Your New Life Overseas--Mexico (Mazatlán)

by Kathleen Peddicord

  How to Choose?

  When trying to decide where in Mazatlán to base yourself (as when trying to make this important decision anywhere in the world), try to picture what everyday life will be like after the wow factor of a new life in a foreign country has worn off.

  In Mazatlán, for example, it might be the ocean view that attracts you at first, and you might think that you want an unobstructed view of the offshore islands, the beaches, and the bay. Before you commit, though, think practically about what you want your day-to-day experience of life in Mazatlán to be like. How much time, really, will you spend sitting on your terrace staring out at the awesome horizon?

  You might prefer to base yourself within easy walking distance of amenities, for example. Long term, it could be, for example, that you spend every evening in the Centro Histórico enjoying the theater, the restaurants and cafés, and the company and camaraderie of your fellow residents. The boardwalk is the place to be when the sun goes down.

  IV

  YOUR OWN HOME IN MAZATLÁN

  When making any move overseas, I recommend that you rent before you buy. You don’t need to rent for years—maybe just a month or two, long enough to give yourself a chance to find out firsthand what it’s really like to live in that location.

  This is an important step anywhere, but especially in Mazatlán.

  In Section III, I highlight five distinct areas in Mazatlán, each a top option for expat living in this city. Each of these neighborhoods has its pluses and its minuses. It would be difficult and risky to choose among them without trying them on for size first.

  For example, each of these neighborhoods offers different advantages at different times of the day, making it impossible to get the critical twenty-four-hour picture without actually living there. You might enjoy the miles-long beach in the Malecón sector during the day but not so much at night, when you find that the traffic keeps you awake.

  Furnished Rentals

  A month-to-month furnished rental is the perfect accommodation for this trial period. A furnished rental allows you to live like a resident, not a tourist, without all the hassles and costs of actually being one. You don’t have to shop for bed linens, kitchen cutlery, or lighting fixtures, or hassle with things like Internet and cable service. You show up, as you would at a hotel—and then you stick around. If you don’t like the area where the furnished rental is located, you can move on with nothing lost and important experience gained.

  This strategy works whether you’re intending eventually to purchase a place of your own or to rent long term. A short-term furnished rental allows you to be certain of your choice before committing to a long-term rental contract.

  You should be able to find a furnished rental for as little as $1,000 up to $2,800 per month, depending on the property’s location, amenities, and proximity to the beach.

  In some vacation markets, expect a big discount during the off-season, when furnished rental rates can drop by as much as 80 percent. This is not the case in Mazatlán. Prices can drop during the summer months, but, because Mexican vacationers come to town during that time of year, not dramatically. For the best bargains, focus on buildings that are not popular with Mexicans.

  Unfurnished Rentals

  When you’re comfortable enough to commit to a location longer term, you can shop for an unfurnished rental, meaning a contract for six months or longer.

  Unfurnished rentals are generally farther from the beaches and tend to be houses rather than apartments. In fact, while writing this section, I was able to find only one unfurnished apartment available in Mazatlán’s coastal areas, a two-bedroom beach condo that was renting for $1,250 per month.

  Unfurnished houses are easier to find and, even when within walking distance of the beaches and near-beach amenities, generally less expensive. You’ll pay $700 to $900 for a nice three- to four-bedroom home in a good area. These are a great value, given their size. The drawback is that you’ll likely have to walk a couple of blocks farther to get to the beaches. Plus, maybe you don’t want all that space.

  Finding a Rental

  In some attractive markets overseas, it can be difficult to find a rental. Inventory is thin. This is not the case in Mazatlán. Thanks to its popularity as a year-round vacation destination, the rental supply is big and varied. The challenge is not finding a rental but choosing among all the good options.

  Start your search by checking international sites such as Airbnb, HomeAway, and VRBO. Next, check with local property management companies, many expat-owned. Then, for the best deals, check the local papers. This is how you connect with the local market. Mazatlán Craigslist, a good local online local source, lists 20 rentals as of this writing. Finally, search on Google to catch anything that’s managed privately. You can search in English, but you’ll likely have better luck in Spanish. Try:

  Departamento en renta Mazatlán (for an apartment)

  Casa en renta Mazatlán (for a house)

  Departamento en renta Mazatlán largo plazo (for long-term rentals)

  Casa en renta Mazatlán largo plazo (for long-term houses)

  Sin muebles (without furniture)

  Amueblado (furnished, the preferred spelling for this region)

  When You’re Ready to Buy

  First, to address the question that might be nagging at you: Yes, it is legal for foreigners to buy and own property in Mexico. (Note that all contracts and documents must be in Spanish to be legal.)

  The twist is that, if you (as a foreigner) want to purchase within the “restricted zone” (the area within fifty kilometers of the coast or one hundred kilometers of the international borders), you must do so through either a bank trust, called a fideicomiso (fee-day-co-ME-so), or a Mexican corporation.

  Here’s the thing, though: the owner of the Mexican corporation is prohibited from personal residential use of any property held in that corporation. Plus, Mexican corporations come with strict and extensive accounting and reporting requirements and pay higher taxes and utility rates.

  A corporation can make sense for business acquisitions—for example, purchasing and operating multiple investment properties. For an individual buying for personal use, a fideicomiso is the way to go.

  What You Should Know About the Fideicomiso

  A fideicomiso can be established with any Mexican bank, including Scotiabank, Bancomer, Banamex, Banorte, and HSBC, among others. The setup cost is charged in pesos and is currently the equivalent of about $1,200; the annual maintenance fee is around $500.

  The bank is the trustee and the buyer the first beneficiary of the trust. A second beneficiary can be named, so that the property can pass seamlessly to heirs (that is, without the necessity of probate) in the event of the death of the first beneficiary. Each co-owner can leave their share of the property to the other. A third party or parties (children or others) can be the next named beneficiaries, who, again, can inherit without the necessity of probate or any change to the trust.

  A fideicomiso has a term of fifty years, renewable for an additional fifty years, and the first beneficiary has full rights of ownership and use, including remodeling, renting, or selling the property.

  One advantage to purchasing through a fideicomiso is that the bank establishing the trust performs its own due diligence on the transaction, in addition to that performed by the notario, providing another layer of confidence that the title is clear and free of liens or unpaid utilities, for example.

  Plus, a Mexican trust offers the same level of asset protection that you might seek from a US trust.

  Property Pricing

  Real estate in Mexico can be priced in dollars, in pesos, or in dollars attempting to look like pesos. The last is when the price is in dollars but converted to pesos to make you think you’re getting a good deal.

  Peso-priced properties are a super bargain right now. The current exchange rate means real estate in many Mexican markets can be bought
for almost half as much as you would have paid (in dollar terms) in 2008. However, even dollar-priced properties can be a great deal if you get connected on the ground.

  In particular, for example, great buys are available in Mazatlán from Canadian sellers, especially at the high end of the market. Because Mazatlán is a buyer’s market, many Canadian sellers have adjusted their expectations. They are open to accepting offers based on how the price compares to what they paid in Canadian dollars, rather than US dollars.

  Say a Canadian seller bought a piece of property in 2011 and paid $350,000 USD. At the time, that was equal to $350,000 CAD. Then, in 2016, say, he wanted to get his money out of the property and listed it for $350,000 USD. It didn’t sell. So the seller decided that he’d be happy to recover his cost in Canadian dollars instead. At today’s exchange rate of $1.35 CAD per US dollar, the $350,000 CAD the seller wants works out to around $260,000 USD.

  If he’s successful making a sale at that price, the Canadian seller heads home and redeposits every penny he took out to buy the property . . . while the American buyer gets a $90,000 USD discount.

  The Purchase Process

  Under Mexican law, all property title transfers must be handled by a notario, which is a much more powerful and significant position than a notary public in the United States. To qualify, one must be a licensed Mexican attorney, over thirty-five years old, have at least three years’ experience working for a notario, and pass a stringent exam. Only then can one be considered for appointment to the position by the state governor. A notario has the power to witness and certify important documents that require absolute authenticity.

  When you’ve identified a property you want to purchase, your notatrio will provide you with a contrato de compraventa, or provisional purchase/sale agreement, outlining the terms of the transaction, with deadlines and penalties. At this point you typically make a 10 percent deposit. Be sure the agreement stipulates which party pays the closing costs and what happens to your deposit if the deal falls through.

  Next, as a foreigner, you must get authorization from the Secretary of Foreign Affairs to purchase property in Mexico. You sign what’s known as the Calvo Clause, stating that you will not seek foreign jurisdiction in relation to the property transaction. The fee for this permit is $1,000, and it’s required to set up your fideicomiso.

  Next, your notario obtains the title (escritura) from the seller for review. He’ll check that the property taxes, condo fees, and utility payments are up-to-date and verify the IDs of the seller to ensure he indeed has the right to sell the property in question.

  Then the notario files a notice with the civil registrar stating that the property is under contract. This notice prevents any other transactions or liens from being processed against the property. The notario next obtains a certificate from the civil registrar stating that the property is free of liens. If everything looks good, the notario orders an appraisal, begins processing the fideicomiso paperwork with your chosen bank, collects your documents (passport, birth certificate, marriage certificate, and residency paper, either visa or tourist card), and asks you to arrange for the purchase monies. There is no formal process for escrow in Mexico.

  Finally, the notario prepares the new title in the name of the trust and schedules the closing. At the closing, the notario reads the provisional title aloud in Spanish (a translator must be present for non–Spanish speakers), and the buyer, seller, and notario sign the provisional title. The buyer pays the seller the purchase price, typically using a Mexican bank check.

  Finally, the notario files the provisional title with the civil registrar and obtains your permanent title. From signing the convenio de compraventa with the seller to closing takes three to five weeks if everything goes smoothly, twice as long if there are snags.

  Closing Costs

  Closing costs in Mexico involve fees for many more documents and permits than you may be accustomed to elsewhere. The calculation of the closing costs is dynamic and complex and performed by the notario. For years, when the exchange rate was around 10 Mexican pesos to $1 USD, closing costs averaged about 6 percent of the sale price. Because most of the permits and fees are paid for in pesos, today, with the exchange rate at 19.75 pesos to the dollar, closing costs average only about 3 percent of the US dollar purchase value.

  Customarily, the seller pays the sales commission and any capital gains tax, and the buyer is responsible for all other fees, including:

  Acquisition tax: 1 percent

  Foreign affairs permit: 16,900 pesos

  Preventive notice: 300 to 800 pesos

  Fideicomiso setup fee and first-year maintenance fee: 18,560 pesos

  Notario fee: 0.75 percent

  Local transfer fees: 3,360 pesos

  Public registry fee: 4,000 pesos

  Property tax certificate: 300 pesos

  Certificate of freedom of liens: 600 to 800 pesos

  Some of these fees vary depending on the value of the property being purchased.

  Can You Finance?

  In the past, it has been possible for foreign buyers to qualify for bank- and mortgage-company financing in Mexico. You may hear or read claims that these programs still exist. But in my experience, foreigners are not able to obtain institutional financing to buy real estate in Mexico.

  Ejido Property

  All the horror stories you’ve heard about foreign buyers having their property “stolen” from them? Those are all to do with ejido land.

  Here’s what I recommend you understand about ejido land in Mexico: you don’t want to buy it . . . because, in fact, you can’t. It can’t be sold. Unfortunately, this does not keep real estate agents and others from “selling” ejido land to unsuspecting buyers.

  An ejido is a communal land grant. Parcels of the grant are assigned to specific members of the ejido community, but the parcel is not fully owned by that person. Therefore, the property can’t be sold. Regardless of the legal arrangement between the buyer and the ejido member who holds the deed, the buyer’s right to the property can be challenged and overturned by the government . . . because it’s the government that actually owns the land.

  In recent decades, thousands of foreigners have purchased ejido land. Many of them continue to “own” and occupy it today. They and many real estate agents across the country will assure you that buying ejido land is not a problem. Don’t believe them. Ask the foreign buyers whose ejido land has been claimed by the Mexican government. They’ve learned the hard way that buying ejido property can lead to big problems.

  V

  WHAT WILL IT REALLY COST YOU TO LIVE IN MAZATLÁN?

  It’s as though all of Mexico is running a sale: Fifty percent off! Act now.

  At the current rate of exchange between the US dollar and the Mexican peso, dollar holders have supercharged buying power. No one can say how long this advantage will continue. My advice, therefore, if Mexico interests you, is to make your move sooner rather than later.

  Two strategies could help you to hedge against a weakening dollar. If owning is part of your plan, you could invest now in a piece of property priced in pesos. This locks in today’s exchange rate for your housing expense.

  The other common hedge would be to buy pesos for your local bank account while rates are still good. Then you have them in reserve to spend if and when the dollar’s value falls.

  Even with today’s dollar advantage, Mazatlán is not the cheapest place to live in the world or even in Mexico. This beachside city, though, offers one of the best lifestyle bargains you’ll find anywhere. Few places in the world can you enjoy the standard of living for anything like the cost.

  Cost of Housing

  If you are certain enough of your plan to pull the trigger on a property purchase quickly (though I’d still recommend renting for a month or two to confirm the location works for you), then you not only lock in your dollar advantage but you also eliminate your housing expenses. You’
ll have the costs of maintaining your property, yes, but that should be a fraction what it’d cost you to rent. As housing is typically the lion’s share of any budget, this is a big deal.

  Even if your plan has you in Mazatlán only part of the year, buying still can be a good strategy. When you’re not using the place yourself, you could rent it out to cover the property’s carrying costs and even supplement your local expenses when you come to town.

  The Cost to Rent

  Maybe owning your own home in Mazatlán is more of a commitment than you’re up for. No problem. Depending how modest a lifestyle you’re comfortable with, the cost of renting in this city can be very low. One expat I know is paying the equivalent as of this writing of $200 per month for a nice three-bedroom home. He’s happy with his situation, but his working-class neighborhood wouldn’t suit everyone.

  Most expats want more direct access to the beaches. A reasonable budget for a long-term rental in a good location near the water would be $700 to $900 per month.

  Cost of Living Beyond Housing

  Housing aside, you could live comfortably in Mazatlán on as little as $900 per month. A package that includes a landline phone, cable TV, and Internet is $35 per month at today’s exchange rates. The costs of water, sewer, and gas are negligible.

  Electricity can be costly, depending how often you run your air-conditioning. You probably won’t need it in the winter, when temperatures are in the seventies by day and below sixty degrees at night. In the summertime, though, when temperatures approach ninety degrees, you’ll want AC, at least at night. Your summer electric bill, as a result, could be three to four times your electricity expense in winter.

  As with anywhere in the world, your food costs depend on what you buy and where you buy it. Mazatlán has a Walmart that offers a good selection of familiar grocery items, but it’s not the cheapest place to buy food (or anything else).