2 June 2008 297 views 2 Comments

Nick Fong is a real estate agent in Cabo San Lucas. After receiving a degree in Real Estate Finance from the University of Illinois in Champaign-Urburna, he started a real estate company in Chicago before moving to Cabo San Lucas, where he has been representing buyers and sellers for the past two years.

Hola Nick. First off, why should I invest in Cabo real estate rather than other locations in Mexico?

Cabo is one of the fastest growing areas in all of Mexico. The appreciation in real estate prices here has been phenomenal. This area has made many people rich and continues to do so. The accessibility to Cabo San Lucus for foreigners will continue to make Cabo a prime tourist destination especially those who live on the West Coast of the US. In 2 hours you are here by plane and it really is no more difficult than any domestic flight. Aside from the ease of travel, the calm and relaxed nature of the area has made this place so attractive to foreigners. Whether it be fishing, water sports, mountain biking, golf, or just plain old relaxing on the beach, Cabo is the place to be.

Suppose I want to buy a home in Cabo. What steps would I need to take to make it happen?

To buy a house in Cabo here are the steps that I feel will make your experience not only enjoyable but as stress free as possible:

1. Spend time with a real estate agent so they can learn what is important for you (location, price range, amenities, # of bedrooms, # of bathrooms, property type, etc).

2. Tour properties with your real estate agent.

3. Once you have found the property of your liking, make an offer on the property

4. Once the offer terms have been agreed upon by all parties, then the Buyer will set up a 3^rd party escrow account to deposit his/her earnest money.

5. A home inspection is done along with having an attorney check the paperwork from the seller, e.g. making sure the seller legally can sell the property, all taxes, hoa fees, etc are paid current

6. Once the prior step is finished then the buyer will setup a fideicomiso (real estate trust) with the aid of a closing company. This allows a foreigner to own property here in Cabo.

7. Once the fideicomiso and the paperwork for transfer of title are ready then a Notary will legally transfer the property to the buyer. It is typically 5 days prior to this point that the buyer will send down the rest of the money to the 3^rd party escrow company.

What are the most common obstacles foreigners face in the process of buying a home in Cabo?

The most common problem, which is not a problem but just the biggest difference that foreigners face with buying a home here in Cabo, is that they need to setup a fideicomiso (real estate trust). Even though many people in the States and Canada own their properties in a real estate trust, the majority do not. So when foreigners come to Cabo and they are required to own property in a fideicomiso it is a little strange to them. In the end, though, it has never proven to be a problem for any of our clients.

Do you have any suggestions for US investors who may not be aware of the legal and tax requirements in Mexico?

US investors need to be aware of many things when buying here in Mexico but I think two of the most important things to consider are the 2% acquisition tax paid by buyers and the capital gains taxes. The 2% acquisition tax is assessed on the purchase price of the property. Many people try to escape paying the true amount by recording a far lower purchase price which will save you some money but when it comes time to sell the capital gains will be substantially higher. This brings us to the next point which is the capital gains. Capital gains taxes are 28% of the gain calculated from the Sales price minus the original purchase price and also the cost adjustments for inflation. You can see why trying to save yourself a 2% acquisition tax will be silly when the time comes to sell your property and you pay 28%.

Which lenders do you recommend?

I have recommended many clients to Baja Capital Mortgage because of their attentiveness to the details of a transaction and their list of mortgage products.

What is your favorite thing to do in Cabo?

My favorite thing to do in Cabo is anything physical. Whether it be surfing, lifting weights, running on the marina, or mountain biking there is no shortage of outdoor activities here in Cabo.

What do you see for the future of Cabo’s real estate and why?

I see the future of Cabo Real Estate growing more and more. With an almost perfect climate all year round, it makes for a great place to retire and vacation for people. In my opinion Cabo is much like California is to the United States back 30-40 years ago. There are so many people moving here on a daily basis that each year it is almost a unrecognizable place to those you have left and returned but for just one year. In the last few years we have seen the big names of Walmart, Costco, Home Depot, Office Depot, Sam’s Club, and many more to come. It’s truly an exciting time to be living in Cabo and this is why that I remain very optimistic about the real estate market both residential and commercial here.

Nick Fong can be found at www.loscabosagent.com or you can reach him at fongna@gmail.com and 773-353-5069 US.