Well,here we are again,and it’s time to debunk some myths about investment returns in Mexico,why so many people are investing in Mexico Real Estate,and most importantly…how it’s possible.
First let’s look at the housing market in the US as it once was. How developers got financing and homeowners alike,and the inevitable downfall of the whole system and what it has to do with investments in Mexico.
I happen to know a developer who was smart enough to get out before the crash. Basically it’s all supply and demand. When the US government started guaranteeing loans for people who had no business buying homes,then a vacuum was created for a need for homes. Banks were eager to lend on guaranteed loans and even more eager to loan contractors large sums for development projects on low terms knowing the homes would be bought. Then when the inevitable fact that these loans were useless,the banks bundled the bad loans into what they called “mortgage backed securities" and sold them off to someone else. These people sold them down the line until there no buyers left and the whole system crashed. They basically lent money to people who had no way to pay it back.
Here in Mexico,everything has been,and still continues to be a 95%-99% cash market. I like that because it keeps the market conservative. People buy what they can afford,not what they can afford in payments. During the housing debacle that went on in the US prices didn’t really drop here in the Mexico Real Estate market,buying just slowed down because no one had money to invest and they were trying to keep their heads above water. If you owned something outright in Mexico and it’s paying you an annuity,why sell. If you have that going it’s the last thing in your portfolio you would let go of.
Property development in Mexico goes by the same rule “Cash is King“. Even with great credit and being a national,interest rates on loans are very high,around 11% - 13% compared to the US and I’m glad. I want the market to stay stable and home and land values to increase,I mean that’s what an investment is for right.
Typically in some projects you have a developer who wants to build,let’s say,condos. Well land,especially beachfront or in close proximity of it,goes for a premium down here since there isn’t much left. So the landowner will put up the land ahead for,let’s say,50% of the profit. Well,then the developer has to build the condos,market them,sell them,all the legal papers,…etc and then give 50% of the profit to the landowner after doing all the work. Doesn’t seem fair does it?
I mentioned in my first blog of this series how FIRMAs worked and how you can get a group of people to invest in a portfolio of properties making great returns and still stay liquid. Now I’ll explain how we do it. So keep up with me now.
Since 2006 Investment Properties Mexico has been an innovator in Mexico Real Estate Investments here in the Riviera Maya and has grown to be the largest Real Estate Company in Latin America. Starting out in land banking,then condos,homes,property management,architectural design and building,we can now sell you a lot,design a home and construct it on time and on budget. Our dedication to customer service,professionalism,and the wide range of products and services which we offer our clients has allowed us to dominate the Real Estate market here in the Riviera Maya. The next natural evolutionary stage would be property development which is precisely what we have done.
In an exploding market where there are buyers for every property,and the ever expanding economy here in the Riviera Maya,we are seeing developments such as Real Zama,Zama Village,Zama Gardens,Prano,and others selling out before construction is even completed. The same can be said for our development Villas Las Palmas 1 in Puerto Aventuras which is being delivered this month and was over 87% sold before finishing work was even started. The die is cast for Villas Las Palmas 2,2 more spec homes and a condo development in Aldea Zama just to name a few. Our knowledge and background in this market ensures that we know where progress is headed and we always get there first.
We understand that in this buying environment that prices tend to be inflated and subject to interpretation,but we also know the market and we know that we can,and have,produced a higher quality product built by US standards at a better price point than our competitors and we don’t mind putting our name on it.
If you read the first in this series then you know that it is beneficial to everyone to set this investment in place. We buy the land outright,you get a guaranteed,secured 12% return and we as a company make more money because we don’t give 50% of the profit to someone else and we can expand into other markets… that’s it,it’s just smart investing,and if you roll your money back into the investment at this rate,the law of 72 says you will double your money in every 6 years. Check with your financial advisor and see if he has an option like that for you.
The properties are,and will continue to be built,demand requires it by any means. That being said,someone is going to get the interest on the loan. Why would we want to pay money to a financial institution when we can give the money to investors? Buying into a portfolio of investments allows you to stay liquid in case you need to back out if some other need arises and still take advantage of the high returns. If you follow the news there is between 3 – 5+ trillion dollars in overseas and out of country investments from the US by individuals and corporations that will not be coming back to the US due to tax penalties,so again,why do people invest abroad? It’s simple,taxes and higher returns.
Stay tuned for my next Blog on Land Banking and how with a minimal short term investment and taking control of your IRA can double your money and put you on the path of realizing you dream and securing your retirement.
For more information please feel free to call me at US (561) 459-1185.
As always Don't take our word for it,see what our clients have to say. See our client testimonials.
And remember... Buy Smart,Buy Secure,with Investment Properties Mexico.