How to acquire funding for investment properties in Mexico? (Canc

Question

After moving to Cancún I found a 3 apartment deal fully furnished already cash flowing on ABNB for $115,000. We have been able to raise $70,000, which leaves us needing an additional $45,000. Part of the funds we have raised is with a loan through a Mexican bank @ 9% APR. I have the other part of the funds through a loan and savings. I'm Looking into DSCR but am not sure if they'll do cross border lending. Also I have a low income about $2000/month. Any suggestions on how I could raise the other funds would be helpful. Moxi's min loan is $250,000 with like 30%-40% down.

Mike Lambert · Answer

@James J Young

I wasn't suggesting it's too good to be true. Like you said, there are plenty of $50,000 apartments and they're not cheap for the average Mexican. So you can acquire these properties. The question is what are you going to do with the apartments. You were talking about cash flow so I imagine the idea is to rent the apartments. Short-term? Long-term? To whom.

Not knowing any morte details, short-term renters who pay great money typically want better quality in a location where foreigners go. And, most visitors to Cancun go to all-inclusive resorts, not short-term rentals who can't compete for obvious reasons. For the little that I know, these apartments would be more suitable to locals long-term renters. Personally, I would never rent a property in Mexico that way and that's why I suggested to make sure you understand what you're getting into.

To expand on this, there are two property markets:

A. The market in which the buyers are foreigners or well-to-do Mexicans and property are traded in USD and which are in specific (types of) locations.

B. The rest of the market, in which the properties are typically traded in pesos.

I wouldn't touch any property in B but that's me. In any case, its buyer beware.

Finally, I'm not sure how you can investigate a safe location at night. If the area is bad, it doesn't mean it's bad every time or something necessarily will happen to you. Also, it isn't only the reality. Perception matters.

For years now, I've been encouraging people to not be overly fearful about investing in real estate in Mexico, with the caveat that it's important that buyers/investors know what they're doing. I've seen many foreigners making investments that don't make sense because they don't understand how the local market works, which is oftentimes very different than how it works in their home country.

Mike Lambert · Answer

@James J Young

You did a great job getting the loan from the Mexican bank at 9% with the income you’re mentioning. Mexico’s central bank raised its benchmark rate to 10.5% a few days ago! For the rest, neither cross-border nor DSCR should work. You need cash. What about friends & family?

On another note, 115k in Cancun? Make sure you understand what you’re getting yourself into.

Bonnie Griffin Kaake · Answer

@Mike Lambert  and  @James J Young  James, pay close attention to what Mike said above. Then, remember that there are those of us who don't like the all inclusive resorts. We don't drink a lot and may have food allergies or are vegan and can't justify the incredibly high cost associated with all inclusive resorts. In addition, My husband and I speak Spanish and love to practice while in Mexico. We deliberately look for non-all inclusive resorts.

A couple words of caution, as Mike said, even if we frequent travelers to Mexico go for a condo or Airbnb type property, we want luxury. Therefore, you will likely need MUCH more money than you think you will need to purchase and upgrade those properties.

Think this through well and crunch the numbers with a savvy investor in MX. I wish you great success!

Michael Baum · Answer

@Mike Lambert is a good resource to ask about this. He does a bunch of stuff in Mexico.

James J Young · Answer

Yes sir thank you I constantly receive caution notices from individuals I talk to about deals that seem to good to be true but the reality is if your as diligent as I am constantly searching for good investment opportunities talking to individuals without fear is harmless. I've check the public record here with the aid of my Mexican associate and it turns out that the deeds to the three apartments are free and clear of any leans. They're in a safe location that I personally investigated even at night. I have a lawyer who will oversee the contract and review all documents. I will buy the properties through a trust (aka Fedeicomiso) with the bank. There are many apartments here for sale for even just $1,000,000 pesos which is roughly $50,000 USD Thank you for your advice I will continue to try to acquire the funds to purchase the three apartments.

How to acquire funding for investment properties in Mexico? (Canc

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