More Canadians and Americans are choosing to build their Dream Homes in Tulum Mexico
Many foreigners have the dream of coming to Mexico, buying a piece of land, designing a home built to their tastes, and living their dream along the ocean or on a majestic mountain side….at half of the price it would cost in their home country.
Is this a fairy tale? NO, not completely. Below is a story on how one Canadian couple chose to buy land in Tulum Mexico and are taking on the challenge of constructing their Mexico dream home. “Many people from my home town said we were crazy, but we surrounded ourselves with qualified help, we did our homework and we discovered great investment return potential in the Tulum real estate market, a project in an ideal neighborhood, and data that helped us make our decision to build versus buy.” stated Craig a proud new Canadian owner of land in downtown Tulum, Mexico. With the current low quantity of services and infrastructure available in this fishing village and projected new jobs coming to the region these factors are catching the attention of many buyers and investors. The number one factor which entices hundreds of Mexican foreigners to purchase land in Tulum is the investment potential of the region.
In Tulum Mexico, real estate has been a hot topic, given the quick growth being experienced and with the history of the booming towns of Cancun and Playa del Carmen, odds are that this fishing village will have the same success and demand witnessed in the past 15 years in these two nearby northern neighbors. “We did our due diligence, and researched hard on the internet till we found a good, experienced Mexico real estate agent of the area. With our criteria in hand, the agent led us away from where we had initially started our search in developed and established municipalities up north and he took us to this small village called Tulum” explained the couple. Existing condos and home properties in Tulum are still very scarce. At the same time, there have been increases in the constructions of hotels and resorts along the southern half of the Riviera Maya where Tulum is located. In the past couple of years, the quantity of hotel rooms in the Riviera Maya surpassed the number of units located in Cancun making this zone one of the highest growth potential areas in the state of Quintana Roo. A new double lane highway has been under construction and is projected to be completed in the summer of 2009 which will connect Playa del Carmen with their southern neighbor. “All of these factors gave us the confidence that our investment into Tulum land should create great appreciation returns” added Craig. The decision of where to choose along the Mexican Caribbean was their first task and led to their second important question; where should I buy land in Tulum?
As suggested by many experts in purchasing residential properties, a comparison of the neighborhood’s pros and cons was prepared and evaluated. The criteria were jotted out along with reviewing a list of those items the buyers thought would be required to make their lives comfortable and happy while living in Tulum, Mexico. Craig shared his thought process “We began evaluating the different locations around town ideal for our needs and we ended up investing into a rather large planned community that had an existing building restrictions code.”. Tulum is a new municipality and there still exists many properties with unclear legal deeds. There have been instances of transfers of physical possession, yet the legal transfers are unable to be completed given the lack of proper transfer rights. There also exits several projects, where developers have gone through the process to privatize larger sections of land, subdivide, develop the infrastructure, and begin selling the smaller individual parcels. “I wanted to focus my attention to the designing and the building, I did not want to go in having to worry about my title, I am hundreds of miles away and the last thing I wanted was a legal obstacle, so we decided to purchase a higher priced property compared to other land for sale in Tulum” Although Craig bought within a planned community, many other foreigners have elected to purchase properties in the downtown zone and direct from individual owners. There are parcels of land with and without structures that are located in the downtown area that already have existing electric and water services. Other areas in the southern half of town are within the planned zoned areas of the municipality but the area has yet to develop paved roads, no water nor electricity services exists. A large concentration of foreign buyers has built in this area. “They are betting on the future and the odds are in their favor” states Hector Moreno a real estate broker with many years experience of working in the Tulum region. “The city has to grow, and the city will need to begin paving the roads and adding the basic services, when this happens, the property values will go in one direction and that is up”. Many people are predicting a strong growth in the Tulum real estate market, so what type of properties are the most appealing to the foreigners coming for these purchases and investments?
One of the difficult questions that Americans and Canadians contemplate when buying into the new Tulum market is which type of property will best meet their expectations and dreams. Oceanfront property is usually the number one choice and if this is not in the budget a common response is “find me the closest possible real estate to the Tulum beaches.” With a population of only 15,000, this new municipality is still a quiet little village. There are only a hand full of Tulum condo projects available for sale and several of these are in pre construction stages. “Single family homes for sale in Tulum? I can only think of 3 or 4 and these are in the Region 9 area.” Was the response from Andy Welbourne an agent whose job is to find properties and represent buyers in the Riviera Maya region “These homes are good quality, new constructions and very unique designs with strong Mayan culture influence. A lot of the non-Mexicans like that style for this area.” When buyers choose the option to build, it allows the owner the flexibility to create a living dwelling specifically to his habits and likes. Owners can choose the location and size of the window that looks upon the back yard or pool for example. Changing the layout of the patio or the location of the columns in the last minute are options that can occur, and such adjustments can give your retirement home those special personal touches that will return hours of future living comfort and enjoyment. “We also felt much more at ease with the idea that we are going to know the quality of materials that will be inserted into our winter home” said the Canadian couple. Craig added the fact “I had a special two and a half car garage designed in our home. The half car slot is where I plan to park my little golf cart with electric outlets and other special features that I asked the architect to add” These issues were the decisive points that led Craig and his wife in their decision to build in Tulum and have their Mexico home constructed to their particular tastes and needs.
There is a growing quantity of Americans and Canadians who are buying Mexico homes and making the move to the warmer climates of this southern country. Tulum is one of those regions experiencing the first stages of a population boom with a large amount of those being Mexican foreigners. Many of these buyers are betting that with Tulum’s favorable future expected increase in prices, the municipalities limited existing neighborhood options, and the personal benefits of designing their own home has led to an increasing amount of foreign real estate investors to choose “buying a lot and build” rather than “buying a finished residential home”.
Mexico Real Estate Taxes on Capital Gains.
Linda Neil is a broker/owner of a real estate agency in the La Paz Mexico real estate region, she shares some valuable insight on how to administer your taxes south of the border.
There is a lot of misinformation on this subject, such as:
“If you become a Mexican citizen you have no tax to pay when you sell your Mexico real estate”……
or “With a FM-3 and some receipts, you will be exempt from paying capital gains on the sale of your house in Mexico”
Neither scenario is completely correct!
Mexican citizens must pay exactly the same tax as any foreigner, whether the property is located in the La Paz Mexico real estate region or whether it is located in Oaxaca, Oaxaca. No exemption is permitted for the sale of a vacation home, no matter what immigration status the seller has. As of January 1, 2007 an exemption is granted on the sale of a primary residence. This exemption applies to Mexican citizens and any foreigner whose TAX RESIDENCE is Mexico.
The Law of Tax on Rents (Impuesto Sobre La Renta), Article 109, Fraction XV provides for exemption for the sale of a personal residence. An exemption of 1,500,000 UDIS is permitted, provided other requirements are met.
UDIS….. And what is a UDI???
A UDI (Unidad de Inversion) is, in English, an investment unit. This is based upon a price-level adjustment established by the Bank of Mexico in 1995 to assure that loans denominated in UDIs maintain their purchasing power and provide a real rate of return in the local currency of pesos. Because the peso has been quite stable over the past years, the UDI value does not change significantly now. The rate is published daily by the Bank of Mexico. In 2007 the rate went from 3.789867 in January to 3.926066 in December, a change of less than 1%
In other words the deduction of 1,500,000. UDIS in December, 2007 is 5,889,099 pesos, or about $555,000. US dollars.
Full Exemption: per Article 109, Fracc. XV (Art. 129 RL ISR)
When the sales price of the property does not exceed 555,000. USD dollars, the property can be exempt from the capital gain, or income tax, provided all conditions are met.
Partial Exemption: (example when the sale price exceeds the deduction) A house sells for 700,000. USD
Less 1,500,000 UDIS 555,000 USD
Taxable 145,000. USD, less any permitted deductions such as capital improvements. The tax rate is based upon a sliding scale ranging from 3% to 28%.
In order to qualify for the deduction, the seller must prove this is his/her principal residence with utility bills, bank account and credit card accounts with the same address, electoral card or immigration document showing permanent residence in the country. Title must be in seller’s name or in spouse’s name. Seller must also sign an affidavit that this is his/her principal residence and the transfer must be made before a notary public.
A small house on a large piece of land will take into consideration only the construction (supported by building permits) and the adjoining outbuildings, not the excess of the land.
Only one property per annum will be exempt and seller must manifest that this is the first transfer of a personal residence in the calendar year.
Please remember, and don’t be misled: an exemption allowing exclusion of capital gains is provided to residents who have lived in a home in Mexico as a primary residence. This exclusion is intended to benefit residents, whether nationals or foreigners, of Mexico, not those who own second homes in the country.
In Mexico, the owner’s basis in a property is the value declared in the deed. In the past it was common to declare the appraisal value which could be much lower than the amount actually paid. This is the very important reason to have the price you paid for the property declared in the deed. Be sure, however, that this is a condition of your offer to purchase and is accepted by the seller when you make the offer.
By law the amount declared in the deed must be written in Mexican pesos. It should also be declared in US dollars, if that is the currency used in the transaction, at the rate of exchange on the date payment is made.
If this important point is overlooked when the property is sold, the capital gain tax can be enormous!
The Tulum Real Estate Market Prepares for the New Planned Commercial Zone called Aldea Zama
The Mexico real estate market is expecting big changes over the next five years. One of the regions with the largest potential growth rate is a small Mexican Village known as Tulum, Quintana Roo. This Mexican Caribbean village of approximately 15,000 people has projected growth rates estimated to reach and possibly surpass the extraordinary growth record of its neighboring sister city of Playa del Carmen. This is causing the land for sale in Tulum to increase notably requiring good urban planning for better protection of the environment and to improve the living atmosphere of the community. A new project, Aldea Zama, is introducing their community very near to the present downtown zone of the village. A section of various city blocks has been launched by the Tulum developers that will encompass residential land, green park areas, and commercial community zones all with the plan to be within easy walking distances. The success and great acceptance of the European style 5th avenue of Playa del Carmen was closely studied by the Tulum planners in order to repeat and improve upon such communities. A close eye on the protection of the green areas and preservation to the Mayan atmosphere are present and evident throughout the master planned zones. This section of Tulum is currently in the process of having the infrastructure prepared for the large expected flow of demand that is arriving.
Aldea Zama Tulum, Located within the Riviera Maya region south of Cancun. The site is located between the present day community of Tulum and one of Mexico’s prettiest Caribbean beaches. 185 acres have been reserved and is being developed as a friendly little village. In the center, strategically situated as a “walk to everything” community, the retail and entertainment section is being constructed. Those who enjoy Mexican Caribbean strolls in the evenings and night will soon find various affluent but casual lifestyle shops and sidewalk cafes, all within the community. People who are planning to retire to Tulum, or to vacation several months in this beach side region, will find this neighborhood very appealing and livable. “We don’t want the people feeling as if they are living in a resort, spring break city, we want them to feel as if they are in a home and within a home community” commented Francisco de La Torre sales director of the project.
Land for sale in Tulum is available in various parts of the city. The Aldea Zama group wishes to introduce land for single family buyers and within condo buildings that have an organized building code. The idea of the development is to motivate the new neighbors to utilize traditional materials, contemporary styles, and embrace the Mayan ambiance. In the center of Aldea Zama, apartments will be located above the shop which is a growing popular request both for business owners and tourist visitors. This European style of zoning is bringing many foreign buyers and commercial operators to invest into the future project.
Located next to the Ecological national park and the archeological zone of Tulum, Aldea Zama wishes to preserve the treasured Mayan cultural history. There is a strong push to maintain green areas, both in wide winding avenues dotted with trees in the meridians and parks within jungles and located around cenotes. Buildings are encouraged to utilize the skills of local artisans with indigenous materials blended with new designs and modern technology. The overall goal is to blend the new community into the existing delicate and beautiful natural settings of Tulum.
Tulum is expecting a burst of population over the next several years. By studying the successes and failures of nearby cities and their communities, the Aldea Zama group is planning to introduce a new community within this village that will embrace three basic goals; “Walk to Everything” master planned community, European ambiance, and the preservation of the nature and of the historical Mayan traditions currently found in Tulum. The developers are betting that these are the community attributes expected from future citizens, both national and international, of this Mexican Caribbean city of the future.
The Inflation Premium for Residential Real Estate
Residential housing does have a cash-saving value, if financed with a fixed rate mortgage. Over time, the growth in income and rents increases the cost of housing for renters. The inflation of housing costs for renters is greatly lessened for homeowners using a fixed-rate mortgage because their housing costs are effectively frozen at the rate of their ongoing mortgage payment. Other costs of home ownership, such as property taxes, insurance and maintenance do still rise with inflation, but since the mortgage payment is about two-thirds of the cost of ownership, fixing this amount provides a large benefit. Over time, the savings accruing to homeowners from a level housing payment can be quite substantial. Applying the technique of discounted cashflow analysis, this savings over time can be evaluated.
Since the savings grow every year, the value of the inflation premium grows as the term of ownership is extended, and this premium is not as sensitive to changes in the discount rate as is the appreciation premium. The premium accruing from the savings on rent can be substantial, but ownership periods vary, and the national average is less than 7 years; therefore, if a buyer pays this premium up front by paying more than the rental equivalent value, they do not reach breakeven for several years. In the early years of the mortgage, the owner who paid in excess of the rental equivalent value actually falls behind the renter in terms of out-of-pocket cash outlays for housing. Over time, as the renter faces yearly increases in rents, the homeowners will eventually be paying less, and the savings will make up for the earlier period of deficit.
The above analysis assumes renters face the full brunt of increasing rental rates. For many apartment dwellers, this is true as landlords will raise rents every year knowing that if a renter moves out, there will be another to replace them at market rates. The circumstance is a bit different for private landlords. Most private individuals that rent out investment properties are far more concerned with the loss of cashflow resulting from the property sitting vacant than they are about maximizing income through raising rents each year. Most long-term landlords have conventional, fixed-rate financing on their properties, and because their costs are not increasing, and because they do not want to endure vacancy loss, they seldom raise rents. When they do, they do not tend to raise them to market for fear of the tenant moving out. The result of this is that housing costs are somewhat fixed for long-term renters who rent from private individuals. These renters get to enjoy almost the same benefits of fixed housing costs as homeowners. The implication of this landlord behavior is that homeowners do not necessarily see the dramatic savings over renting suggested in the calculation of the inflation premium.
The investment value for home ownership is a combination of the appreciation value and the inflation value. Both accrue to homeowners for different reasons. The appreciation value is caused by the general tendency of house prices to increase over time with the inflation of income and rents. The inflation value is a cashflow savings accruing to owners as rental rates increase while their cost of ownership is fixed. There are many variables that influence the investment value, and much depends on the assumptions behind the variables selected. Based on a typical ownership period of 7 years, and an investment environment adhering to historic norms, residential real estate has an investment value of approximately 10% of the fundamental value of the property.
Buyers who pay this 10% premium will see a return on their investment if they stay in the property long enough. Buyers who pay premiums in excess of this amount or who own the property for shorter timeframes do not see a return on their investment. Buyers in the Great Housing Bubble paid well in excess of the fundamental and investment value of real estate primarily due to unrealistic expectations for appreciation. If a buyer believes properties are going to appreciate at a 15% rate every year forever, paying a 100% premium over fundamental value is justified; however, since house prices cannot rise at that rate in a sustained manner, such premiums are ill advised.
Estimated Moving Costs Trends
Here’s four potent clues about moving estimates, movers would rather you omit in your moving plans. Deal with movers from an insider’s position to save you up to 35% and avoid being scammed.
With these bad economic times, it would help to find movers that do long distance that will help you locate employment in another city.
Imagine, where on earth would we be if we could not get moving estimates for our move?
As the proverbial saying goes: up the creek without a paddle.
Along the way of business and servicing final customers, the moving estimates helps and guides you of what and how your estimated moving costs could be.
Moving expenses are reflected on paper in direct relationship to the mover’s services and there are important things to include while hunting for moving estimates. The more relocation estimates you get, the better the odds that you will get a good deal. You should try to get at least three (3) different moving estimates to know what a reasonable rate is and to find the best rate among those who are reasonable in price.
When you sit down and compare your moving estimates, you can easily realize the advantages of comparing like services from multiple vendors. Take a look at things like the hourly rate, the loaded pound weight, what the costs would be for them to move your belongings and what other things they might charge extra for.
Approximate tips per person per hour of moving work, disconnect / reconnect appliances and for dismantling and reconstructing things like water beds, mirrors, or other difficult pieces of furniture, the hidden charges in the moving estimates must be brought out to the open, things like processing fees for credit card use, additional charges for delays, and storage.
How come moving estimates are important to you and the relocation industry? Have you ever realized the fact that obtaining these moving estimates can potentially stand in the way between you having an excellent move and you having to deal with the worse move? There are a lot of good reasons for getting a number of moving estimates, four (4) factors stand out over the general consensus.
1. Constructing A More Realistic Relocation Budget.
If you want to stick within your budget, make sure you get multiple moving estimates from several different moving companies. You can better plan and organize your move when you have a moving estimate and can stay within a moving budget. This will allow you to anticipate costs and not force you to wait and see if you can cover the move when you could be in too deep. This itself is of great help in reducing the stress of moving and the fact is about 70% – 80% of total expenses incurred by you goes towards payment to movers.
2. Don’t Allow Yourself To Be Frauded By Dishonest Movers.
There are a lot of scams in the relocation business right now. Apparently everybody is trying to earn a profit, and using others in order to do so. It is common to hear a number of horror stories that magnifies the thought that certain companies hold belongings for money and exuberant moving tips for completed work. Some shaky moving companies make it hard for real companies that are struggling to make it in the industry.
Moving estimates
if they are followed, can help you stay away from shaky moving companies. Usually, these relocation companies will give extra low relocation estimates that will lure people in. Make sure you get a binding estimate from the mover, as these are legal contracts, and scam artists will never give you a binding estimate. Unethical moving firms take advantage of the loophole offered by non-binding estimates which give them some latitude when they price a moving job for a potential customer.
3. It Gives You The Insider Knowledge To Keep You One Step Ahead
You can find the best deals available if you research and obtain relocation prices from different movers and compare each one of them with the other. You can only find a good moving deal if you compare it with different companies.
When you are confident of getting good binding estimates, obtaining the least expensive or the one that provides you with most of the services, will help you find the best moving company as well as a good deal on a variety of things that are necessary to handle your move. Remember a binding estimate is a legal contract between you and a mover – once the relocation cost is set, it can not be altered by either party.
4. Exposure To The Moving Company’s Customer Experience.
Requesting these professional moving estimates do allow consumers to test the movers’ customer services in terms of customer response times, professional level, presence in the market, and how much in tune these movers are in the consumer’s local moving market. How do they handle customers’ complaints, feedback, how accommodating they are in getting the information out to potential moving patrons.
Most of the free online moving estimates are released as non-commitment estimates and hence they provide a splendid opportunity for consumers to check and test the waters if you make them feel convenient to do so without enforcing them to proceed further if they feel inconvenient.
Be certain that the moving company you select has full registration status for relocation services. For long distance moving companies A U.S. Dot number is required by the Federal Motor Carrier Safety Association (FMCSA). Check the mover’s registration at the protectyourmove.gov internet site
But, if you are relocating ‘intrastate,’ you ought to research with the state’s attorney general office. Sadly, unscrupulous moving companies may “low-ball” you to try to get you to hire them and then charge you far more than what you would have paid one of the other firms you got an estimate from earlier in the process.
Home Relocation Estimate Bids Ought To And Must Be A Component Of The Moving Ritual.
It is easy to see that getting Moving estimates is important to nearly any type of move. It does not matter if you are moving within the city that you live in currently or if you are interstate moving over a period of a few days. You must research and verify a number of moving price estimates so that you can choose the best deal thereby moving company for your relocation. Ultimately, relocating to a different home is simplified and more worry-free, and you’ll save on time and expenses too.
After deciding on which moving company to hire, utilize them as a gold mine of a resource in relocation information. They can help you with packing supplies, tips and hints on interstate moving, moving truck estimates, and even give you an idea of the timetable items that should be achieved in advance of your moving day.
This should not be skipped because it makes stress-less move.
Source
Home Relocation Estimate Bids Ought To And Must Be A Component Of The Moving Ritual.
It is easy to see that getting Moving estimates is important to nearly any type of move. It does not matter if you are moving within the city that you live in currently or if you are interstate moving over a period of a few days. You must research and verify a number of moving price estimates so that you can choose the best deal thereby moving company for your relocation. Ultimately, relocating to a different home is simplified and more worry-free, and you’ll save on time and expenses too.
After deciding on which moving company to hire, utilize them as a gold mine of a resource in relocation information. They can help you with packing supplies, tips and hints on interstate moving, moving truck estimates, and even give you an idea of the timetable items that should be achieved in advance of your moving day.
This should not be skipped because it makes stress-less move.