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NEW YORK (MainStreet) — The U.S. State Department estimates that there are 1,036,300 American citizens living in Mexico, including those visiting for 6 months on a tourist visa.

Developers in Cabo San Lucas and sister city San Jose del Cabo have responded by increasing new construction. Since 2004, there has been an estimated 20% increase in both developed and undeveloped resort properties in Cabo, where fractional ownership is a common luxury real estate sales term. It's been noted to attract celebs, too. Cabo, after all, is a scenic island city surrounded by the Pacific Ocean and the sea of Cortez at the southern tip of the Baja California peninsula in the Mexican state of Baja California Sur, which boasts the second highest rate of immigration from the U.S.

Under fractional ownership, 6 to 8 owners purchase a villa and use it during specific times of the year while full time owners can choose to have resort management rent out their villas when traveling back to the U.S.

At the Esperanza Resort, fractional ownership opportunities start at $400,000 and full time ownership at $2.5 million with the same concierge services and amenities.

"The difference between being a full time or fractional owner is the time you can use the property," said Esperanza Resort Residences manager Javier Zavala.

Entry-level prices for exclusive hotels and gated residential communities are expensive because many of these properties are a mecca for Hollywood stars, such as Jennifer Aniston, Leonardo DeCaprio, George Clooney, Cindy Crawford and Oprah Winfrey.

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At the Capella Pedragal Hotels and Resorts, fractional ownership starts at $290,000.

"It's an investment portfolio you can live in versus investing in equities that may or may not accumulate in value," says Juan Diaz Rivera, a Capella Pedregal developer.

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For a slower pace, the staid and demure fishing town of San Jose is 20 miles away from the beach party atmosphere of San Lucas by Corridor, which is a highway studded with a string of golf courses and resorts.

The Las Villas de Mexico development in San Jose's Campestre Private Beach Club has full ownership opportunities ranging from $700,000 to $1.2 million.

Unlike in the U.S., purchasing a home in Mexico requires an ability to speak Spanish. The down side of owning in Cabo is that closing costs are slightly higher by 2%. The upside is paying nearly no or very low property taxes.

Ex-patriate Michael Hull lives full-time in Cabo with his family. The 35-year-old previously paid $25,000 in property taxes a year on his million dollar Texas home compared to $900 in Mexico.

"Homeowners funnel the transaction through a trust established at a Mexican bank with the help of an attorney or accountant after securing financing," said Ricardo Ramirez, general manager at the Hacienda Beach Club & Residences in San Lucas where properties range from $600,000 for a one bedroom to $5 million for a beach front villa. Located near the popular Medano Beach, the Hacienda offers an optional ownership rental program with a 70-30 split after fees for part time residents.

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Relocating to a foreign country for retirement or to launch a business is a daunting process, which is why experts suggest first vacationing at the desired destination to get a lay of the land. At the Cabo Villa Beach Resorts, 90% of business comes from timeshares while full time ownership starts at $800,000 in the Cabo Villas sister property Bayview Suites.

"Our ownership market is made up of overqualified time share clients," said Chris Erikson, project director at the Cabo Villa Beach Resorts, which charges $15,000 for one week time shares and $180,000 to $250,000 for six week packages for fractional owners.

--Written by Juliette Fairley for MainStreet