Ever wanted to retire in Mexico? After almost 15 years of living in this beautiful country, I can highly recommend a move to Mexico. And don't take my word for it. Forbes had plenty to say on this subject too, making Mexico their #1 pick for countries to retire to. I had the opportunity to sit down with Ian Gengos who is a luxury real estate adviser for Engel & Völkers, Snell Real Estate. I'm curious to know how the market is in Cabo for those who want to retire in Mexico.
An Interview With Ian Gengos
Jen: First of all, could you tell me a little bit about the international investing market. What's the trend right now?
Ian: Well, globally speaking, economies are gaining momentum. The International Monetary Fund expects that the overall world economy will grow 3.5% in 2017, up from 3.1% in 2016. Canada, advanced economies, even emerging and developing economies are gaining momentum over the last couple of years, and real estate holdings are a part of that. People have an increasing capacity to work and live abroad and real estate investment remains one of the best ways for people to distribute their wealth. We see certain markets do very, very well as people are much more global citizens these days.
Despite the different political and economic environments around the world, international real estate offers a very viable option for today's global citizen to retire in Mexico, invest abroad, and diversify their profile in the process
Retire In Mexico And Continue To Earn
Jen: So in actual fact, it's almost like not retiring. Investing in a retirement property doesn’t mean that you can’t yield an income from that purchase. People could retire in Mexico and enjoy a healthy return on their investment over time. Is that fair to say?
Ian: I think that's fair to say. It's more about protecting your wealth and your assets. Whether you own multiple homes somewhere like London and you're dealing with Brexit, or you own multiple homes in California and you're uncertain of future US foreign and fiscal policy.
Perhaps it makes more sense to pull holdings out of one particular area and look to a market like Toronto or Vancouver or Cabo San Lucas. People are becoming more and more investment savvy. Above and beyond just wanting to live somewhere warm, they have a primary residence and international vacation homes and investment properties.
Mexico Is At The Top Of The List
Jen: I'm not just saying this because I live in Mexico and I love it, but isn't it true that people looking for their dream retirement location can retire in Mexico as it's one of the top places to go? Why is that?
Ian: Well, it's top for North Americans certainly. Forbes Magazine just published an article in the International Living Subscription publication that ranks countries according to a variety of different metrics: healthcare, culture, political stability, infrastructure and such and it's always sort of a neck and neck race between countries like Panama and Costa Rica and Mexico.
But this year, 2017, Mexico just surpassed them and hit the number one mark as the most popular place for North Americans to retire to. Close proximity to Mexico is a plus, but add some of the most amazing Mexican culturally rich cities, beaches, and ecosystems on the planet and it's a no-brainer. Anyone considering switching countries would be wise to retire in Mexico for these reasons.
As the population ages, healthcare is a primary concern for a lot of people. Do they have adequate health care in a place they're going to spend a substantial amount of time away from home? Retire in Mexico and the answer to that question is yes. Political stability, the value of their currency against local currency are also key factors.
Look at somewhere like Hawaii which has always been hugely popular with Americans and Canadians, but the idea of traveling a day each way and then spending dollars in a dollars market or worse, Canadian dollars in a US market is becoming less appealing than spending dollars against pesos in a market that's just a two to three-hour direct flight from home.
Jen: Mexico seems to be the path of least resistance as we get so much value for our money, would you agree?
Ian: You get tremendous value for your money, you get a culture that is warm and inviting and the weather that is pretty consistent year-round. Retire here and enjoy that feeling you've gone somewhere a little bit different than your own backyard.
The Real Estate Market In Los Cabos
Jen: What's going on in Cabo's marketplace right now in terms of real estate investing?
Ian: Cabo has been a very popular resort destination for the wealthy subset of the population for many years. But its proximity to the US, its separation from mainland Mexico, and the amenities and services it offers have made for a very healthy place to retire in the real estate community. Currently with the currency disparity and other political factors; call it the 'Trump Effect' if you will; I think we're experiencing the strongest buyers' market I've seen in my 14 years here.
Jen: Why is the market favorable toward the buyer as opposed to seller?
Ian: Well, I think it's a combination of factors. First and foremost, it's the inventory that's available and the disparity in the US dollar against the peso. A few years back, there was a pretty substantial Hurricane that did quite a bit of damage. After the fact, a lot of developers came in and maybe some received some subsidies & incentives from the government to build or they were able to pick up parcels of land for a good deal. Post-Hurricane Odile, more new inventory was added to the market that was newer, which typically puts pressure on the existing sellers in a market to up their game and be more competitive in their pricing and their strategy.
Then there are other subsets of the market; let's say the $400,000 USD to $600,000 range which have also become more available to people. It used to be very much an ultra-luxury, cash-only market here, but that isn't the case anymore. You don't need millions of dollars to retire in Mexico now.
I think that's appealing to a lot of people. Another component to consider is the currency conversion. Depending on when a person bought their property in the past, and whether they paid US dollars for it or not, it's registered with the Mexican government as a pesos purchase.
If you sell a property in a de-valued peso market, the seller is going to be subject to some pretty healthy capital gains taxes. This makes them more open to negotiating price rather than pay excessive tax on the sale. If the seller nets the same amount of money either way then, combined with ample inventory, the buyer has a strong position.
Who Can Buy Real Estate In Cabo?
Jen: That's great. Is there a particular type of buyer that's interested in Cabo as a destination?
Ian: Cabo used to be exclusively for the wealthy, investment groups and corporations that had their vacation properties here. But now, it's a much wider range. We find that we're helping people find great little condos on the beach, two-bedroom condos on the beach in the $400-600,000 USD range. Some of them require a bit of work. Some of them don't. It's just a matter of aligning with the right adviser to help you find what you're looking for and being comfortable to take action when you find that dream home.
I think that's probably the key takeaway: it is a very healthy market. It is active and signs are that it's not slowing down anytime soon. We see all demographics here now; retirees, vacation homeowners, investors, all ages, all nationalities.
I know there's uncertainty everywhere in the world, even close to home; call it the Trump Effect on Mexico (read about it here). But in fact, it's been a very good thing. The Los Cabos real estate market is certainly dynamic and very active, even going into the summer.
The Purchase Process
Jen: Here’s a question for a person that's been coming down to Mexico for most of their vacationing life and they're really ready to take the jump and retire in Mexico.
What are the costs involved when it comes to acquiring your first real estate retirement purchase?
What are the most common questions that you get asked by people who want to retire in Mexico and make their dream a reality in the Cabo market?
Ian: One of the biggest questions is the myth that foreigners can't own land outright in Mexico, and that's just not true. Just like Canada or the US, you can own land through fee simple title providing it's not in a restricted zone. The restricted zone is about 50 kilometers from the ocean or 100 kilometers from the border and was established to protect Mexican sovereignty.
In the restricted zone, a foreigner may purchase real estate by means of a trust called a Fideicomiso. It's a 50-year, renewable bank trust that grants the foreign buyer the right to use, improve, rent, sell, and otherwise enjoy the property. The trust is not an asset of the bank, and the foreign buyer is called the Beneficiary. As the beneficiary, the buyer retains all ownership rights to the property and can sell, lease, mortgage, or will the property to heirs.
Now, secondly, what sort of costs are involved? In Mexico, the burden of title transfer is on the buyer. Fees for permits, appraisals, and notaries make up some of the cost, but the largest portion is what is called a foreign acquisition tax. Any time you find a property in Mexico that you want to invest in or retire to you are subject to that tax. All in, the total additional costs at closing represent between 3-6% of the purchase price.
Google It Or Get Representation?
Jen: What's the best strategy for people? Let's say I'm living in New York. I'm interested in purchasing a vacation or a retirement home in Cabo. I spend weeks and months on the internet trying to find the dream place and I'm scared to reach out to a real estate adviser because I don't want to feel like I'm committing to the sale. Tell me what the best approach is for a buyer wanting to retire in Mexico and purchase a property here.
Ian: In my opinion, the best approach is to get past your fear and just reach out. You'll know soon enough whether or not you want to work with that individual. In my case, when dealing with foreign buyers, my exclusive responsibility is to represent the best interests of the buyer in this market.
Obviously, I have a responsibility to my company, Engel & Völkers as well, and also to my local clients in getting their homes in front of buyers around the world. But for the foreign buyer, it's about what's the best property for them, not whether or not it's our company's offering.
So the best option would be to find the right person to represent you. Let them find the property for you. If they understand your needs and what it is that you're looking for, that alliance gives the buyer the most security and the biggest level of comfort in making the decision to retire in Mexico.
You can go and look at different MLS listings and find a property, but you're ultimately going to have to get somebody involved to help facilitate the transfer of that property, take care of all the paperwork and such. You absolutely do need someone to be your advocate in this market.
The bottom line is to build a good relationship with an advisor that understands you; one that you're confident will truly take care of you and your family.
If you are interested in buying a property to retire in Mexico, please contact Ian directly on his Facebook page, or send him an email to firstname.lastname@example.org.