# Building or Flipping homes for profit



## cheftim (Nov 19, 2013)

Hola a todos,
I currently live in Playa del Carmen 6 months a year but am retiring to Mexico this fall. I own several apartments that i rent out for income so do not need to make a lot of money. My wife (Mexican0 and i are going to move to Valladolid in the winter as PDC is not what it used to be.

I am looking to hear from anyone who has built or renovated houses in Mexico for resale. I am trying to find out more information on costs of architects, labour, fees and permits and whether or not this is even viable. Of course, i would like to make a bit of money of projects but as long as i don't lose money i am happy. Any information anyone can share would be much appreciated,. thanks

tim


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## TundraGreen (Jul 15, 2010)

cheftim said:


> Hola a todos,
> I currently live in Playa del Carmen 6 months a year but am retiring to Mexico this fall. I own several apartments that i rent out for income so do not need to make a lot of money. My wife (Mexican0 and i are going to move to Valladolid in the winter as PDC is not what it used to be.
> 
> I am looking to hear from anyone who has built or renovated houses in Mexico for resale. I am trying to find out more information on costs of architects, labour, fees and permits and whether or not this is even viable. Of course, i would like to make a bit of money of projects but as long as i don't lose money i am happy. Any information anyone can share would be much appreciated,. thanks
> ...


I don't like to be negative, but it sounds risky to me. Do you have experience buying and selling property in Mexico? The market is very different from the US. Mostly it is all cash, although there are some agencies that do loan money for housing now. Property can sit on the market for years. If people don't get the price they think it is worth, they just hold it. Without mortgage payments, and with minimal tax payments (or none if they skip them), there are not the same downsides to holding property that there are north of the border. So there is not as much incentive for selling quickly. Consequently, you might have trouble picking up distressed properties for a bargain price that you could turn around. And, of course you would have to have the liquidity to do it without financing.


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## cheftim (Nov 19, 2013)

no, thatt's not negativity, just the facts. i own property in Mexico already so i do know it can be complicated. Liquidity is not a problem either. in the area i am relocating to, Valladolid there are tons of bargain properties. land is dirt cheap, pun intended..jaja. And broken down old houses can be had super cheap too. However, the sales prices of houses are pretty good. so it's all the stuff in between i am interested in. My question more pertains to the cost of architects and building and if there can be a profitable or even break even outcome. sitting on a property is not a problem either.


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## Stevenjb (Dec 10, 2017)

Might make a good TV reality show - Flip It or Leave It - Mexico Style


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## Stevenjb (Dec 10, 2017)

cheftim said:


> no, thatt's not negativity, just the facts. i own property in Mexico already so i do know it can be complicated. Liquidity is not a problem either. in the area i am relocating to, Valladolid there are tons of bargain properties. land is dirt cheap, pun intended..jaja. And broken down old houses can be had super cheap too. However, the sales prices of houses are pretty good. so it's all the stuff in between i am interested in. My question more pertains to the cost of architects and building and if there can be a profitable or even break even outcome. sitting on a property is not a problem either.


My thought would be to contact a contractor in the area of interest and pose these questions. Might be able to find a contractor through a realtor.

Also from what I have read on these forums - sitting on a vacant property, you may find someone sitting in it when you return.


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## citlali (Mar 4, 2013)

I have two houses, one I bought in dollars in a hot market and one in pesos where there were lots of deals, I can tell you that the one I bought in pesos and that i fixed up is the one I will make the least amount on.There is a reason why cheap houses are abundant in one area and not in the other and the cheap area may or may not become desirable in the long run. Timing and luck are all important..


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## Orfin (Sep 26, 2016)

Not long ago seeing documentaries about Mexico construction companies tied to investor groups. Stories of languishing residential complexes that go into decay without enough buyers and renters to turn the tide against decay and vandalism. So many of them it even becomes hard to manage against the hoards of squatters that move in.
Just investors with money to shelf somewhere that draws attention away from its original source. 

You really do have to take into account how long an area has been like it is, in terms of cheap easy deals everywhere with lots of places needing fixing up.
Also who is there and what the econmy is based on.
Tourist towns are better than non toursit towns, as locals are not likely to buy into a profit turning scheme when so many cheap deals lay around. Rich locals are also not easy to read when trying to sell to them. Most likely they are nit easy sells either. Unless......

All the stories of serious large real-estate investments that get huge hype and then quickly go into decay because the market os not there to support it perpetually. 
This is because there is a lot of money floating around in Mexico, looking for a place to rest without scrutiny and question about illicit sources. It goes into investor groups to get mixed up and fudged around, before being dropped into anything that can register as net worth in a portfolio.

Who else is investing where you habe your eyes? Who is there spending on what you hope to sell? Is there anything near there that would give reason for that location to go into serious growth in the next 10 years?

Mazatlan and Puerto Vallarta both have seen huge growth and investments since i was first there in 1999/2000. Back then, it was one cost of living in those places and now it is a whole new world of expenses. So people who saw it all in 1999 and made their 10 or 20 year plan to work, save and move there, got there 10 or 20 years later and met a different scene than wha they fell in love with. 
And also met a different set of $ metrics for the feasibility of their plan hatched 20 years prior.

That disappointemnt factor did not crash the dream for most people. All it did was create an overspill out of Mazatlan and Puerto Vallarta, into areas inbetween the two tourist hot spots.
Even over spill to south of Puerto Vallarta and North of Mazatlan. 
People who simple went to the next nearest town that did not get so expensive in the 10-20 years they waited to make the move. Of course those towns quickly change and then the next one and the next one and on and on.

I found a town still mostly untouched by all the growth and price hikes, but i was not the only one to find it. So the same trend continues and the town has just been given a major overhaul of infrastructure and expansion, to make it yet another attractive beach resort destination. 
A town like that is definitley the place to buy and build now, before 10 years from now makes it hard to afford. Already the locals with run down places are not selling cheap. Even raw land is hard to find cheap there now. 

Where you are at, is there an overflow trend from places with similar growth as Puerto Vallarta and Mazatalan? 
Has there been a steady 20year history of town after town being gobbled up by ever expanding hoards of money spenders looking to escape the price crunch of the prolific growth around them? 
This is basicaly the trend on virtually all of Mexico’s Pacific Coast and even on the Cancun side.
But, places like Acapulco that ae the grandfathers of Mexico international tourism, have crased harder than hell, after hell’s minions literally crashed the town. 

If you are outside the tourism growth trend, then you are faced with less certainty about the growth. Tepic is not a tourist city but it is significant enough between Puerto Vallarta and Mazatlan, that it has potential, but no where near along the coast. Cheaper in Tepic as a result, but hard to drive growth in a locals setting like Tepic. Their wages and economic culture is not the same as foreigners who flock in with spending power. Harder to find a hard to doubt niche there. And Tepic locals tend to drive to the coasts for the weekends at any of the many tourism oriented towns. Some still very price friendly to locals but not cheap. 

Lots of small towns away from the beaches and it all depends on what route they sit on and what sits on either end of the route passing through. That determines who comes through and what spending power they bring. 
Even Mexican investors are more inclined to invest on the tourist trail. Not easy selling to locals.

And i am talking from Experience with a local duena who owns porperties that range from raw land to rental houses and apratments. She says she does well when renting to foreigners and tourists. The foreigners occupy the space in a different way that does not make it difficult for her to manage and keep up. They also do not drive her price down and costs up. 
Selling is not that easy for her either and she is 100% Mexican based in a place on the tourist trails but a more remote and tucked away part.
Of course she is not trying to sell cheap either. 

After seeing what Mexicans go through in the business, and having myself already set up in USA with property, i decided it is better to keep my hold in USA and even grow it more there. 
Buying in Mexico is because you want a house there or you need a place to drop money amid no other options.

I have it hard enough competing against mexicans for a spot in line at a small shopping center or customer service center. Imagine then competng for lucrative spot in any market especially with so much narco money competing there, and not so much for proft as a place to rest wealth without drawing scrutiny. Settings like that can easily crash a market when there is more investor money than there is money spent to buy what the investment is selling.

If the place is so cheap, you cannot get any cheaper, then maybe not a bad buy. But in Mexico it can still mean being locked into the buy with no way out other than renting very cheap to the only people who would want to live there.
And in Mexico, if a lace is the cheapeast, it is likely not a place any ome wants to be.
Maybe buy the whole small town and fix it up, advertise it as something special and let that dream redefine the place and hope it works out in the long run.

For myself, i would feel easier and be more frugal, buying into the cheapest parts of USA. Even low reputation states like Arkansas that never show on the map for anything outside of the immediate region. Problems can happen everywhere, but is better in places with so much more going for it. And to think most Mexicans, even with good money to invest, would rather be in USA as well.

Of course i am from USA and have the benefit of there being open to me. USA still remains better earnings, investment and living standard for me. Mexico still remains affordable beach life for me.
As with most US expats, Mexico is better place to spend than to earn. So they bring USA earnings down to spend and Mexico is enriched by it.


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## HolyMole (Jan 3, 2009)

I think people who regularly flip houses for profit should be in jail, but hey, that's just me.


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## TundraGreen (Jul 15, 2010)

HolyMole said:


> I think people who regularly flip houses for profit should be in jail, but hey, that's just me.


I tend to agree, but it can be a little more nuanced. If someone is buying abandoned properties that are a blight and attract pests either human or animal, and then fixing them up and selling them to people who will actually live there, they can be doing a service.


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## HolyMole (Jan 3, 2009)

TundraGreen said:


> I tend to agree, but it can be a little more nuanced. If someone is buying abandoned properties that are a blight and attract pests either human or animal, and then fixing them up and selling them to people who will actually live there, they can be doing a service.


Point taken, but I doubt your average flipper is that "nuanced".....or that altruistic. I can't see many municipalities giving out a humanitarian "House Flipper of the Year" award. 
But again, that's just me.


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## Hound Dog1 (Feb 6, 2016)

Stevenjb said:


> My thought would be to contact a contractor in the area of interest and pose these questions. Might be able to find a contractor through a realtor.
> 
> Also from what I have read on these forums - sitting on a vacant property, you may find someone sitting in it when you return.


Good point, Stevenjb. If one buys a home in Mexico and then leaves it vacant for some variable period of time, one may find squatters living there upon one´s return and evicting squatters may be more problematic in Mexico than one might anticipate if one is used to dealing in properties in the U.S. for instance. We thought of buying a retirement home in France when the market was good for buyers years before our proposed retirement but here we were living in the U.S. with a vacant house in France where evicting squatters from uninhabited properties can be, shall we say, an uncertain legal process. Much of Mexican law traditions mimic Franch law traditions. Do your careful reasearch and know your plans before making any commitments .


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## dwwhiteside (Apr 17, 2013)

I don't know anything about buying "distressed" houses and renovating them to sell, so I will not make any comments about that. But, my wife (Mexican) and I have built some houses here on land we purchased. Perhaps I can help you with some of the particulars.

You absolutely need to work with an architect, and an engineer; but the engineer will most likely be contracted by the architect. Again, I am speaking specifically about building on vacant land. Anything else and this may not apply.

The "big name" architectural companies will quote you a turnkey price per square meter. Basically, they are going to charge you "retail" for the construction meaning that, once you're done, you have paid the same as if you just came in off the street and bought an existing house. You won't make any money. You need to find an individual architect that you can work with to make sure you, the one putting up the money and taking the risk, not the architect, makes the profit.

We paid ours a flat fee, around $12,000 for the blue prints and "calculos" (the part done by the engineer), but then had to pay a little extra for some changes we wanted to make. All told, between the design, blue prints, calculations and permits; we spent about $20,000 MXN. 

The architect is also the one that supervises construction; hires the workers, purchases materials, schedules other contractors like the electrician and plumber, etc. You need to get estimates up front. There are phases of construction, obra negra, obra gris and obra blanca. We asked our guy for an estimate of just the obra negra phase with the understanding if he completed this phase within the estimated time and cost, we would continue using him and his crew for the next phase. 

Actually, since we are building a two story house, we got an estimate for just the first floor obra negra. But, the work was completed on time and under budget so we got the estimate for the next phase and continued. 

Every Friday afternoon we get an invoice from the architect listing the work accomplished that week, the materials purchased and delivered, and showing the total cost to us for that week. We pay that money to the architect on Saturday, in cash, and he uses that to pay the workers. However, for major material purchases, we either pre-pay to a supplier or pay via wire transfer at the time of ordering.

The obra negra phase uses lots of materials; stone, gravel, sand, bricks, cement, mortar, rebar, etc. But, obra gris (when the final roof is on, obra negra ends and obra gris begins) is more labor than materials. This is the phase where the brick walls are covered and made ready to paint, the ceiling is made ready and the concrete portion of the floors goes in.

The fun part is obra blanca. This is when the walls are painted, the tile goes in, the fixtures are installed and all the carpentry happens. Once this phase is complete, the house is ready for final inspection and then occupancy.

Depending on where in Mexico you are building and how fancy you want to make the house, if you have a good architect that will work with you, you can complete construction for as little as $5,000 a square meter (this does NOT include the cost of the land). We will probably spend a little more than that on our current project because we are going to put a little more into the kitchen, the closet, the floors and the fixtures. But, when the "retail" price is $8,000 - $10,000 a meter, that still leaves room for some profit.


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## Balboa (Nov 16, 2010)

cheftim said:


> no, thatt's not negativity, just the facts. i own property in Mexico already so i do know it can be complicated. Liquidity is not a problem either. in the area i am relocating to, Valladolid there are tons of bargain properties. land is dirt cheap, pun intended..jaja. And broken down old houses can be had super cheap too. However, the sales prices of houses are pretty good. so it's all the stuff in between i am interested in. My question more pertains to the cost of architects and building and if there can be a profitable or even break even outcome. sitting on a property is not a problem either.


My father is in the middle of a construction project for his retirement house in Jalisco. I have many familiy members who have sold / built homes recently.


Labor can be very cheap - but typically the skill level is low and work quality varies tremendously

Properly trained architects are expensive - I contacted various when we were designing my dads house. you get the best results by working with an architect

Typically, people will just work with a general contractor who can design simple houses and has a team of workers. 

Materials for houses are still expensive

Land prices in Jalisco are crazy expensive, and anything that appears "dirt cheap" is likely dirt cheap for a reason


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## Stevenjb (Dec 10, 2017)

I always find these 'flipping' TV shows amusing. Nice to watch the dramatic process - but then comes time to sell - crickets chirping. If there is no market for one to turn a profit - forget about it!


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## chicois8 (Aug 8, 2009)

And do not forget since it would not be your principle residence SAT will be looking for 30+% capitol gains taxes.


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