Yesterday, I showed you one of the ways of getting into Mexican real estate market with as little as $25,000 of investment money. Today, I'm going to tell you about a more advanced method that will only work in larger cities, such as Guadalajara, Mexico City, Monterray...
If your budget allows it, a very profitable way of investing in Mexican real estate is to buy remates bancarios, which are similar to REOs, or real estate owned (by the bank) in the United States. These are houses in the medium to high price range, which can be bought with a significant discount, but unlike REOs, they don’t come with a clear title.
Because of the laws favoring the homeowner, it may take years for the bank to get the house back from an owner who stopped paying his mortgage. In other words, despite lack of payment, the homeowner cannot be easily evicted and the banks leave this task to the new buyer. If you decide to get into this market, you have to be prepared to pay the previous owner several thousands of dollars for his cooperation, or in the case of tenants, wait until their lease expires.
Also, be advised to do thorough research before buying any remate bancario, and enlist the help of both a real estate lawyer and a local real estate agent. However complicated this may sound, keep in mind that the reward justifies all the effort, as the net profit on a $200,000 house could be as high as $30,000-$40,000 realized within a six months period.
Wednesday, June 6, 2007
Tuesday, June 5, 2007
INTERESTED IN MEXICAN REAL ESTATE?
If you dream about becoming an international investor but think that you’d need at least $200,000 to start, you will be pleasantly surprised with what the real estate market in Mexico has to offer. It is still possible to find undervalued properties in need of some TLC in less affluent parts of Guadalajara and Zapopan, and unlike in the United States, the blue collar areas of these cities are perfectly safe and very attractive to the buyers.
Even with the home loan market growing, and mortgages readily available and heavily advertised by the banks, there is still a lot of misunderstanding and mistrust among the lower and middle class, and therefore the majority of the purchase and sale transactions are exclusively cash deals. This is why the houses within the $20,000-$30,000 price range are extremely popular and are usually sold within days through newspaper ads and the word of mouth.
The small, two bedroom townhouses often need electrical updates, paint, flooring and a few kitchen cabinets, but if the materials are bought in local stores, they are much less expensive than in the States. Plus, the labor cost is minimal, which should not be surprising taking into consideration that the minimum wage in Mexico oscillates around $5 a day.
After the repairs, there are two basic exit strategies: sell the house for a profit of about $5,000 or rent it for about $250 a month unfurnished or $300 furnished. With so many out-of-town and international students, there is high demand for furnished bedrooms and apartments. It is customary to ask for a deposit in the amount of two month’s rent if the prospective tenant does not have a non-related cosigner but ultimately the decision is yours. The tenants usually take a good care of the apartment but you want to protect yourself by making sure that all the lease paperwork is filled out properly, signed, and notarized in a rare case that you do need to take them to the court.
Tomorrow, I will show you how you can profit in the Mexican real estate market if you can afford a bigger initial investment.
Even with the home loan market growing, and mortgages readily available and heavily advertised by the banks, there is still a lot of misunderstanding and mistrust among the lower and middle class, and therefore the majority of the purchase and sale transactions are exclusively cash deals. This is why the houses within the $20,000-$30,000 price range are extremely popular and are usually sold within days through newspaper ads and the word of mouth.
The small, two bedroom townhouses often need electrical updates, paint, flooring and a few kitchen cabinets, but if the materials are bought in local stores, they are much less expensive than in the States. Plus, the labor cost is minimal, which should not be surprising taking into consideration that the minimum wage in Mexico oscillates around $5 a day.
After the repairs, there are two basic exit strategies: sell the house for a profit of about $5,000 or rent it for about $250 a month unfurnished or $300 furnished. With so many out-of-town and international students, there is high demand for furnished bedrooms and apartments. It is customary to ask for a deposit in the amount of two month’s rent if the prospective tenant does not have a non-related cosigner but ultimately the decision is yours. The tenants usually take a good care of the apartment but you want to protect yourself by making sure that all the lease paperwork is filled out properly, signed, and notarized in a rare case that you do need to take them to the court.
Tomorrow, I will show you how you can profit in the Mexican real estate market if you can afford a bigger initial investment.
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