We are Neighbors- Lets be Good Neighbors
by Bruce D. Greenberg, MAI, SRA, ASA
We are Neighbors- Lets be Good Neighbors
United States citizens own about 100,000 properties in Mexico. The aggregate price of this real estate exceeds $30 billion (US dollars). At least half of the properties are owned free and clear with no debt while the balance is funded mostly by developers. The equity of American owned real estate in Mexico is above $20 billion (US dollars).
For the past ten years, limited U.S. lenders have been active in the Mexican marketplace. Currently a number of major organizations have entered the marketplace while other substantial groups are taking a hard look at also entering this marketplace. Therefore, the housing stock owned by Americans will grow at a greater pace over the next several years.
During my ten years of doing business and personally owning real estate in Mexico, I have learned four key practices to success in Mexico. These are:
1. Have strong relationships;
2. Understand the culture;
3. Follow government protocol; and
4. Network.
In appraising, one is taught that there are four forces or elements of value: social, economic, political and physical. These elements are also true in owning real estate in Mexico. It is in your best interest to have strong friendships with respective local, and if possible, state and federal officials. Socially, be visible and be part of each (local, state and federal) community; be seen and participate at fundraisers, economic, educational seminars and key community meetings. Are you donating both time and money to civic fundraisers to illustrate you are both giving and taking from the community? Politically, don’t talk politics! You are a foreigner! In the end, ask yourself… What are you doing, to enhance Mexico? It is all about, how are you “selling” Mexico and promoting the community. These four elements prove your worth in Mexico.
Do not act like a GRINGO! Cultural understanding is a must. In a business setting, never talk business first. Begin by asking about family and attempt to speak the language. I always start the conversation by apologizing for my weak language skills. Learning protocol and customs is essential.
If you are going to buy real estate it is best that you know the following basics:
What are a Fideicomiso and Trust Bank?
A “fideicomiso” or bank trust is defined for real estate purposes as a transaction between a Mexican Trust Bank and a foreign individual or firm investing in areas otherwise restricted to foreign investment, with the Trust Bank serving as a trustee or legal owner with respect to a certain real property interest and the investor serving as the legal beneficiary of the Trust. The bank holds the title to the property in trust for the beneficiary who retains the exclusive right to use and control the property. As a trustee, the bank acts on behalf of the beneficiary in transactions involving the property held in trust. However, the beneficiary controls and makes the investment decisions regarding the property, including the decision to transfer, assign or otherwise dispose of his or her interest in the property. The trust is essentially a contractual arrangement, which, in most respects, is identical to the type of Trust commonly used in the United States. Trusts are established for an initial 50-year period and can be renewed. So in other words, this is the recorded legal instrument setting forth, the Trust Bank, the buyer and the seller of the property.
Where and what is the Public Registry?
This is the “recorders” office found in most local municipalities.
Why do I need a Notario?
Mexican law requires this “official”, a state appointed lawyer, to record the Deed and/or fideicomiso and collect the appropriate taxes payable to the respective government agencies.
Do your homework before you acquire real estate! You need to know all of the parties to the transaction and how the system works.
You must follow Mexico’s governmental procedures and legalities. Do not violate Mexico tax and immigration laws!
While buying or selling real estate, you should put together a competent team of Mexican professionals including lawyers and accountants. Seek out in your community professionals within the Real Estate Industry, Real Estate Associations to identify for those “professionals” include AMPI (Mexico’s Association of Realty Professionals), respective Multi – Lists, and Canaco (The Mexican equivalent of the Chamber of Commerce).
Networking is key. The Mexican business community will quickly mark you as either a giver or taker. The Mexican community wants our assistance to further the economic growth of Mexico.
Do not leave your brains north of the border! Have fun, respect the system and the culture. Enjoy the experience and the great people of Mexico. We are neighbors- be a good neighbor!