appreciate any help you can provide. We would prefer debt financing as we plan to hold the resort long-term, but are open to other arrangements too.
Hey Wendy,
It’s extremely difficult to find a lender for what you’re trying to do indeed. I might have somebody in my network but I’d need more info. Send me a DM if you want.
Hi Wendy,
One option that might work could be to get unsecured funding. It's out there and available from lenders who don't have as strict criteria as conventional banks.
Best,
Dave
Sounds like a super cool opportunity but can definitely see financing being tough to come by - curious if there are lenders in the US that offer out of country financing
@Wendy Usrey:
What is the amount sought? Would require details about the project. In an environment where some banks wont lend outside of the county they operate in, a US bank lending for a real estate development project in Mexico might be a stretch.
Generally, lenders don't lend out of their own country because they don't have the infrastructure to get their hands on collateral in case of default. Moreover, it's way too risky to lend without having the upside of an equity holder.
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@Wendy Usrey
Do you have any us based collateral that could be used ?
@Mike Lambert:
The exception of course are global financial institutions who do business in multiple countries and diversify their risk by lending in other countries. Different countries pose different challenges, have different legal systems, cultures, ownership structures, economic and political risk profiles.
HELOC on us properties and use funds for mexico.
Global financial institutions are no exception. For example, Citigroup's Citibank will not lend in Mexico while Citibanamex, Citigroup's Mexican bank, will lend in Mexico but not to American residents. Ultimately, a global financial institution is a multitude of local banks, who will each only lend in their own country to their country's residents.
Absolutely and many do that. But that's like using your own cash, which defeats the purpose as you're not using the equity in the property.
@Mike Lambert:
Global financial institutions are no exception. For example, Citigroup's Citibank will not lend in Mexico while Citibanamex, Citigroup's Mexican bank, will lend in Mexico but not to American residents. Ultimately, a global financial institution is a multitude of local banks, who will each only lend in their own country to their country's residents.
That is not correct. Using your example, years ago Banamex was operated at some point by the Mexican government, then it went private, then during some internal turmoil in Mexico, it was on the verge of bankruptcy. Citigroup saw an opportunity to expand into Mexico and bought it with Banamex becoming a subsidiary of Citigroup. FYI, Banamex subsequently expanded into the US doing business in some US states until Citigroup got fined by DOJ for some money laundering activities (apparently).
Correction, a global financial institution is not a multitude of local banks. Most banks operate on different levels. Some operate in a few counties or county, some in a few states or state, some nationally in a specific country and some in multiple countries. There are some US banks operating in 50+ countries.
The Canadians, Chinese, Japanese, French ... all have some institutions doing business globally in multiple countries.
You are correct. Of course, banks are lending cross-border, which I should know since I used to do that as an international banker for many years and that happened to be my specialty. However, it doesn't work for real estate at a retail level, which was my whole point. The fact that Citibank has activities in Mexico and Banamex had activities in the US doesn't mean that they finance real estate activities there. Most international banks have limited banking activities in foreign countries, either limited by law or their own strategy.
So what I wrote is generally correct when it comes to this specific situation but, actually I took a bad example with Mexico, which I chose because the conversation was about Mexico. Indeed, some Mexican banks actually will give mortgages to some US and Canadian borrowers but they won't finance projects. They want a single family home (which includes a condo) that is already titled.
@Mike Lambert:
Actually it depends on the bank. Most banks specialize in various areas of lending, can often be limited by their personnel and internal capabilities, know how etc and offer varying products and services. Some might say if any lender had to venture into any niche (whether in the home country or abroad), real estate would make the most sense from a collateral perspective. Not all banks operating internationally operate on a limited basis. Some have deep roots in reasonably stable areas and offer a vast range of products and services.
@Frank Greg:
We are looking for $10m in funding for the project. I don't think a US bank will lend there either, unless they also have a division there and are willing to do the loan that way- we don't have permanent residency yet so we don't qualify for most loans in Mexico until that is done and we have established credit there. Most likely our funding will need to come from private sources.
You're correct. Real estate is in theory one of the less risky business a bank could do in a foreign country due to the value of the collateral. The problem though is that a foreign bank doesn't have the infrastructure to seize the collateral if needed and it's commercially not worth for them to set it up, as they don't have the volumes that would justify it. Therefore, they won't get involved for commercial reasons unless they want to do something for their large international clients.
No US bank will finance that indeed.
@Mike Lambert:
Real estate is not necessarily ‘less risky’ but that’s a whole different can of worms. Less risk is not always a good thing for a banker or investor when finance is all about risk and reward. You also seem to be overgeneralizing and rendering assumptions not applicable to every bank doing business in other countries. In the US, just about each state have subtle to significant variances in its foreclosure laws; you can’t lump to whole world into the same jar in terms of how things work. Dont make rash generalizations or present such as facts!
I don't like generalizing and rarely do. This being said, this conversation was about a financing in Mexico. I worked in the banking business for many years in cross-border lending across the planet and my whole point was to share my experience and say that no bank will normally finance a real estate project in another country at the retail level. Call that a generalization if you want. And, if you find one that does, let me know because I'll be knocking at their door. I only mentioned this in to help people not wasting their time or having false hopes but it's their prerogative to find that out the hard way by themselves if they want.
And, yes, banks are oftentimes known as being conservative animals but, at times, some will be aggressive to generate more income because, yes, it's about risk and return indeed. But this is a whole other conversation.
@Mike Lambert:
... no bank will normally finance a real estate project in another country at the retail level ...
If by retail level you mean retail banking, the statement above would also seem a false. Many foreign banks doing business in the US for instance are engaged in both consumer and business/corporate banking. Mexico just so happens to be a country where apparently in excess of 70% of the market is actually controlled by foreign banks; many of who are involved in retail banking in Mexico. I am also not aware that the project that was discussed was a personal project -- a beach resort? That certainly would be a commercial development project.
I'm wondering if you got my point but, nevertheless, I'm out of this discussion. Indeed, this reminded me of a very fruitful exchange I had with the BiggerPockets forum coordinator a while ago and I learned something great from her.
What I concluded was that, once a conversation becomes about who is right or wrong, it's time to leave, especially if the conversation doesn't help anybody. While we cannot control what others write about us or what they say about what we write, we can still decide how to respond or, oftentimes better, not respond at all.
Also, I was reminded to never underestimate the intelligence of the people on the BiggerPockets forum. Readers can draw their conclusions from what is written and we, as writers, don't need to constantly defend what we write.
I already feel I overstayed my welcome in this conversation but it's never too late to leave. I made my point in my initial response as I thought it'd be helpful. Readers can make their own opinion about it. If they think what I wrote makes sense, they can always send me a DM to pursue to conversation.
@Mike Lambert:
This is not personal. I think the point you seem to be missing is that there are many on here who unfortunately (despite how many disclaimers) will rely on what is posted in the forum as facts on matters of interest to them. So when you keep stating and restating inaccurate information as facts, you can mislead people and cause them to make faulty decisions. You would not want to be misinformed or misled yourself.
Santander Mexico Bank would be a place to start
I appreciate if this wasn't personal since I'm not in the business of stating and restating inaccurate information and, in that case, I don't mind answering this if it helps. While I stand with what I wrote, it's obviously caveat emptor. People might want to do their homework and corroborate the information.
We're trying to help people so we don't want to mislead them indeed. However, we can't be held responsible if people, who might be unfamiliar with the situation, misinterpret what we write. Otherwise, we're gonna stop answering to posts and this isn't gonna help anyone.
Well this discussion seems to have taken a wrong turn. This probably isn’t the place to split hairs. I think sometimes we get too hung up on a specific choice of words and miss the bigger picture. I appreciate the insights, but of course don’t expect anyone to have the perfect right answer (unless of course they themselves are the investor willing to loan the funds for our project). The biggest issue we have faced is that Mexican banks (or Mexican branches of international banks) will not loan to us on commercial or multi-use projects, they also won’t loan for new construction. It seems the only way for a foreigner or temporary resident to get funding from a bank in Mexico is to purchase a residential property that is completed. I have not talked with anyone there that would even discuss commerical loans for foreigners or temporary residents. There are ways to ensure a lender has access to the property as collateral but most won’t even begin the discussion. It’s been frustrating indeed. There is so much potential in this market, especially with the new train system and airport in Tulum, but I don’t think mainstream lending has caught on yet. I appreciate everyone who has offered input and/or reached out directly. I am traveling so haven’t had reliable access to connect but will be responding to everyone’s message as soon as I can.
Quote from @Henry Lazerow:Not really an option unfortunately. We need $10m in funding as it’s a large project and don’t have the ability to raise that much out of HELOCs.
HELOC on us properties and use funds for mexico.
Quote from @Caroline Gerardo:
Santander Mexico Bank would be a place to start
Do they offer loans to temporary residents or foreigners? We currently have our accounts with Intercam (we were told they were the only bank that would work with us since we opened the accounts prior to having temporary residency). We definitely are not opposed to switching banks, especially if they will help us with loans.
Quote from @Frank Greg:Do you know of any global financial institutions that would loan on a project like this? So far I haven’t been able to find any that will.
@Mike Lambert:The exception of course are global financial institutions who do business in multiple countries and diversify their risk by lending in other countries. Different countries pose different challenges, have different legal systems, cultures, ownership structures, economic and political risk profiles.