How To Buy A Retirement Home In Mexico

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Mexico’s premier colonial city is attracting American retirees. The largest number of Americans living outside the United States is in Mexico. The U.S. Embassy in Mexico City estimates that more than 1 million Americans live in the country either full or part time.

The U.S. Census Bureau forecasts a doubling of the nation’s 65-and-older population, which will grow from 43.1 million in 2012 to an expected 83.7 million by 2050. It is reasonable to expect that many of these retirees will also be attracted to Mexico, for the same reasons the million Americans already in Mexico made that choice. Mexico offers a warm climate, proximity to the United States and an affordable cost of living.

On the list of destinations in Mexico that get American retiree attention, San Miguel de Allende, with its colonial charm, great weather and international flavor, is near the top. The expat community in this colonial city is more than 15 percent of the total population, and, like the expat retiree population of the country as a whole, is likely to increase substantially over the coming decade.

San Miguel also enjoys a lot of attention from within Mexico. This country’s economy has grown at a consistent pace over the past few years, making it possible for more Mexicans to afford second homes. President Enrique Peña Nieto has been successful at implementing political and economic reforms, instilling confidence that more good times lie ahead.

San Miguel is located in the “cradle of independence” in the state of Guanajuato, a part of the country where many Mexicans feel strong cultural and historical ties. Also, many Mexicans who have spent their career living and working in the United States are returning to their native Mexico for their retirement years.

In the years leading up to 2008, real estate activity in San Miguel was frenetic and property values were on a tear. However, prices and sales fell with the post-2008 disappearance of North American buyers.

Today, the real estate market has stabilized, and values are again beginning to move up, due to the influx of Mexican buyers, increased purchasing by Canadians and the return of U.S. buyers, thanks to the improved U.S. economy.

For all these reasons, the property market in San Miguel de Allende is among the most interesting worldwide. However, it is not among the world’s most affordable places. This market qualifies more as luxury than bargain, with many properties priced over the $500,000 mark. Two and three decades ago, 300-year-old homes in the Centro neighborhood were plentiful and cheap. Today these properties are priced in the millions. The best deals are the fixer-uppers. These come at below-market value, and, if remodeled well, can see big jumps in value.

For example, on the market right now is a two-bedroom, two-and-a-half bath home in the heart of the downtown Centro neighborhood. The asking price is $495,000, due to the location. If you were to invest $60,000 to $75,000 in a remodel of this property, adding a master suite, for example, it could become worth $1 million.

San Miguel de Allende’s rental market is active, and you have good options for property management. Both snowbirds and income investors can buy with the intention of renting out their properties either short or long term to enjoy steady rental income. One good location for this kind of purchase is the popular San Antonio neighborhood. This is a walkable, friendly neighborhood with bakeries, shops, restaurants and cafes. Values in this neighborhood are well below those in Centro. You could buy a one-bedroom, one-bath condo in this part of the city, only three blocks from the main square, for less than $200,000.

Most real estate transactions in San Miguel are cash purchases. While it is possible for a foreign buyer to finance a purchase through a Mexican bank, the terms are very different from those American buyers are accustomed to.

It can be difficult to get reliable information on the property purchase process in this country. Foreigners can legally own property in Mexico. However, you have different options for how to take title to property you buy in this country depending on the location (within a certain distance from the coast, for example), intended use and whether financing is involved.

A foreigner purchasing in San Miguel de Allende can hold fee-simple title in his or her own name, or you could take title through a Mexican trust. This can be advisable when financing is involved or when purchasing through an individual retirement account or 401(k).

If buying for business or commercial use, you could establish a Mexican corporation, and then purchase your property through that corporation. However, this option is not allowed when purchasing property for use as a personal residence.

Kathleen Peddicord 

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About Author

Kathleen Peddicord

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With 30 years of experience covering this beat, Kathleen reports daily on current opportunities for living, retiring and investing overseas in her daily e-letter. Her newest book, "How To Buy Real Estate Overseas," published by Wiley & Sons, is the culmination of decades of personal experience living and investing around the world.