Buying That Dream Home -- In Mexico

Lynne Bairstow, director of marketing and operations for Punta Mita resort, agrees. She says the resort's real estate is priced in dollars, as is that of other resort areas in Puerto Vallarta and Cabo.

More than 90% of owners at Las Palomas Beach & Golf Resort, a 350-acre golf community and an upscale full-service destination resort located on Sandy Beach on the Sea of Cortez, are Americans. The master plan, designed by Swaback Partners, includes some 2,000 residences, each individually owned, at prices ranging from $340,000 to $1.9 million. Nearly 1,000 units have been sold in less than four years, its agents said via a release. The marketing team expects sales to grow even more as the commercial flights and a new highway make the destination more convenient and accessible.

With property taxes in most municipalities in Mexico at a fraction of the cost of those across America, the low cost of living and often-favorable climate, Mexico is an appealing place for retirees and investors, say others.

"There has been a whole world of real estate market potential in Mexico during 2007, which will continue in to 2008," says Gleeson of NewCondosOnline.com. "We will definitely see more expansion in the Mexico real estate market in 2008 and beyond."

How Foreign Real-Estate Ownership Works in Mexico

American citizens looking to buy real estate in Mexico need to know that non-Mexican citizens are restricted from actually purchasing land in many parts of that country.

The Mexican constitution prohibits foreigners from having direct ownership of real estate in its "restricted zone." This zone includes land located within 100 kilometers (62 miles) of any Mexican border or within 50 kilometers of the coastline, and constitutes almost half (45%) of Mexico's territory, including the entire Baja California peninsula, where many Americans flock.

So how is it that Americans end up with coastal property in Cabo San Lucas, Acapulco or Cozumel? The title to the property is actually held by a Mexican trustee -- perhaps a friend or a Mexican bank. And the "buyer" -- in this case, the American investor -- becomes the beneficiary. This real estate trust, called a "fideicomiso," allows the beneficiary to develop and use residential property, or even instruct the bank to sell or lease it.

"These restricted areas in Mexico adversely affect small investors, such as retirees, who must undergo the cumbersome and costly fideicomiso system," says Jorge A. Vargas, a University of San Diego law professor who is an expert on Mexican real-estate law. As a result, some politicians, bankers, entrepreneurs and other investors are looking to change the system.

"Japanese investors have been demanding an open and outright system whereby Japanese companies can own directly any real property anywhere in Mexico, especially in coastal and border areas," says Vargas.

As it stands now, the same restrictions do not apply to land in the interior of Mexico. Thus, a trust is not needed if you're purchasing land in Mexico City or Hidalgo, though those areas aren't usually as desirable as beach-front property.

Outside of the expense of Mexican real estate attorneys to help you wade through the paperwork, the trust, and thus the land, behaves essentially as if it is yours for 50 years, as any given land can be held via a trust for 50 years with a renewable 50-year term.