Real estate in Mexico could soon become one of the hottest opportunities for U.S. investors, according to Carol Haffner, who, with her husband, launched Cabo Este International in 1992.
The door of opportunity has been opened by a new Mexican law that allows foreigners to own beach-front property. The ownership system is called Fidecomisco, a bank trust. Its terms are renewable every 30 years.
Ms. Haffner's firm serves investors' interests in Mexican properties. The services include real estate brokerage, escrows, development, legal matters, financing, architecture and engineering.
"Our business was set up to educate Americans about the idea of owning property in Mexico," Ms. Haffner said. "Most interested people want to live part or full time on their Mexican property. We now have about 350 people on our mailing list -- those who are actively interested in acquiring property in Mexico."
The idea of owning land in Mexico has become popular because of comparatively high real estate prices in the United States and because President Carlos Salinas de Gortari of Mexico has eased restrictions on foreign ownership of land. A foreigner can now own land anywhere in Mexico, though the property must be in the name of a bank-held trust if it is near a border or coast.
Ownership of Mexican property that is within 100 kilometers of a border or 50 kilometers of a coastline can now be acquired by individuals or corporations, Ms. Haffner said. The only rule is that the deal must be carried out through a trust with a Mexican credit institution as trustee. If so, the real estate can be used and enjoyed by foreign investors.
"Currently, international hotel chains like Sheraton, Princess, Quality Inn, Club Mediterranee and others operate efficiently in Mexico under this system," she said.
xTC Although no foreigners can own land by direct title in the "restricted zone" (close to borders or coasts), they can own the beneficial interests of the property -- the right to use and enjoy benefits derived from the title placed in a bank trust.
"In a way, it's like owning 100 percent of the shares of a corporation, which, in turn, owns the farm," Ms. Haffner said. "While it is technically true that you do not have the farm [the corporation does], it is for most practical purposes the same as direct ownership."
A note of caution: Mexico does not have a solid system of title insurance. Title insurance can be obtained in the United States to cover properties in Mexico, but it is costly.
In the absence of title insurance, care should be taken in selecting anattorney to help establish a bank trust in Mexico. The lawyer can trace the chain of title and can insist that the prospective trustee conduct its own independent investigation.
Ms. Haffner said she thinks the completion of the North American Free Trade Agreement among the United States, Mexico and Canada will increase the value of property investment in Mexico.
And, observed Forbes magazine: "The next great economic miracle will take place right on our borders. Mexico is on its way to becoming an economic powerhouse. Now is the time for American investors to factor into their plans the likelihood that, in the decade ahead, Mexico could easily have the fastest-growing economy in the hemisphere."
(James M. Woodard is a syndicated columnist; write him at Copley News Service, P.O. Box 190, San Diego, CA 92112-0190.)