Returning Signs of Life in Baja Real Estate: Now’s the Time to Invest in the Coast
Some experts, like Marianne ‘Mimi’ Mills of Bajamar Premier Properties, are seeing returning signs of life in the recently booming Baja California real estate market. They say, ‘Now is the time to get in.’
Ensenada, Baja California – June 21, 2009
“It’s as beautiful here as it ever was…and just as safe. The great part is that Baja California is more affordable right now than it has been in years. This is good news for people looking to pay less for vacation or retirement housing in an idyllic location that’s on or close to the Pacific Ocean and an easy drive to San Diego,” comments Mimi Mills, owner of Bajamar Premier Properties (http://www.mlsbajamar.com/) located at the Bajamar Golf Resort and Hotel. Mills, who has lived in Ensenada for more than ____ years, has been heartened in recent weeks to see renewed interest by visitors in real estate investment in the area.
Mills acknowledges that the economy and overall real estate industry in Baja and particularly the coastal cities were hit hard by the downturn in the U.S. economy, as well as by sensationalistic media focused on isolated violence in some border areas and by the swine flu (which virtually bypassed Baja).
“The reality is that this is one of the only places on the West Coast were people can live in an almost perfect mild climate, even in an oceanfront home or condo, and pay a fraction of what it would cost in the United States,” says Mills. And, according to Mills, there appears to be a dawning recognition by baby boomers and those looking for good deals on real estate that now is the time to take advantage of bargains…and of something even more important.
Realtors Organize to Promote Ethics and Standards
In recent years, driven by more American expatriates moving to northern Baja, the real estate industry in the region has taken proactive steps to become more professional. No more, the ‘Wild West’ approach to real estate, where buyers took a leap of faith when they purchased lots or homes. Realtors like Mimi Mills, Diane Gibbs, Ross Buck and others have banded together in a chapter of the national organization called AMPI (Asociaciòn Mexicana de Profesionales Inmobiliarios) that, while not an actual realtor-licensing organization, provides oversight, guidance, ethics and standards for real estate agents and companies working in Baja.
So what can a wanna-be buyer expect to find and pay in looking for condominiums, townhomes, houses or oceanfront property in northern Baja? And how does one begin the daunting task of finding a retirement or vacation home in the Rosarito or Ensenada area?
Oceanfront or Golf Course Views? Affordable luxury in Baja
Maday Valdenegro, an associate with Bajamar Premier Properties, says that the first thing to do is make a check list. “People need to look at a realistic budget. What do they want to spend and what to they really need in a home: one or two bedrooms or more? How many bathrooms? What kind of storage space? And are they locked into having an ocean view or a mountain view, and so on,” she suggests. “Then they need to think about what they really want.”
And want can mean anything from high-end kitchens outfitted with gorgeous granite (a specialty of the area); a personal art gallery featuring works by some of Mexico’s finest artists (many of whom live in the area); built-in wine cellars that boast some of the world’s award-winning wines from Mexico’s premier wine country, the Valle de Guadalupe…just 20 minutes away; bathrooms with travertine and marble at half the cost of comparable work in the north, and picture windows that take in the breath-taking views of the Pacific Ocean or the soft colors of a Baja sunset on coastal mountain ranges.
Just like in the States, location is everything…but location will cost a whole lot less in Baja, notes Valdenegro. “For instance, right now there are incredible deals available at all levels. There are houses that are literally on the edge of a bluff, overlooking migrating whales, that would be million-dollar-plus properties in the U.S. (and some even here, are) that are currently on the market for hundreds of thousands less.”
On the other hand, she points out, there are houses with private gardens and tranquil courtyards -- many located right on the edge of Bajamar’s famed, challenging 27-hole golf course -- with nearby amenities including a hotel, restaurant, tennis courts, biking and hiking paths, and more. These homes range vastly in size and footage, but, notes Mills, “Right now, we are seeing sales prices lower than they’ve been in five years…anywhere from $200,000 on up.”
Both realtors are adamant that potential buyers need to get to know Baja before they make the purchase plunge.
“I would say the same thing to buyers thinking of moving from Los Angeles to Chicago—go there, see what it is all about,” says Mills. “People need to have a feeling for the place they are considering living…it’s a big decision. We really urge our clients to spend a little time here, ask lots of questions – both of us and of people who already live here—and get a feeling for what ‘the good life in Baja’ is all about.“
To this end, Bajamar Premier Properties has created special stay-tour-play packages for those interesting in visiting Bajamar with the express purpose of considering real estate. Interested parties are urged to visit http://www.mlsbajamar.com/, email bajamarpremierprop@aol.com, or call from the US (619) 446-6734 and speak with Mimi, Maday or MaryCarmen Lopez.M
Friday, June 26, 2009
Friday, February 20, 2009
Developments In Mexican Property Law - Article by Peter R.J. Thompson, Attorney At Law- Published in the Baja Times
Developments In Mexican Property Law
By Peter R. J. Thompson, Attorney At Law“Seasoned” Baja-nuts may recall that I had the honor of writing the “It’s the Law” legal column in the old Baja Times from 1984-1990. Ever since I started helping my clients with their Mexican property transactions in 1979, there have been a few big changes in the legal and regulatory “landscape” that have affected the rights and obligations of foreigners who own property in Mexico. After handling more than 3000 transactions in Mexico over that 30-year time frame, believe me I have seen just about everything. BANK TRUSTS. By now, everyone knows that one of the best and most secure way to own a home in Mexico is in a bank trust (in Spanish: “fideicomiso”, pr: fee-day-co-me-sew, with the accent on the “me”). Bank trusts for property have always been legal in Mexico (I ran across old 10 and 20 year bank trusts), but only became standard operating procedure when President Echeverria authorized 30-year real estate bank trusts in 1971, followed up by the 1973 Foreign Investment Law which set forth the details. Bank trusts are necessary because Article 27 of the Mexican Constitution prohibits foreigners from owning direct title (dominio directo) to real property within a zone of 100 kilometers (about 62 miles) from the border and 50 kilometers (about 31 miles) from the coasts. Due to the shape and size of both states in Baja California, all of the tourist zones in Baja are in the prohibited zone. In the interior of Mexico, foreigners can own fee simple title to property as long as they have the correct Mexican visa. Article 27 was written in a bygone era (around 1917) when Mexico was less powerful economically, and its leaders felt they needed something drastic to prevent its most valuable property from being controlled by foreigners. Now, in modern times, the bank trust laws became a way to permit foreign ownership without having to change the Constitution, which was (and still is) politically impractical.In a bank trust, a Mexican notario creates a recorded deed in which a Mexican bank is listed as the trustee and legal titleholder of the property, and a foreign person or entity is listed as the beneficial owner of the property. The bank trustee receives start-up, annual and termination fees for its services from the foreign owner, and, although the beneficial owner has most of the rights and obligations of ownership, the bank trust document does contain restrictions and conditions. In 1989, bank trusts were made renewable and then, in 1993, bank trusts were extended to 50 years. Those were VERY important and necessary changes. Older 30-year trusts do not automatically become 50 years—you have to apply (and pay fees) to extend them to 50 years. Likewise, trusts are not automatically renewed at the end of their term. Again, you have to apply for renewal within a very specific time frame close to the end of the trust, and pay certain fees. If you don’t renew in that limited time window, you could have problems with your title. All new trusts being made these days are automatically for 50 years and are renewable.The bank trust program has been very successful in providing non-Mexicans with a secure form of recorded and marketable title for residential real estate. In fact, bank trust title is just as valid and secure as normal fee simple direct title for Mexicans. Title insurance is also readily available for bank trusts—another big selling point for Americans buying in Mexico. Of course, as in any country including the USA, property scandals and scams can be perpetuated against the unwary buyer, so it pays to have an attorney do title checks and investigations before making payments. It also pays to have a lawyer guide you through the purchasing process because it is very different than closing procedures in the U.S. CORPORATIONS FOR “NON-RESIDENTIAL” PROPERTY. One interesting (and controversial) recent development is the increasing use of Mexican corporations by foreigners to own houses and condos. Mexican law now allows 100% foreign ownership of Mexican corporations which own fee simple title to “non-residential” real estate in the prohibited zone. The word “non-residential” is not defined in the law, but clearly this applies to vacant land, as well as to property to be used for commercial purposes, and (some maintain) to houses and condos that are rented out to third parties because the use of the property in the hands of the foreign owner(s) is commercial, not residential.Although some say that such an interpretation is contrary to the intent of the foreign investment laws of Mexico, I know of no court case or regulation which settles the issue, and in fact for years notarios have been authorizing such corporate titles. The reason people seek to do this is to avoid the very real restrictions inherent a bank trust. However, even if legal, corporate ownership does have its costs, include the costs of promoting the property as a rental, hiring a Mexican accountant and filing Mexican tax returns. Another hidden cost is that if the property value significantly appreciates before you sell, you must pay the full Mexican capital gains tax rate (currently round 30%), without the possibility of the tax exemption/reduction available to individual resident bank trust owners and also without the benefit of the foreign tax credit on your U.S. form 1040 (see the next section about those points). If significant appreciation is unlikely or is not your concern, and if you truly intend to and actually do rent-out your house or condo, corporate ownership might be a good option. In a future article, I will discuss the details of 3 other forms of acquiring property besides bank trusts and corporate title, namely: 1) leases, 2) federal zone concessions and 3) ejido land. MEXICAN CAPITAL GAINS INCOME TAXES ON THE SALE OF A RESIDENCE. I do want to briefly mention 3 changes in Mexican capital gains income tax. First, the Mexican IRS (Hacienda) now considers the sale of more than 25% shares of a U.S. corporation or LLC which owns a bank trust property to be a taxable sale of the real estate. (Article 151 of the Mexican Revenue Code). If this is done, and you do not pay the Mexican income tax (if any is due), you may cause a tax lien burden against the property for the new owner. Second, (as does the U.S.) Mexico now grants a significant capital gains income tax exemption for the sale of a “residence”. You need to consult a tax or real estate advisor to make sure the property qualifies as a “residence” and also to make sure you qualify as a “resident”. In an upcoming article, I am going to explain more about that. Third, a Mexico-U.S. tax treaty allows a taxpayer to take a credit against U.S. income taxes for Mexican income taxes paid, and visa versa (thus avoiding double taxation of the same income)—but that only applies when it is the SAME taxpayer. Thus, if you hold property in a Mexican corporation and sell it, and if the corporation pays a Mexican tax on any gain, then you as an individual person can’t take a tax credit in the U.S. on your 1040 income taxes because the corporation and the you are not the “same” taxpayer. So because of the tax exemption and the tax treaty, you can see that corporate ownership isn’t necessarily the best strategy if you reasonably expect the property to greatly appreciate during the time of your ownership. Mr. Thompson is a San Diego attorney who specializes in Mexican law and Mexican real estate. He has handled over 3,000 Mexican transactions over the past 30 years of practice.
By Peter R. J. Thompson, Attorney At Law“Seasoned” Baja-nuts may recall that I had the honor of writing the “It’s the Law” legal column in the old Baja Times from 1984-1990. Ever since I started helping my clients with their Mexican property transactions in 1979, there have been a few big changes in the legal and regulatory “landscape” that have affected the rights and obligations of foreigners who own property in Mexico. After handling more than 3000 transactions in Mexico over that 30-year time frame, believe me I have seen just about everything. BANK TRUSTS. By now, everyone knows that one of the best and most secure way to own a home in Mexico is in a bank trust (in Spanish: “fideicomiso”, pr: fee-day-co-me-sew, with the accent on the “me”). Bank trusts for property have always been legal in Mexico (I ran across old 10 and 20 year bank trusts), but only became standard operating procedure when President Echeverria authorized 30-year real estate bank trusts in 1971, followed up by the 1973 Foreign Investment Law which set forth the details. Bank trusts are necessary because Article 27 of the Mexican Constitution prohibits foreigners from owning direct title (dominio directo) to real property within a zone of 100 kilometers (about 62 miles) from the border and 50 kilometers (about 31 miles) from the coasts. Due to the shape and size of both states in Baja California, all of the tourist zones in Baja are in the prohibited zone. In the interior of Mexico, foreigners can own fee simple title to property as long as they have the correct Mexican visa. Article 27 was written in a bygone era (around 1917) when Mexico was less powerful economically, and its leaders felt they needed something drastic to prevent its most valuable property from being controlled by foreigners. Now, in modern times, the bank trust laws became a way to permit foreign ownership without having to change the Constitution, which was (and still is) politically impractical.In a bank trust, a Mexican notario creates a recorded deed in which a Mexican bank is listed as the trustee and legal titleholder of the property, and a foreign person or entity is listed as the beneficial owner of the property. The bank trustee receives start-up, annual and termination fees for its services from the foreign owner, and, although the beneficial owner has most of the rights and obligations of ownership, the bank trust document does contain restrictions and conditions. In 1989, bank trusts were made renewable and then, in 1993, bank trusts were extended to 50 years. Those were VERY important and necessary changes. Older 30-year trusts do not automatically become 50 years—you have to apply (and pay fees) to extend them to 50 years. Likewise, trusts are not automatically renewed at the end of their term. Again, you have to apply for renewal within a very specific time frame close to the end of the trust, and pay certain fees. If you don’t renew in that limited time window, you could have problems with your title. All new trusts being made these days are automatically for 50 years and are renewable.The bank trust program has been very successful in providing non-Mexicans with a secure form of recorded and marketable title for residential real estate. In fact, bank trust title is just as valid and secure as normal fee simple direct title for Mexicans. Title insurance is also readily available for bank trusts—another big selling point for Americans buying in Mexico. Of course, as in any country including the USA, property scandals and scams can be perpetuated against the unwary buyer, so it pays to have an attorney do title checks and investigations before making payments. It also pays to have a lawyer guide you through the purchasing process because it is very different than closing procedures in the U.S. CORPORATIONS FOR “NON-RESIDENTIAL” PROPERTY. One interesting (and controversial) recent development is the increasing use of Mexican corporations by foreigners to own houses and condos. Mexican law now allows 100% foreign ownership of Mexican corporations which own fee simple title to “non-residential” real estate in the prohibited zone. The word “non-residential” is not defined in the law, but clearly this applies to vacant land, as well as to property to be used for commercial purposes, and (some maintain) to houses and condos that are rented out to third parties because the use of the property in the hands of the foreign owner(s) is commercial, not residential.Although some say that such an interpretation is contrary to the intent of the foreign investment laws of Mexico, I know of no court case or regulation which settles the issue, and in fact for years notarios have been authorizing such corporate titles. The reason people seek to do this is to avoid the very real restrictions inherent a bank trust. However, even if legal, corporate ownership does have its costs, include the costs of promoting the property as a rental, hiring a Mexican accountant and filing Mexican tax returns. Another hidden cost is that if the property value significantly appreciates before you sell, you must pay the full Mexican capital gains tax rate (currently round 30%), without the possibility of the tax exemption/reduction available to individual resident bank trust owners and also without the benefit of the foreign tax credit on your U.S. form 1040 (see the next section about those points). If significant appreciation is unlikely or is not your concern, and if you truly intend to and actually do rent-out your house or condo, corporate ownership might be a good option. In a future article, I will discuss the details of 3 other forms of acquiring property besides bank trusts and corporate title, namely: 1) leases, 2) federal zone concessions and 3) ejido land. MEXICAN CAPITAL GAINS INCOME TAXES ON THE SALE OF A RESIDENCE. I do want to briefly mention 3 changes in Mexican capital gains income tax. First, the Mexican IRS (Hacienda) now considers the sale of more than 25% shares of a U.S. corporation or LLC which owns a bank trust property to be a taxable sale of the real estate. (Article 151 of the Mexican Revenue Code). If this is done, and you do not pay the Mexican income tax (if any is due), you may cause a tax lien burden against the property for the new owner. Second, (as does the U.S.) Mexico now grants a significant capital gains income tax exemption for the sale of a “residence”. You need to consult a tax or real estate advisor to make sure the property qualifies as a “residence” and also to make sure you qualify as a “resident”. In an upcoming article, I am going to explain more about that. Third, a Mexico-U.S. tax treaty allows a taxpayer to take a credit against U.S. income taxes for Mexican income taxes paid, and visa versa (thus avoiding double taxation of the same income)—but that only applies when it is the SAME taxpayer. Thus, if you hold property in a Mexican corporation and sell it, and if the corporation pays a Mexican tax on any gain, then you as an individual person can’t take a tax credit in the U.S. on your 1040 income taxes because the corporation and the you are not the “same” taxpayer. So because of the tax exemption and the tax treaty, you can see that corporate ownership isn’t necessarily the best strategy if you reasonably expect the property to greatly appreciate during the time of your ownership. Mr. Thompson is a San Diego attorney who specializes in Mexican law and Mexican real estate. He has handled over 3,000 Mexican transactions over the past 30 years of practice.
AMPI...Do you know who or what this is?
AMPI.... Do you know who or what this is?It is a professional association of Realtors, alive and well in Rosarito, in good standing in the state of Baja and with the National AMPI Association in Mexico City. We are affiliated with the National Association of Realtors in the U.S. AMPI Rosarito in Baja California Norte is off to a strong, optimistic start for 2009. Since AMPI’s inception in Rosarito in 2004, we have had some “growing pains” as there always are with new organizations where individual participation is vital and necessary. We were pleased when AMPI National came then to instruct and certify about twenty of us and we grew to thirty three members in 2008. The goal for our chapter is an ambitious ninety-nine members.We in the business realize the importance of AMPI as the 21st Century professional face of Realtors, not just on the Baja Coast area but throughout Mexico. Working within the guidelines of AMPI National gives us uniformity in how we do our work. The goal for us as a group is to improve business relationships with disclosure and transparency. During this global economic downturn, we in Rosarito intend to focus on the positive aspects with clients and each other. With a strong committed President, a proactive Board and Committee chairpersons, our plans for the year include continuing the current programs and adding to our agenda for promoting AMPI Rosarito to become a more integral part of the community by being more visible and active.Belonging to AMPI gives each of us a professional image which is of utmost importance, not just what we know about our business, but how we do the work of listing and selling properties as Realtors. Membership for associates in related businesses are encouraged and invited to join us, companies such as Title and Insurance companies, Home Inspection and Security Companies, Developers, Architects, Banks and Mortgage companies in the business of making consumer loans. Associates are essential as we work as a team providing service to clients. AMPI Rosarito will resume its continuing education classes in Escrow, closings and the costs associated with them, contracts, disclosure, technology, Federal Zone, Real Estate taxes, how to sell as a trusted professional. Another positive aspect coming in the future include State and Federal licensing which will be a great benefit to us and the people we serve.We look forward to having an AMPI website completed where we will have standardized contracts, a Multiple Listing Service, marketing only properties with clear titles, reporting actual sale prices so we will have real comparables to discuss with clients. And we will have information on the website for those interested in how it is to live in Baja, all services available, clubs, organizations, etc.Another most important area is that our local AMPI will be working with the City government as it pertains to developers in the planning and construction stages of offering their ventures to the public. The structure of Rosarito AMPI includes the officers, vocals and important committees.They are: Admissions, Continuing Education, Publicity/Marketing, Technology, Developers, Community Involvement, Safety, Events, Elections, and Honor and Justice.We are undertaking two ambitious fundraising events in 2009 scheduled a few months apart. Our emphasis will be on charities of our area and to help our Association meet some of the operating expenses. In the Spring, we will have a fiesta, a celebration for all of the greater Rosarito area residents and for residents of the Unites States who visit and enjoy this area, many of whom purchase Real Estate here. The fiesta will be a joint, cooperative effort of AMPI and the associations of restaurants, hotels, spas, Chamber of Commerce, Tourism, furniture, artists, dance, music and civic organizations.In the Fall, a golf tournament, a fun event for the Real Estate industry and their clients.This promises to be a great day of golf and fellowship, with prizes, raffles, dinner and dancing.AMPI Rosarito is definitely a team effort as a group making a difference in our work and in the community. Members will be listed with a contact number in a March edition of the Baja Times as this is the enrollment period for past and new members.
Laura Miller, Publicity Chairman
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