So You've Decided To Move To Mexico.

In My Humble Opinion
1

Actually, we’ll be making the move in about five to seven years, but we’re looking at buying a couple of beach front lots about a half an hour outside of Cabo San Lucas/Los Cabos in the East Cape area, but there’s also a couple of houses in town that we may be interested in. We’re still in the looking phase, but are committed to becoming expatriates as soon as our kids are done with school.

We want to use our home’s equity to make the purchase this winter, because its difficult to get a mortgage in Mexico, and property values in Baja are skyrocketing. Then when we make the move, we can sell the house in Orlando and never make a house payment again.

We can think of a million good reasons to do this. It almost seems too good to be true. If any one of the Teeming Millions with experience in this sort of thing can offer a reality check, now’s the time to do it. We haven’t heard the downside yet. If there is one, let’s hear it!

Thanks.

2

About the only cautionary advice I can give is that I’m just about positive that non-citizens of Mexico cannot legally own property. So just be very cautious about who you deal with. I don’t know what the crime rate is around Cabo, but check into that. Remember that you won’t be living in the ‘tourist’ areas anymore, so check out crime rates against foreigners. Other than that, good luck, and enjoy!..I’ve looked more than a few times at doing the same thing. So be sure and keep us all updated on how it goes.

3

I’ve heard they’ve recently revised some of the rules in Mexico about land ownership - I’d get a highly experienced lawyer in San Dee to take charge of making certain things are on the up and up.

However - I would urge you to reconsider refinancing your current home - you don’t want to break the 3% increase chain or you’ll be paying through the nose when your taxes go up.

4

From here.

Mynn, what is a 3% increase chain? Does it apply to the US or Mexico? Our plan is to totally rid ourselves of any US tax burden after the move. We’re happy to sacrifice any paltry Social Security and Medicare benefit twenty years down the road in exchange. Not having to finance Bush’s deficits and wars means a lot to us. As they like to say, its our money, not the government’s. :slight_smile:

Real Estate loans in Mexico are considered unsecured. There is no process under Mexican law for foreclosure. You have to pay cash and it isn’t getting any cheaper. We will consult an attorney knowledgeable in Mexican real estate and immigration law before signing anything, but it all seems pretty cut and dry to me.

5

I can’t offer any advice on purchasing property in Mexico, but I lived in Puerto Vallarta for a year and a half (about 10 years ago), and I absolutely loved it, so I just wanted to chime in and congratulate you. Other than moving so physically far away from where you’ve got family and established frienships, which will cause a bit of homesickness from time to time, I can’t think of any downsides at all. I’m sure you’ll have a great time.

Will you be retiring down there, or will you have to work? You might want to check the employment laws, even if you’re just going to want something part time to stave off boredom.

This website looks like it’s got some great info about expat living in Mexico: http://www.solutionsabroad.com/a_getting.asp.

6

If the term of the trust is fifty years than isn’t it technically a lease hold and not a fee simple transaction? You may want to triple check that because it could effect financing.

Also, I’ve always heard that foreigners cannot own beachfront property in Mexico. I can’t vouch for the validity of that claim but again, it’s something to triple check before doing doughnuts on your neighbor’s lawn on the way out of the country.

7

Shayna, thanks for the link.

My family lives in the SF Valley, Oxnard, and Phoenix. I’ll be closer. The wife’s family is in Florida and New England, but she’s OK with the separation. All but one of our kids will have graduated college by the time we leave. Its going to be retirement – early retirement. Maybe I’ll pick up a part-time job as a bartender or open a T-shirt/Tequila stand. The plan is to spend most of our time in the ocean or on the beach, with a little golf thrown in for good measure.

Cisco, the same rules now apply to all land on the entire peninsula. We may end up buying a house in town anyway. Financing isn’t an issue because we are refinancing our first to raise the funds for purchase.

8

I recently returned from the Guadalajara area, where I will retire in 15 years or so.

All in all, I see little reason to buy. In the US we buy to gain tax advantages. This will not apply in Mexico. Further your capital gains will be taxed as you will not roll them over into another US property.

In a year or so of renting, you can become more familiar with the locals and the local market. It is very possible that just a few kilometers up the road prices drop like a rock. Perhaps you will find a little fixer-upper nobody else know about.

(Heck perhaps you will suddenly break out in hives and decide you hate Mexico. It happens to some people!)

So I see little reason to buy now, although I wish you the best of luck.

9

Paul in Saudi, my possibly incorrect understanding is that the first $250,000 of capital gains is now tax exempt. Also, by treaty the US and Mexico give credits for each other’s income tax. Any capital gains I do have to pay here will be credited on my Mexican return. Also, as long as I don’t own property in the US and primarily live in Mexico, I’ll be taxed at a much lower rate.

The reason to buy now is to buy cheap. Our feeling is that property in the Los Cabos area will appreciate much faster than they will in Florida. If we wait, we may be priced out of a chance to go. Worst case scenario is that we sell and break even, but that’s not very likely.

10

E72521, sounds like you’ve got a fun retirement planned!

Paul, how was Guadalajara?! What did you end up doing there? Did you get to Ajijic, do a city tour, try that Swiss restaurant? I’ve wondered how you enjoyed it, but didn’t want to bump the old thread (which you might not have noticed, anyway), so sorry for the slight hijack here.

11

sorry I went Orlando + Equity and left off a few words.

Persuant to state law passed in 1992, your taxable value of your home can not be raised year to year more than three percent unless certain conditions are met.

This means in simple terms, the home you purchased, say, in 1990 for the sum of $100,000 dollars may have had a tax value of around $75,000.

Throughout the years, your tax value has not increased more than 3% year to year, while your retail/resale value may have increased dramatically - your $100,000 cottage is now worth something along the lines of $350,000, though you are paying taxes on a taxable value of say, $100,000 (I didn’t do the math on 14 years of a 3% increase, I suk at math).

However, one of the conditions that allow your friendly local tax assesor to raise your taxable value more than the 3% increment is sale or refinance of your home. So this retail-valued $350,000 home that you have $60,000 worth of a mortgage on ($290,000 equity) has taxes on $100,000 worth of value.

But then … you refinance to get your retiring little hands on that equity. Suddenly, the floodgates are open, and they reasses your house to be worth, tax wise, $275,000. What happens to your tax bill?

So not only are you paying 5% in closing costs, you have more than doubled your tax bill.

My advice? Figure out how much you want to take out in equity, get a home equity line of credit for buying into the trust (if it is allowed), and keep a little extra out to make those second mortgage payments for the next few years until you cash out of the home and move.

12

I agree that that’s best, but I don’t think I could swing two big payments, and I’m weary of borrowing money to pay interest on another loan. I don’t want to run my finances like the US government. One big payment I can handle. My property taxes with the homestead exemption here are about 2K/yr. I could handle two or three times that or more for five years. With an equity line we could earn income off renting if we decided to buy developed property, but that opens it’s own can of worms as far as income tax in Mexico and risk of vacancy goes. With the tax credits, it might be doable. It is worth looking into.

13

Ajijic was great, a nice mountain/lake village that appeals to me much more than a beach place would. Cooler than Panama too.

The (real estate) prices were higher than I would have liked, but then again selling to incoming fresh meat seems to be the national sport in Ajijic. I would presume deals are still to be had in outlaying areas for those who take their time.

Time? I have time. I will return there and investigate further.

I did not make it to your restaurant. Frankly there are just too many good places to eat to hit them all. I did get into town to get my Hard Rock Cafe shirt. Sort of a custom of mine.

All in all, well worth the trip.

14

Congratulations on leaving debt accumulated by OUR generations to your kids. If you want to move to Mexico because of the low cost of living, the scenery, the weather, because your friends are there… cool. But moving to escape the debts run up on our watch seems like a bad faith idea.

And just because someone will ask:
No, I don’t approve of how a lot of the money is spent by the government, but it’s still being spent on MY watch. I never expect to collect social security, but it’s a commitment made by the government in my name. I don’t have kids, but I gladly help fund yours through school.

15

The quality of life, scenery, weather and people are our primary reasons, blowing off US taxes is just a perk. It was bad faith when people I didn’t vote for left my kids with that kind of debt. I don’t owe this country any favors.

Outside of my military service, I’ve never worked for the government. I am no more responsible for their commitments than they are for mine. I’m glad you’re glad to help fund education, just as our parents and grandparents helped fund ours. I’m looking forward to helping fund Mexican children’s education.

16

:smiley: [sup]Methinks, this is so much sour grapes.[/sup]

17

Ain’t that the truth! We had some of the best food I’ve ever eaten when we were there. Some day when you get back, you’ll have to put Luscherly on the list to try. I’m glad you had such a great trip. I’m certain my husband and I will make a trip there someday (I really want him to experience the Mexican culture, as well as seeing where I once lived), so if you’re there by then, we’ll have to look you up! :slight_smile:

18

So government spending only counts if it was spent by a candidate you voted for?

Write-in candidate: Mickey Mouse.

19

Paul in Saudi has given you the best advice. Don’t burn any bridges to home until you’ve spent a good amount of time in Mexico and are 100% sure it’s for you. I’ve seen countless people do exactly what you are thinking of doing. Many become disillusioned within the first year or two for any number of reasons and wind up returning home.

How much time have you spent in Mexico? Spending a few idylic weeks at the beach is much different than living there year round.