How to Own Real Estate on the Baja California Peninsula With No Cash Down
Baja Sur Beach – photo by Ken Bondy
You do not need to be a millionaire to own property in Baja. A moderate to low-income retiree can own their own home and enjoy a pleasant lifestyle in many areas of the Peninsula. One low-cost housing alternative is to lease a lot from a Mexican land-owner and build a small casita or place a trailer or mobile home on the property. Monthly lease rates vary from $150 USD a month to $400 USD, approximately, with an annual 2 to 4% increase. A ten-year lease is most common, with an option to renew. Any lease more than ten years is not legal and binding in Mexico.
The advantage to this option is there is no down payment required, no paperwork to fill-out for a housing loan, no mortgage responsibilities. As long as the Mexican land owner has a valid title to the land and you keep up-to-date with your monthly payments you should not encounter any difficulties.
Advantages to leasing a lot as opposed to buying land are obvious when you are living on a fixed-income – there is no down payment. Sign an agreement, pay your first months lease payment and start pouring the slab for your motor home or R.V.
You may be required to pay the full-years lease amount in one lump sum, still very low cost compared to buying a piece of property. And much less hassle. Another advantage is there is less potential loss if you hold the land for a short time period and plans or a personal situation change. When little money has been spent, it is easier to walk away from a deal. You also do not have the stress and worry of having to sell the property.
There is one issue with leasing a lot and then building on it that is very important to be aware of – whether a foreigner who has leased land in Mexico and then builds on the property ever legally owns the improvements even if it is written as such in the lease agreement. In some towns with large gringo communities it is standard practice that improvements made to the lot are owned by the lessor, as well as profit from sale of the improvements to a new buyer. The Mexican families who lease in these communities have been around for decades and upheld their agreements. Even so, if push came to shove and the Mexican land owner wanted to sell his land instead of lease it, or take possession of the property – gringo homes and improvements included – most likely they could.
There is a saying in Mexico – don’t invest more than you are willing to lose. This is where that logic is applicable. Do your research and ask other owners how the property owner in question conducts business before leasing property. A safe option is to lease and put a trailer or mobile home on the land that can be moved if a dispute arises. Or alternately – buy a parcel of land and build or purchase an existing home. Just make sure the property has a valid title that has been registered on the mainland in Mexico City.
New Housing Developments on the Peninsula
New Yorker Donald Trump and other large-scale, big money real estate developers such as David Butterfield and John Fair have moved onto the Baja scene, or are in the process of doing so, with mega-resorts planned for retirees and others wanting to invest in the real estate boom going on.
Trump Ocean Resort – developed in partnership with Los Angeles-based Irongate Development – is a 526 suite, luxury hotel and condominium complex in northern Baja, 30 minutes from Tijuana. Amenities of the resort are purported to include: an owner’s concierge, a lobby bar & lounge, a pool house bar & café, a fine dining restaurant, an infinity edge resort pool, lap and family pools, a spa, a fitness center, tennis courts, and walking trails. The project began in 2006 and is estimated to be completed in ten years.
Multimillionaire David Butterfield started the project The Villages of Loreto Bay (Baja California Sur) in the year 2000 – a grand scheme that when completed will include: two 18-hole championship golf courses, a 5,000 acre natural preserve, a beach club, tennis center, and a marina.
John Fair and Luis Cano are the founders of Paraiso Del Mar, a 1700 acre resort development located on a secluded bay six minutes from La Paz (Baja California Sur) by ferry. The project includes 294 luxury homes, 400 condominiums, an 18-hole golf and country club, swimming pools, marina and miles of nature trails. Construction began in 2005 and owners have now begun moving into their new homes.
Summer Heat & Hurricane Season
Hard-core aficionados live year-round in communities north and south on the Peninsula but in general, if your chosen expatriate haven is in Baja California Sur you may want to be a “heat bird” and escape for the months of July, August and possibly September. During these months not only do temperatures climb to the high 90’s F and above, humidity often descends with a vengeance at 90% plus; hot, very hot and humid. Home-bound with AC units on high is not most people’s idea of a good time, though there are those who don’t seem to mind it.
Hurricanes are another reason to avoid traveling the Peninsula during September and also October; the months that most storms occur. Hurricane season runs officially from June 1st to November 30th. A tropical depression is the first pre-hurricane stage, with wind speeds of 38 mph. The next phase pre-hurricane is a tropical storm, with winds from 39-73 mph.
The flooding from tropical storms creates national disasters that kill and cause massive destruction annually throughout Mexico – yet are an essential part of the Baja ecosystem. Without the heavy rains that tropical storms (pre-hurricane) bring to the Peninsula, water shortage issues would be much more extensive. The flooding from the heavy rains of a tropical storm can wreck havoc of catastrophic degree in an area, and does so annually in many areas of the Peninsula. When a tropical storm’s constant wind speed reaches above 73 mph, you have a hurricane on your hands and should be prepared to evacuate if it becomes necessary.
Your chosen location in Baja will have its own hurricane history and storm vulnerabilities. Some areas are high-risk such as La Paz and Cabo San Lucas, some areas are at moderate risk such as Loreto and some areas rarely, to never, experience the landing of a tropical cyclone such as Ensenada and Rosarito Beach in Baja California norte. Home owners insurance is available to protect your real estate investment if you should experience damage to your property from a storm.
It’s Still Mexico and Is it Safe?
Kidnapping, murder, notoriously corrupt police and government officials – Mexico has had a historically bad rap that by the mid-2000’s they seemed to have much improved. Baja itself – excluding the border towns such as Tijuana where drug cartels have always held shop – has until recently been considered a safe haven compared to the mainland. Unfortunately, the year 2007 brought a flood of new incidents in the northernmost areas of the Peninsula – and sensational crime stories – that has seriously damaged that reputation.
Beginning with the abduction of a family participating in the SCORE Baja 1000 in November of 2007, groups of heavily-armed, black-masked men have terrorized more than one set of tourists. Victims have been temporarily abducted, held at gunpoint and had all valuables stolen including their vehicles. No deaths were reported but one case involved two incidences of sexual assault.
In response, on April 14th, 2008 the U.S. Department of State issued a crime alert describing the risks of travel to the Peninsula. The alert has been updated as of October 14th and states the following: “Common-sense precautions, such as visiting only legitimate business and tourist areas, avoiding areas where prostitution and drug dealing might occur, and exercising prudence in where one visits during the evening hours and at night, can help ensure that travel to Mexico is safe and enjoyable.”
Excluding these horrific events, theft and drug trafficking are the most common criminal activity in Baja. Unless involved in drugs, most expats and visitors are affected by the high-prevalence of theft and have a relatively low risk of being the victim of a violent crime. An exception may be those who live in or near the border cities. Many long-time Baja travelers suggest avoiding Tijuana, crossing into Mexico at Tecate instead. The Tecate border is located approximately 40 miles east of San Diego and is open from 6 a.m. to 12 a.m.
When evaluating issues of personal safety and whether or not to visit Baja it is important to keep in mind that millions travel to and from the Peninsula annually – 18 million in 2009 – without incident. Some for a day, others for a lifetime.
The article’s first paragraph states:
“A ten-year lease is most common, with an option to renew. Any lease more than ten years is not legal and binding in Mexico.”
The last sentence is correct in that the longest a lease in Mexico can be is one day short of 10 years. However, the first sentence is incorrect in that such a lease with an option is not legal and binding – this is seen as attempts at getting around the limits and thus not legal or binding.
You need to do your research on David Butterfield. He sold out of Loreto Bay to Citi bank, and left the homeowners with exsiting construction contracts high and dry.
This article is all about how to LEASE real estate on the Baja California peninsula with no cash down. Where is the part about OWNING, as mentioned in the title?
Trump image has been left as a trainwreck all over the U.S. One must understand though that Donald builds nothing…he sells his “name” in a licensing fee………how many times has he or his companies filed bankruptcy ??? Silly people who follow him….
what a hoot…the trump resort cited is an abandoned hulk of a trainwreck.