# Investment Property?



## CaliBlue (Apr 25, 2014)

I live and work abroad and within the coming years will be looking to purchase an investment property to rent out either stateside or abroad. 

How is the ROI in Mexico? Best areas? Typical American system of 20% down 30yr note? 

Looking for insights. Thanks


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## sparks (Jun 17, 2007)

Pay cash for everything in Mexico and you need a resident working visa to be a landlord.

Wait till you get here and retire if that's what you have in mind


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## TundraGreen (Jul 15, 2010)

CaliBlue said:


> I live and work abroad and within the coming years will be looking to purchase an investment property to rent out either stateside or abroad.
> 
> How is the ROI in Mexico? Best areas? Typical American system of 20% down 30yr note?
> 
> Looking for insights. Thanks


Your question raises so many questions in my mind that I hardly know where to start.

Have you lived in Mexico or visited it. 

Traditionally, real estate changed hands for cash in Mexico. That has started to change but the process of obtaining a loan is fraught with pitfalls. I believe 30 year loans are uncommon, 15 or 20 years is more common.

How do you plan to find tenants, collect rents, carry out maintenance. Mexico is still mostly a cash economy that runs on face-to face-contact.

The property market is not as liquid as some places. Because property taxes are low and people rarely have loans it is not uncommon for property to be held even if it is not being used.


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## CaliBlue (Apr 25, 2014)

I would use Airbnb.com

It handles everything with regards to finding tenants and payment. 

As for maintenance I would have to find someone I trust who lived there to handle stuff I couldn't. 

What kind of rent could I generate with 100K USD?


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## TundraGreen (Jul 15, 2010)

CaliBlue said:


> I would use Airbnb.com
> 
> It handles everything with regards to finding tenants and payment.
> 
> ...


Location, location, location. The space you can buy for $100K usd varies greatly depending on where you are: inland city, small town, beach resort area, smaller beach community. The rent you could get would also vary by location. I don't know whether they would scale together. They might roughly since in resort areas both property and rents are higher.

In the center of Guadalajara, I can GUESS at the numbers. For other places, I have no idea. $100K usd is about $1.3M mxn. A few years ago that would buy you a 3 bedroom house in centro. The rent on that house might be about $4000 or $5000 mxn/month ($300-$400 usd). This is for a long term rental. I don't know what airbnb would do.


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## CaliBlue (Apr 25, 2014)

Wow that is terrible ROI. I could get 10+% ROI in the states.


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## Isla Verde (Oct 19, 2011)

CaliBlue said:


> As for maintenance I would have to find someone I trust who lived there to handle stuff I couldn't.


Someone to trust? You'd have to spend some time here to find someone like that, I fear.


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## Isla Verde (Oct 19, 2011)

CaliBlue said:


> Wow that is terrible ROI. I could get 10+% ROI in the states.


Have you spent any time at all in Mexico? Why did you imagine that you could get a good ROI (is that "return on investment"") in Mexico?


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## CaliBlue (Apr 25, 2014)

Isla Verde said:


> Have you spent any time at all in Mexico? Why did you imagine that you could get a good ROI (is that "return on investment"") in Mexico?


Someone recommended Mexico to me.


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## chicois8 (Aug 8, 2009)

Nice friend, I have friends who rent their homes only to have everything missing including the kitchen sink when they finally got them to leave....sounds like an absentee landlord headache..........


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## Isla Verde (Oct 19, 2011)

CaliBlue said:


> Someone recommended Mexico to me.


I assume this someone has had a successful experience being an absentee landlord in Mexico.


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## GARYJ65 (Feb 9, 2013)

CaliBlue said:


> Wow that is terrible ROI. I could get 10+% ROI in the states.


10%?
Where? How???


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## AlanMexicali (Jun 1, 2011)

GARYJ65 said:


> 10%?
> Where? How???


I think he is talking about paying cash for a rental, not the 20% down and a 30 year low interest mortage or it wouldn´t make sense. With 20% down you can´t even pay the mortgage with the rent. You would have to subsidize the place for about 15 years.


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## Bobbyb (Mar 9, 2014)

Wait until the OP returns to this property and finds that everything that is not nailed down is gone: Doors , light fixtures, toilet seats, plumbing fixtures. Thieves will even remove kitchen cupboards. Commercial real estate is even worse! For those with big money Mexico can be a great place to invest but not small time rentals.


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## AlanMexicali (Jun 1, 2011)

Bobbyb said:


> Wait until the OP returns to this property and finds that everything that is not nailed down is gone: Doors , light fixtures, toilet seats, plumbing fixtures. Thieves will even remove kitchen cupboards. Commercial real estate is even worse! For those with big money Mexico can be a great place to invest but not small time rentals.


Bobby trying to scare people? I agree it could happen in a $300,000 peso house in a bad neighborhood where there are many abandoned houses. In a neighborhood where there are $1,300,000 peso houses, never. The neighbors and central alarm systems etc. work to prevent it. Where the heck do you live? In a 15 to 20 year old URBIVILLA development in TJ or Mexicali?


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## sparks (Jun 17, 2007)

Being scared is good in this case. The whole thing is a terrible idea


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## AlanMexicali (Jun 1, 2011)

sparks said:


> Being scared is good in this case. The whole thing is a terrible idea


I know just ask the thousands of absentee qowners who have condos in beach tourist áreas sitting empty and paid 1.5 to 4 hundred thousand US and the management agents can´t rent them except at Christmas for a month or two.


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## kcowan (Jul 24, 2010)

I think the whole rental as an investment idea went sour with the bursting of the housing bubble.

Owners in PV have to pay for PM, IVA and Income Tax and, even then, end up barely covering their costs. ROI? Good luck. They justify it by having the net rentals cover their fixed costs so they can vacation "for free". This ignores capital costs.


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## CaliBlue (Apr 25, 2014)

AlanMexicali said:


> I think he is talking about paying cash for a rental, not the 20% down and a 30 year low interest mortage or it wouldn´t make sense. With 20% down you can´t even pay the mortgage with the rent. You would have to subsidize the place for about 15 years.


Yes that would be correct. Cash on cash.


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## Hound Dog (Jan 18, 2009)

_


CaliBlue said:



I live and work abroad and within the coming years will be looking to purchase an investment property to rent out either stateside or abroad. 
How is the ROI in Mexico? Best areas? Typical American system of 20% down 30yr note? 
Looking for insights. Thanks

Click to expand...

_Actually, Cali, surely you are shining us on to some extent or,perhaps this is simply an exploratory posting.
* ROI is calculated based on your investment of your own resources and the lower your personal investment the better your ROI. Successful real estate investors with whom I have dealt over many years wish to maximize leverage by using as much debt or investment capital from others as possible to maximize leverage and, thus their ROI. As a foreign investor in Mexico, you will not, in my judgment, find normal debt terms such as 20% cash down and 30 year straight amortization available and even if you did, the costs of such borrowings would be prohibitive. You must, therefore, if you plan to invest in real estate in Mexico, be prepared to fund any purchases 100% out-of-pocket unless you have rounded up fellow investors willing to take the risk of participation in the investment and then you have to calculate the cost of that in each instance. If you must invest 100% of the capital cost then a sufficiently attractive ROI needed to take the inherent risk will be that much harder to achieve. 

Inviolate Rule #1 for every successful real estate investor I have ever dealt with as a banker over four decades, and I have encountered many unsuccessful real estate investors for every successful one is, only invest in geographical regions with which you are personally highly familiar. I was a banker in California in both the San Francisco Bay Area and the Los Angeles Basin from 1966 through 2000 and the incredible real estate markets in those urban áreas helped créate many successful investors who would have been dismal failures during normal times in normal markets. Lots of investors made money despite themselves in that market but I wouldn't count on that if I were you. 

Best áreas? The two markets with which I am most familiar are (1) the expat retirement colony on Lake Chapala centered in a geographic región stretching roughly from about the Poncitlan Municipal line on the east to the western stretches of the Jocotepec Municipal line on the west (say, maybe 30 kilometers +/-) . A very small área considering the lake as a whole and (2) the Chiapas Highlands centered around San Cristóbal de Las Casas. I would advise strongly against your investment in either of those places. I was investing in personal residential properties for my retirement and never intended to sell and wouldn´t dream of renting out either residence since I had to pay full cash price for each place 13 and eight years ago respectively and could never, in my judgment, achieve an adequate ROI to make those investments worthwhile even though either property would command a profitable gross rental considering my initial investment. In either of those very disparate markets, these properties would be hard to unload at a reasonable profit within a reasonable time frame as I define those two important elements of any investment decision. In fact, had I bought the Lake Chapala property back around 2008 instead of 2001, I would probably incur a loss at sale today if I could sell the property at all. 

You´ll have to depend on others to assess áreas with which they are familiar but my advice is, unless you are simply seeking a residence in which to live full time, avoid Mexico as an investment option like the plague.

Now, I´m hitting the road but in closing, remember, that Dawg is a banker and inherently consevative financially speaking so some of you big risk takers may wish to chime in now and refute my stance. I won´t be around for a while to read your rebuttals if you have any to express.


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## CaliBlue (Apr 25, 2014)

HoundDog,

When I say ROI, I am simply meaning if I invest "x" amount of cash, then I can reasonably expect to get "x" in return. For example, if I invest 100K USD it would generate a 10K USD return ie 10% ROI. 

Like many things in life, success in RI comes down to knowledge, desire, planning, and preparation. With a little luck sprinkled in.


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## Hound Dog (Jan 18, 2009)

CaliBlue said:


> HoundDog,
> 
> When I say ROI, I am simply meaning if I invest "x" amount of cash, then I can reasonably expect to get "x" in return. For example, if I invest 100K USD it would generate a 10K USD return ie 10% ROI.
> 
> Like many things in life, success in RI comes down to knowledge, desire, planning, and preparation. With a little luck sprinkled in.


OK, Cali. I understand. We don´t disagree. All I was saying is that, if your _net _return on a $100,000 investment in real estate is $10,000 and you have paid cash for the property then your return is 10%. If, on the other hand, you put "$20,000 down and borrowed $80,000 in bank debt to affect the purchase, _your _ROI if you net $10,000 per annum is 50%. and you still have $80,000 in cash to invest in even more properties. True that this is an oversimplification and there are costs of borrowing that must be taken into consideration but that is not any big deal in Mexico because you are unlikely to find the bank financing anyway. One of the reasons, by the way, that bank financing of real estate for investment purposes is so hard to find at any reasonable cost in Mexico if at all is that the foreclosure process here in the event of default is costly, cumbersome, time consuming and legally difficult. In California, where I was a banker for many years; bank funds are made available under a deed of trust system facilitating normally inexpensive foreclosure with ease in the event of default and for years a lively resale market made collateral repossession and liquidation relatively easy so bank money chased mortgages until a bubble was créated and finally burst - again, an oversimplification but what the hell, as I said earlier, I´m hitting the road, have no debt of any kind and only invest in real estate for a roof over my head and avoid capricious landlords with rent-raising authority. 

Whatever, I wish you luck in your chosen investment strategy. My cash flow strategy now that I am in my 73rd year is to check my computer the 3rd day of each month to make sure that social security benefit payment rolled in as promised.


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## GARYJ65 (Feb 9, 2013)

Hound Dog said:


> OK, Cali. I understand. We don´t disagree. All I was saying is that, if your net return on a $100,000 investment in real estate is $10,000 and you have paid cash for the property then your return is 10%. If, on the other hand, you put "$20,000 down and borrowed $80,000 in bank debt to affect the purchase, your ROI if you net $10,000 per annum is 50%. and you still have $80,000 in cash to invest in even more properties. True that this is an oversimplification and there are costs of borrowing that must be taken into consideration but that is not any big deal in Mexico because you are unlikely to find the bank financing anyway. One of the reasons, by the way, that bank financing of real estate for investment purposes is so hard to find at any reasonable cost in Mexico if at all is that the foreclosure process here in the event of default is costly, cumbersome, time consuming and legally difficult. In California, where I was a banker for many years; bank funds are made available under a deed of trust system facilitating normally inexpensive foreclosure with ease in the event of default and for years a lively resale market made collateral repossession and liquidation relatively easy so bank money chased mortgages until a bubble was créated and finally burst - again, an oversimplification but what the hell, as I said earlier, I´m hitting the road, have no debt of any kind and only invest in real estate for a roof over my head and avoid capricious landlords with rent-raising authority. Whatever, I wish you luck in your chosen investment strategy. My cash flow strategy now that I am in my 73rd year is to check my computer the 3rd day of each month to make sure that social security benefit payment rolled in as promised.


Have you seen the movie ZEITGEIST ADDENDUM yet?


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## lagoloo (Apr 12, 2011)

Yes, I've seen it, along with the original.
However, I take Hound Dog's posting as coming from a well versed background in the banking field and a deep, well founded cynicism which follows.

The future: the wealth gap continues to grow and our descendants will probably be living in conditions much like the peasants of medieval times before the Plague. Unless there is an immense infusion of very enlightened self interest, the planet itself won't be fit for living.

Has anyone as yet come up with any workable solutions that those whose self-interest is anything but enlightened will be willing to accept and work with? If so, please give a reference.


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## conorkilleen (Apr 28, 2010)

CaliBlue said:


> HoundDog,
> 
> When I say ROI, I am simply meaning if I invest "x" amount of cash, then I can reasonably expect to get "x" in return. For example, if I invest 100K USD it would generate a 10K USD return ie 10% ROI.
> 
> Like many things in life, success in RI comes down to knowledge, desire, planning, and preparation. With a little luck sprinkled in.


I would recommend buying a fixer upper for around 75k...put 25k into it and start to rent it. You will get your 10% back in a few years..quite a few years.....or you can just flip it.

Unless you have investors your hope to buy an "investment" property and make your 10% quickly is slim to none. The high dollar houses/apartments, even a fixer upper, will run you a lot more than 100k USD


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