Check out this nightmare experience that this
American had investing in Mexico real estate.
I bought a derelict house on the ocean
in Puerto Aventuras and put 10 million pesos
into it to restore it to glory.
I also bought beach property around Mahahual,
20 hectares on Lake Bacalar and a 2000 hectare
ranch that had been abandoned near Chetumal.
We then went to work.
We hired seven fulltime employees to work the
ranch in addition to protect it from poachers.
Among the species we protect are
deer, tapirs, jaguar and puma.
There is a 500 hectare lake on the
ranch as well, where, when we arrived, poachers
were gill netting with 100 meters nets and
destroying the fishery for generations to come.
We stopped all of that from happening.
Birds have now returned and fish now abound.
We have given back to nature and the community.
Our workers who come and go each day
are well paid and fed breakfast and lunch.
Our foreman lives full time in a house
we built for him and his lovely family.
They all get health insurance and he gets a
truck to drive, free gas, free food, a free
cell phone and free access to the internet.
Basically, everything is paid for and he gets
to use his salary as discretionary income.
It's a great deal for him, but
it also works great for us.
It's a true win win for all of us.
And how have I been treated in
exchange for all that we have done? Not well.
My ranch has been invaded twice.
Once by ten men with guns who threatened to kill
all the workers if they did not leave immediately.
We called the police.
And what did they do? Nothing. Nothing at all.
It took one year and more than 2 million pesos to
correct the wrong and get my ranch back from the thugs.
I have another property that I am currently
fighting to preserve from an invasion and have
been doing so for more than three years.
Sure, I've won battles in court so far, but
the wouldbe invaders are still on my property and
I've spent over 200,000 pesos on lawyers. Will I win?
Yes.
But I have no desire to keep fighting this battle.
Mexico requires me to keep spending money simply
to hold on to those things that I've
already bought and legally paid for.
For me, the straw that finally broke the camel's back
came last year when a Mexican bank known as Monex
stole more than 20 million pesos from our accounts.
We had money in the account one month, and
the next month bank employees had stolen every peso.
Many newspapers and TV networks reported that 158 accounts
and nearly 800 million pesos had been robbed from
the accounts of Americans and other foreigners.
For many of these people, it was their life savings.
Did bank officials from Monex
get arrested and prosecuted? No, they did not.
Has Monex replaced a stolen money
in full to those depositors? No.
For the most part they have not.
In fact, my brother and I have yet to receive one
peso of the money stolen from us by the bank.
We have filed criminal charges and civil actions,
but it might be many years before the
Mexican government forces Monex to reimburse our funds.
So that was Ken's experience.
He's a retired dentist and a successful investor
and that's what he went through when buying
real estate and owning real estate over the
course of 20 years in Mexico.
This video is the reasons why I
would not buy property in Mexico.
And that's the first reason. Many people
have horror stories like that when it
comes to owning real estate in Mexico.
The next reason is that I don't have
the same rights as a Mexican citizen when
it comes to purchasing real estate.
It's even in the Mexican constitution that
foreigners can't own land within 100 km of a country
border or within 50 km of the sea.
There was this foreign investment act that was initiated
that allows foreigners to own that property, but you
can't own it directly in your name.
You either have to start a corporation
or own it through a land trust.
It's not a huge deal to take that extra
step and own it through one of those ways.
But what is a big deal to me,
I think it's a huge red flag that as
a foreigner you don't have the same rights as
a Mexican citizen when it comes to owning property.
Whereas like in the US, foreigners have the same rights
as US citizens when it comes to owning property there.
The next reason why I wouldn't buy a home
in Mexico is the growing anti-foreigner sentiment.
I've noticed this increasing over the past two and
a half years or so, but it has gotten
really bad in the last six months.
Let me give you some examples of the most
upvoted comments on a recent Facebook post of mine.
Please don't move to our country.
You are pretty welcome to come and meet us as tourists.
Believe me, we are warm and welcome and kind people.
But when you become a threat to
our economy, that is absolutely not cool.
That has 104 replies and 1700 upvotes.
I love this video.
Hopefully every gringo will go back
to their country after watching this.
That has 83 replies and 1200 upvotes.
I see these comments on my
social media channels every single day.
In fact, there's dozens of these every single day.
There are still a lot of Mexicans here who are
very welcoming, but the list of people like this is
growing bigger and bigger and bigger by the day.
And with this growing anti-foreigner sentiment comes
a bigger and bigger threat of nationalization or
some other kind of adverse action towards foreigners.
And in almost every single instance around the world where
a government wants to screw over foreigners, they do it
on assets that cannot be moved, like a home.
And let me be clear.
I'm not saying that this is a
probability, but it's certainly a possibility.
Next is that right now, the Mexican
peso is relatively strong compared to most
other currencies around the world.
What this means is that when you take your dollars to
convert them into pesos, you're going to get fewer pesos, meaning
that it will take more dollars to buy the same house
compared to when the Mexican peso was weaker.
For example, if you bought a home in
Mexico for 2 million pesos at the peak
exchange rate in 2020, you paid $80,000.
But if you bought another home today for 2
million pesos in Mexico, you're paying $112,000. $80,000 to
$112,000 just because of a difference in exchange rate.
And most Latin American countries almost make it
a national sport to destroy their currency.
So if you're interested in using your dollars to
buy a home in a Latin American country, you're
probably going to be better off if you're patient
and you wait for the right opportunity when the
exchange rate is more in your favor.
The next reason why I wouldn't buy a home
in Mexico is there are a lot of laws
here that favor both squatters and renters and are
kind of disadvantageous towards the owner of the property.
In my personal talks with landlords, people who own a
lot of homes around Mexico who rent them out, they
have a really hard time finding quality tenants.
Like it is super common for them to rent out
their house and have the tenant completely destroy it, or
they rent out their house and then the tenant is
late all the time or doesn't pay rent at all.
That's super common.
So landlords, or at least the experienced landlords,
are very careful about who they rent to.
And if you're a quality tenant, if you can prove
that you take care of their property and you pay
your rent on time every single month, well, then the
landlord, in all likelihood, is going to be really generous
with you and isn't going to raise your rent.
Just to share a couple of
examples of laws that favor tenants.
If a tenant is renting a house and stops paying
rent, it may be a year before the landlord can
legally kick that person out of the house.
And another example when it comes to laws favoring
the tenant is that in certain states, landlords aren't
allowed to raise their rent over a certain amount.
For example, like, let's say you just want to
raise your rent to keep up with inflation.
Depending on what state you're in, you
might not be able to do that.
The next reason is the very high closing costs.
You'll end up paying between seven and 10%.
That means the day you purchase your home, you've
already taken about a 10% loss on your home.
The next reason why I'd think twice about buying a home
in Mexico is the very high capital gains tax here.
There is a way to avoid it.
But you have to meticulously follow the law and
make sure you're dotting all your I's and crossing
all your t's and doing everything perfectly.
There's another YouTuber here in Mexico that is
very good about knowing all the laws.
And he, despite all of his knowledge
and his meticulous nature, almost didn't qualify
for the capital gains exemption.
We received a bill in an email that said that we
owed $30,000 in taxes as a part of this transaction.
So Linda immediately calls the lawyer and
says, hey, what is this tax bill? What's going on here?
And he says, you know what, although you have all
of these bills in your name and bank accounts in
your name, things like that, nothing is linked to your
Mexican tax number known as an RFC.
Now thankfully, he was able to qualify for it only because
the buyer of the property agreed to delay the sale so
he could get that tax ID number on his next bill.
But stupid reasons like that could disqualify you
from the capital gains exemption, which could cost
you tens of thousands of dollars.
The next reason is that 99 times out of 100
in Mexico, foreigners don't have access to Mexican credit to
purchase a home using funds from a Mexican bank.
And also US banks won't
lend against Mexican real estate.
So in like 99 out of 100 cases, almost
every single time you see someone buying a home
in Mexico, they're paying for it in cash.
The next reason is that it almost always makes more
financial sense to rent in Mexico instead of purchase.
Let me show you an example using
the last house I was renting.
Now all these numbers are in pesos, but for simplicity's
sake, I'm just going to do this in dollars.
So $1750 to rent.
Or I could purchase it for $500,000,
but that does not include closing costs.
So after closing costs, let's call that $535,000.
Now, not a lot of people have an extra
$535,000 laying around, but let's say you do.
It's not like your cost to own the home end there.
You're going to have costs every
single year and they're not insignificant.
For example, on this particular home, the HOA fee or
what they call mantenamiento is $3,000 a year.
The insurance is probably going to
run you about $2,000 a year.
But this number could easily be higher if you're
in a place like Mexico City that's prone to
earthquakes or if you're in a place that gets
hurricanes. And then upkeep on the house, you're probably
looking at at least $3,000 a year.
Because this is a pretty large house.
It's over 4000 square feet and
There's a lot of stuff that goes wrong,
a lot of stuff that needs constant maintenance.
And if you don't do constant maintenance on
a house, after ten years, it's going to
look like hell and be functioning very poorly.
So I think that's a very conservative estimate
there. And then your property tax is going
to be another $500 a year or so.
So in total we're looking at an extra $8,500
per year when you own the home outright.
But if you're renting, you're not subject to
paying any of these expenses right here.
By the way don't take anything I'm talking
about in this video as financial advice.
I'm just showing you how I think.
Now let's take a look at this example of
what happens if we rent the first year instead
of using that $535,000 to buy the home.
So if we rent we will have to
pay a significant amount of money, $21,000.
Now that does seem like a lot of money right?
But if we take that $535,000 and invest
it into something like Ares Capital which is
the biggest and best run business development company
and they're paying over a 10% dividend.
So if you put all of your money into there
you're looking at like $55,000 a year in dividends.
The thing about business development companies is that
their stock prices are very very volatile.
So you have to be buying this for
the dividend and not for the stock appreciation.
The next option I have to invest in is VYMI.
This is a Vanguard index fund
and its dividend yield is 4.39%.
This is a collection of over 1000 of the
best run dividend paying companies in the world.
So this is super diverse and a great inflation
hedge and it's still a good dividend payer and
far less risk than buying a single stock.
So you can buy this be getting
4.39% dividend yield plus you're going to
get capital appreciation there as well.
And there, the first year you're going to
be pulling in about 23,500 in dividends.
Despite this being the lowest yield on the
list it's still more than enough to cover
your first twelve months of rent.
Now stick with me for a couple more minutes
because it is going to blow your mind how
much better off you are after ten years of
renting versus having purchased a home.
What I consider the most risky option on this list
is buying a one year CD with a Mexican bank.
They're going to be paying you over 11%
netting you about $61,000 in that year.
Keep in mind that's going to be in pesos,
not in dollars, that you're going to receive that.
And the next option is the one year
US Treasury currently paying you over 5% which
is going to bring you in about $27,000.
And now let's take a look at what happens to
our $535,000 when we invest it over ten years.
535,000 we're going to put it all into VYMI
because I think this is the safest option of the
four options I gave. And you might be like Jordan,
you seriously think it's safer than a US Treasury?
Yes absolutely.
Because a US Treasury guarantees
that you lose against inflation.
Although the default risk is very, very low.
It's a guaranteed loss against inflation, whereas this is
one of the best inflation hedges you can have.
And I'm going to assume a
conservative 7% annual growth rate in this.
What we're going to do is we're going to pay our
rent using the dividends we collect from this, and then we're
going to reinvest what's left over after paying rent.
And in addition to that, we're also going to
invest $8,500 per year, because remember, that's the amount
we would have to put into our home in
the form of taxes, insurance, upkeep, things like that.
So after the compounding on year ten,
you have a portfolio worth $1,256,000 that's
paying you annual dividends of over $53,000.
Now let's take a look at what your rent
will likely look like for the next ten years.
So your first year you're paying that $21,000,
but really it's not 21,000 because you do
have to pay a one month deposit.
And also you'll probably have to pay for
this thing they call a poliza juridica.
Basically, it's insurance for the landlord in
case you don't pay your rent.
And you're going to be a good tenant who
pays your rent on time every single month, and
you're going to take care of their property.
This is very important for this example, because if you're
not a good tenant, you're not going to get this
deal and you're going to get your rent raised.
But if you are a good tenant, you can likely
go to the landlord and be like, hey, I would
like to extend this lease for another few years.
I've really liked living here, but I'd like
to keep it at the same price.
And since you've been a good tenant, they're
going to be like, sure, no problem.
And if they don't say that, if they say
anything else, well, then go find a new home.
Go find a new landlord, because your next
one probably will be okay with this.
Of course, this is very much a your mileage may
vary kind of thing, but your first five years will
probably be at the same price of 21,000.
But you know, after those five years, your landlord
is probably going to come to you and be
like, hey, my costs are going up.
My insurance costs are going up.
My monthly HOA fees are going up.
I really love having you as a tenant, and I'd love for
you to stay, but I need to raise your rent 10%.
Is that okay?
So the next five years,
you're probably looking at $23,000.
Even though you do end up paying $222,000 in rent
over those ten years, you end up collecting $360,000 in
dividends, and your portfolio grows along with it in one
of the safest investments you can own.
So if you're a Mexican with access to Mexican credit,
or you're one of the very few foreigners who can
get a loan from a Mexican bank for a house
here. Well, then that may change your whole equation.
But I analyzed 20 homes.
I ran these numbers on every single
home of 20 homes around Mexico.
In Queretaro, Mexico City, Monterrey,
and Playa del Carmen.
And in 19 out of 20 of the homes, the numbers
worked out to something similar to what I just showed you.
And in just one single case out of
20, the numbers worked out to be pretty
even when it came to buying versus renting.
So keep that in mind.
Run the numbers yourself on whatever home
you're interested in, and maybe you'll come
up with a different result than me.
And if you were having your cash and letting that
sit in a bank getting eaten away by inflation, yeah,
you're probably going to be better off purchasing the home.
But if you're going to invest it in any
decent investment, I think in almost all cases, you're
going to be better off renting than purchasing.
As long as you're not in one of those few
rental markets around the country, like Puerto Vallarta, for example,
where the real estate prices are going nuts.
With all that said, there are very legitimate
reasons to buy a home in Mexico.
So watch this video on the reasons why
I would buy a home in Mexico.