| The Los
Cabos real estate market is in the midst of a boom and not so
surprisingly. With beautiful, warm, sunny days, miles of secluded
beaches, world class fishing and golf, fabulous restaurants,
shopping and entertainment all within 4 to 6 hours or less from
anywhere in the U.S. or Canada. Recently such fine resort hotels
as the Sheraton Hacienda del Mar, Fiesta Americana, Hilton,
Marquis Los Cabos and Royal Solaris are among some of the newest
developments to appear in Los Cabos. The airport is also experiencing
the same boom as the real estate market with the addition of
direct flights from Chicago, Atlanta and New York/New Jersey
via Newark International.
 Never
before has it been easier and safer for foreigners to purchase
real estate in Mexico. With the intriduction of U.S. Mortgage
Companies now offering long term, fixed rate financing with
as little as 20% - 30% down and unprecedented investment protection
by US. Title Insurance Companies such as Chicago Title, Fidelity
First American and Lawyers Title Insurance help make your
vacation or retirement home both affordable and secure.
Our real
estate company, Baja Properties, is celebrating its 15th anniversary
with over 20 knowledgeable and professional agents. You can
find in five convenient office locations throughout the three
resort towns of Cabo San Lucas, San Jose del Cabo and Los
Barrilles. We cover over 150 miles of coastline with the largest
inventory on listings from homes, condominiums, lots, ranches
and commercial opportunities.
We home
you enjoy your stay here in beautiful Los Cabos and should
the Baja Bug bite, give us a call or stop by any one of our
offices for a tour of available properties.
www.bajaproperties.com
TOP
WHAT
IS FRACTIONAL OR
CO-OWNERSHIP OF REAL ESTATE
by John
Vering
One of
the most important emerging trends in resort real estate is
a concept called co-ownership. This idea is rapidly growing
in popularity as an alternative to full ownership of vacation
homes.
"Actually,
the fractional idea is not really that new. For decades, homeowners
have split ownership and use of second homes to lessen the
costs of infrequently used vacation homes. Today, that notion
has been upgraded to include all sorts of amenities, services
and management benefits for those who have more leisure time
and a preference for luxury.
According
to recent research, the most successful co-ownership
products are located in areas where real estate is in high
demand.
Originally initiated in the ski resorts of the Rockies, these
projects are now spreading to destinations which include golf
and beach resorts.
In Los
Cabos there are a few fractional ownerships. Villa La
Estancia is a good example of this concept. It's the only
condominium project located on the beach in Cabo San Lucas
and offers an exceptional coownership package. Owners have
an independent one fourth interest of a whole beautifully
appointed Villa.
Reservations
are based on an annual rotation system which ensures
that owners can receive a one month period each winter, spring
and summer season.
A valid
concern is how you actually buy something like this in Mexico?
What usually happens is the Owners are deeded beneficiaries
of a trust (a Fideicomiso) inscribed in the Public Registry.
The property can be inherited or sold for full market value
at anytime and lasts 50 years. It can be renewed indefinitely.
Investment
in high end reputable projects like Villa La Estancia is as
secure as it would be in any property in the U.S. VLE is insured
by Fidelity National Title, the largest Title Company in the
U.S with assets of nearly $1 billion.
The fractional
projects in Los Cabos are truly of the luxury variety, and
located on stunning properties. For instance Villa La Estancia,
is an exclusive retreat of 158 Villas. The spacious two and
three bedroom designs, overlook the internationally known
landmark of El Arco at Land's End, on Playa Medano. From the
spacious terraces and verandas to well planned, underground
parking each detail is efficiently addressed. Co-ownership
and full ownership opportunities are available in most of
the projects, and some people are buying whole villas then
selling
"time" to their family and friends. The largest
projects all come with the services of a five Star resort.
Prices range from $100-350,000 USD with 10 year financing
available.
TOP
REAL
ESTATE TIPS
 Mexico
is an exciting and very desirable place to live for those
who are retiring, are working from home on a computer link
with their company, are looking for a vacation home or an
outstanding investment... above all, for those who dream of
a better quality of life!
Home...
the word represents security and comfort for the majority.
All too often the word, when used in conjunction with a purchase
of property in Mexico creates stress, worry and, at times
has been associated with financial loss. This needn't be the
case. Procedures in searching titles and transferring property
are similar to those of the United States and Canada
- RULE
NUMBER ONE:
SELECT
THE COMMUNITY AND THE COMPANY THAT FITS YOU:
First select the general area where you think you'd like
to live. The agent you select to represent you in your
Mexican property purchase should be a member of AMPI and
have certification from PROFECO, the Mexican consumer
protection agency. The AMPI member is required to operate
under a higher standard of care, and to adhere to a strict
code of ethics.
- RULE
NUMBER TWO:
EXAMINE
THE NEIGHBORHOOD
What will it look like in ten years? Are highways or other
development projects planned for the future? Where are
schools, churches, shopping facilities? Are there homeowner
fees for maintenance of common areas? If so, how much
are they and when are they paid? Are all the utilities
in and paid for? What does the developer have left to
do? What building restrictions are there?
- RULE
NUMBER THREE:
BUDGET
FOR YOUR PURCHASE, CHECK TITLE AND UNDERSTAND THE MEXICAN
BANK TRUST (FIDEICOMISO)
- CLOSING
COSTS:
Closing Costs will range from 4% to 30% (yes, 30%')
of the total cost of your property. The higher the price
of the property, the lower the % of total closing costs.
Costs include title search, transfer taxes, bank fees,
government permits and notary fees.
- CHECK
THE TITLE:
Does your seller have a registered title to the property?
Title insurance, now available for many Mexican properties,
is a good investment.
- UNDERSTAND
THE MEXICAN TRUST - FIDEICOMISO
If you are a foreign person purchasing property in many
parts of Mexico, includiag the entire Baja peninsula,
the property will transfer not to your name but to the
name of a Mexican bank as trustee for your interests.
The Mexican constitution prohibits direct ownership
of real property by foreigners in the "prohibited
zone", a strip of land thirty miles wide along
its seacoasts and sixty miles wide along its borders
with the United States and Guatemala/Belize, as well
as the entire Baja peninsula. This is the reason for
the bank trust, the "fideicomiso", which has
been established under the guidelines of the Mexican
government so that foreigners may be protected in their
property acquisitions.
Whether
you are purchasing in a zone requiring a bank trust
or in an area where title can be taken directly into
your name, it is necessary that this transfer take
place and your interest registered as soon as possible
after the successful conclusion of the negotiations
to purchase your dream property. Until this transfer
takes place you are vulnerable; the seller may die,
the heirs may be unwilling to recognize your rights
in the property, you may become involved in a lengthy
and expensive probate proceeding. Meanwhile, your
interest may not be recognized by the authorities
should you wish to obtain a building permit, by the
bank should you wish to borrow money and use the property
as collateral or as part of your assets; by the courts
should a third party also claim an interest in the
land, or, should you later decide to sell it.
The
prudent buyer of real estate in the United States
or Canada
would not consider leaving his title "in limbo"
in those two countries; one should not do so in Mexico
either.
- RULE
NUMBER FOUR:
INVESTIGATE
THE STATUS OF THE CONDOMINIUM REGIME
The unit, or lot must be legally described and an individual
property tax number issued. This individual property must
be registered in both the Property Tax Office and in the
Public Registry of Property. Until this is completed,
legal title to an individual unit or lot cannot be granted
since there is nothing to describe.
- RULE
NUMBER FIVE:
INSIST
UPON RECEIVING A REGISTERED TITLE
Unless the deed (fideicomiso) for the rights of the beneficiary
has been recorded, there may not be a remedy for the purchaser
who neglected to obtain a registered deed... his interest,
his investment, may be lost.
TOP
Owning
Property In Mexico
by Linda
Neil
The bank Trust for ownership of Real Property in Mexico.
Article 27 of the Constitution of the Republic of Mexico
prohibits foreign ownership of real property within thirty
miles of any coastline or sixty miles, of either border. This
is referred to as the prohibited or restricted zone. In 1973,
recognizing that many foreigners would enjoy owning property
in Mexico, and would bring needed dollars to the country through
such ownership. President Echeverria approved the bank trust,
fideicomiso, from of ownership, which is available to non-Mexicans.
This law governing ownership under a bank trust was further
expanded in the Foreign Investment Laws of 1989 and 1993.
Properties located within the prohibited, or restricted, zone
which includes the entire Baja Peninsula, may be acquired
by a foreigner through a Mexican bank trust, which designates
the buyer of the property as the beneficiary of the trust.
Legal title is placed in the name of the bank selected by
the buyer as his trustee. The bank administrates the property
in accordance with the instructions of the buyer/beneficiary.
The buyer/beneficiary enjoys the same rights of ownership
as does a Mexican national. He may build on the property,
tear down existing buildings, modify them, rent, lease or
sell at anytime conforming only to the general laws of the
country established for all persons.
The term of the trust is fifty years and it can be renewed
for additional fifty-year period. In other words, title to
the property may rest in one beneficiary indefinitely, provided
that it is renewed within the terms established by the law.
The procedure for establishing the fideicomiso, the bank
trust, is as follows: 1. Application is made to the Secretary
of Foreign Relations for the permit to establish the trust.
2. Upon receipt of the permit, the trustee bank send instructions
to the notary public for preparation of the deed to the beneficial
rights. 3. Applicable taxes are paid and
4. The deed is recorded in the municipality where the property
is located. The cost for the permit to establish the bank
trust is currently less than $1000 U.S. dlls. Annual bank
administration fees generally range from $300 to $400 US Dlls.
Additional closing cost such as an official appraisal, notary
fees, certificates, registration costs, must be paid, however,
to obtain a registered deed in buyer's name. It is wise to
request a written estimate prior to beginning the transfer
process.
TOP
Time
Share in Los Cabos
What exactly
is a time-share anyway? It's the purchase of the right to
use a luxurious condominium for a week or multiple weeks.
During the time that you have purchased, you may use the condominium,
rent it or exchange it for the use of another similar time-share
property in a completely different vacation destination.
Time share
is a wonderful product for those who intend to use if for
what it is. In Los Cabos Time share is hugely popular. It's
a great way to guarantee your family a quality vacation every
year. It's a marvelous way to have family gatherings in luxurious
settings throughout the world. Enjoy Cabo one year and ski
Vail, the next for example. It has also become an excellent
source for business travelers to have access to the amenities
offered in their timeshare resorts during non-use time. Own
a house in Los Cabos? Why not a timeshare too? Trade your
weeks to somewhere else, save them for visitors and enjoy
the amenities of the resort throughout the year. Many timeshare
resorts offer discounted nightly rental rates for their owners
and families as well.
Here in
Los Cabos we are fortunate enough to have fabulous time-share
resorts offering wonderful amenity packages. Like the Club
Regina at the Westin, piesta Americana, Sheraton Hacienda
del Mar, Pueblo Bonito, Villas del Palmar, Melia Los Cabos
and others.
All of
the friendly and courteous individuals positioned throughout
the resort in their booths who will gladly answer your questions
and offer free rent a car, fishing trips, breakfasts, etc.
all want one thing... for you to visit the resorts they represent.
And you should if you have a genuine interest in having a
time-share. Keep in mind, however, that time share is not
an investment such as equity in a real property rather it
is a use product, a luxury. Resale value is often half.
TOP
Owning
Property in Mexico Requires Special IRS Forms
If you
own a home or other real property located close to the coast
in Mexico, the Mexican constitution requires that you hold
title through a fidiecomiso. A fidiecomiso is a trust with
an authorized Mexican bank acting as trustee, and you, the
true owner, are named as the beneficiary. The trust has a
term of 50 years and can be renewed thereafter. Under US income
tax law this trust meets the requirement of a "foreign
trust" and therefore you must file a United States form
3520 when you initially set up your trust, and form 3520A
each year thereafter.
The 3520
must be filed at the same time as your US tax return (including
extensions) for the year that the trust is initially set up
and to report later transactions.
Some of
the items in this 6 page form are:
The name
and address of the trustee and beneficiaries The value of
property and money transpired to the trust during the year
Distributions from the trust Copies of trust documents etc.
If you
fail to file form 3520, there is a penalty charged equal to
3% of the value of the property transgferred to the trust,
or of the unreported distribution. These penalties can be
waived for reasonable cause which has not been defined.
You must
also file Form 3520A each year therafter. It is due on March
15th (unless the trust is on a fiscal year), but you can apply
for an extension. It is filed by the trustee but often is
actually filed by the beneficiaries since many foreign trestees
do not wish to file the form. It reports among other thins
the trust's income, expenses, balance sheet, and distributions
to beneficiaries. This form must still be filed even if the
trust has no income or expenses to report.
The US
owners/beneficiaries are subject to a 5% of gross asset value
penalty for failing to file this form. Penalties can be waived
for "reasonable cause" which again is not defined.
Our experience
has indicated that many individuals who own real property
through a fidiecomiso did not file these forms and did not
know they were required to. It points out the need for tax
return preparation by professionals who know U.S. expatriate
tax laws. Both of these forms must also be filed if you form
or are the beneficiary any other type of offshore trust, or
an offshore asset protection trust anywhere in the world.
If you
are purchasing your Los Cabos property by contract, and still
have not acquired full legal title by transferring it to a
fidecomisom neither one of these forms will be required until
you do.
If you
are a US citizen who owns stock in a Mexican corporation which
operates your business or holds title to a commercial real
property, there is another IRS form you are required to file
annually with your U.S. income tax returns.
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