Many think that Mexico is a cheaper country and in many ways it is. However, you cannot compare apples to apples as expressed. Some things have the same price levels, but as we will explain, there are many unique factors that come into play in Mexico when it comes to real estate. For those thinking of buying a property to fix or rehabilitate, there are many challenges in Mexico. Most people buy new construction, but for those who want to make a superior repair, here are some of the reasons why it is difficult to do so in Mexico. This article is aimed at the Riviera Maya area of Mexico, but many of the principles also apply to other parts of Mexico.
The last decade or so began the home renovation revolution where anyone could fix a place and possibly sell it. Part of that started with stores like Home Depot, which brought the local hardware store to the masses and made it easier to walk around the islands, getting ideas for your home. Then all the home renovation shows were presented which made it easy to fix and invest homes. For those of you who want to move to Mexico and possibly invest in houses or flats, it will not be the same as other countries. In fact, the whole idea of changing houses or condominiums is relatively unheard of here. Below are some of the cultural and financial reasons that hinder this aspect of real estate.
Mexican mentality of used things, including houses
For those starting a property search, you’ve probably found that there’s no list of properties or MLS where you can browse all the local listings. It can be very difficult to look for properties for sale on your own without the use of a good real estate agent. If you are looking for something to work with, these types of properties are not even handled by most real estate agents, unless it is a larger property (also known as more expensive). The reason there are few and hard to find. Also, if it is an abandoned or unoccupied property, it can have a messy title and closing can take a long time.
When a property goes on sale, there are very few comparable sales and there is no way to access recent sales. This means that a salesperson can order whatever they want. Because property taxes are very low in Mexico, homeowners can sit on a property waiting for someone to offer what they want. Even in some cases, people offer the asking price, just to make the owners rethink their price and ask for more. All of this can make it hard enough to find and buy a place for a project. Home values also come into play for Mexican homeowners. This is what we will talk about next.
A used house?
Most will find that an old house that still works, even though it has an approximate shape, is sold as a livable house and not so different from a new house. Therefore, the prices of dilapidated houses do not go down much. This can be difficult if you know that you will demolish much of the house to renovate it. This same idea of value for things is transferred to used cars and furniture. Those who have seen used furniture and used cars in Mexico will soon realize that prices are not as cheap as other countries.
Finding a business in a house or apartment is very rare in Mexico. Since most properties are property without mortgages, there is no stress in paying for them nor are there people in a difficult financial situation who are willing to sell quickly.
Why foreigners have a hard time renewing them, let alone making a profit
For most people moving to Mexico, they come from the United States, Canada, or Europe. All of these places have different climates, building codes, and construction methods. These factors, in themselves, make it difficult for foreigners to leave Mexico and start a construction project. There are things like language, different types of labor laws, local ways of getting material, and other factors that make it even more of a challenge. Even for expats living in Mexico for a few years, it is not enough to learn all the methods and ways of doing things.
Usually, most people who want to do some kind of construction project ask for help from a local company or a general contractor. This means an added cost to the project. Of course, in most cases in other countries, most people hire people to work, in Mexico you are at the mercy and skill limit of who you see to oversee your project.
Taking some ideas of your own and adding them to the project can add a new perspective to the property. You could also make some mistakes if you don’t really know the materials and qualities of the materials.
Who is your buyer?
A large proportion of the people who shop on the Riviera Maya are investors. They are looking into renting the property and may not be interested in the top counter you just added. There are people looking for a place to live and who will look for the finishes of the property. Still, this market gets even narrower when you think about the people who will like your design.
Mexico is a cash market
Unlike many other countries where loans and mortgages are fairly easy to get, Mexico (especially the Riviera Maya) is a cash market. This means that most foreigners and even nationals who buy investment real estate pay in full cash. This affects the fins in two ways.
- You need to buy a lot of cash to buy a property and then need money to fix it. It is not really possible to take out a real estate loan if you want to start another project.
- As an individual, you have buyers who have to pay in cash. You have some disadvantages for some developers who offer property payments (such as 3 or 4).
Where can you buy a property that is a little superior?
For most people moving to Mexico, they want a city close to the coast and usually in an established location. Here on the Riviera Maya there are no real cities or areas known for the upper parts. Since Playa Del Carmen is the largest urban area in southern Cancun, here are some options, albeit limited.
From time to time you may find a house on the west side of the road that is partially built or in poor condition. These types of properties can be bought and opened to your ideas. Do not expect good prices in homes. Also, don’t expect a perfectly charming street. Often these areas are a mixture of house types, mixed-use properties and mixed levels of finished structures.
If you go further inland and across the peninsula, you can find older cities where some locals leave the older houses to move on to newer style developments. To many, some of the houses look like remains and are not worth the work to make them livable again. With some ideas and passion, it is possible to buy an old house at a reasonable price and renovate it to make it a beautiful thing.
Cities like Mérida and Valladolid have seen many foreigners buy dilapidated old houses to renovate. Sometimes, you can find offers worthy of a project that you fall in love with. These areas are very different from the Riviera Maya and you might get used to it if you only know the Riviera Maya. Many refer to these areas as “real Mexico.”
How to Make Real Estate Money
Since finding a cheap apartment or house to fix isn’t too promising, especially on the Riviera Maya, what other options do you have? Here are three options:
- Building a house from scratch. This requires a lot of planning and research, but once you do, most end up having a fantastic home where you will enjoy living. The sale price will automatically cover all expenses and you will be in a good position in the future when you want to sell the house to take advantage of it. See our article on building a house in Mexico.
- The biggest way to make money with real estate in the Riviera Maya is to buy and rent units. The rental market is going through its ups and downs, but overall it is a strong market with good returns for smart investors. We have several articles on investing, ROI, tips for homeowners and where to buy real estate.
- The last option for real estate is land banking. That means just buying land and selling it in a few years. This has been done in Tulum over the last decade. When people started buying rubbish land in Tulum, a lot of people thought they were wearing too pink glasses. Now, these same people sell the land for ten times the price. Land banking means knowing the market and knowing where it is moving. Areas become popular and begin to develop over time. For some it is quite easy to see trends when they are in the area for a while, however, many rely on a good real estate agent to help them know which areas are good to invest in.
The best thing to remember is that real estate is part of passion and logic. If you are looking for something for yourself, if you like it, you like it and the price and comparable properties don’t matter so much. There are some unique properties in Mexico and if you fall in love with one, well, there is only one place like this. If you are just looking for an investment, research and a good real estate agent it is like avoiding some of the pitfalls that happen to others. If you have any questions about what the real estate in the area is like, let us know in the comments below and we will try to answer the best of our ability or point you in the right direction.
You can find more topics on real estate in our guide here.