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Americans go gaga for Baja

 Southward migration driven by housing prices along Mexico peninsula

Published October 15, 2006

LA MISION, Mexico -- Every weekend, Carmen Tetelboin joins the Baja boom.

After work on Fridays, the Los Angeles resident drives four hours across the border to Baja California, where life is so good and living so cheap, it beats the other California, she contends.

Owning a condo on the coast, she and her husband are part of an American colony exploding during the past five years along 75 miles of pristine beaches, cliffs and towns south of Tijuana. What's drawing them are oceanfront homes at a fraction of the multimillion-dollar prices on the U.S. side.

A native of Chile who is bilingual and a U.S. citizen, Tetelboin jokingly calls this swath of Americans "gringolandia."

"I never speak more English than when I'm in Mexico," said Tetelboin, 51, an adviser to international students at UCLA.

Equivalent to a small city unto themselves, the Americans in Baja, who number about 250,000 according to one unofficial estimate, have created a curious twist on the U.S. immigration crisis bedeviling Congress and the White House.

"We complain about Mexicans illegally crossing the border for a $6-an-hour job ... in an attempt to take back the country, when in fact we're buying Mexico one lot at a time," said Patrick Osio, 68, of Chula Vista, Calif., a former consultant who leads conferences on Baja real estate.

Indeed, the high-rises and gated communities dotting the coast exude a United States ambience, advertising in big English signs--"Beachfront condos. Models open here"--with San Diego or U.S. toll-free phone numbers. Even traffic signs on the coastal toll road are in English.

Prices appealing

Last October, Christine McCusker and her husband, John, bought on first sight a 2,800-square-foot house for $450,000 that's a one-minute walk to the beach in the Punta Piedra development. In Southern California, such a house would cost a few million dollars, she said.

"If I were to sit and think about a whole bunch of adjectives for Mexico, I have to think of beautiful, warm, I love it," said McCusker, 61, who with her husband and two daughters operates two private grade schools in Temecula, Calif. "It's not for everybody, believe me, but they have to get past that mentality of people on the street begging."

Mexico's Constitution forbids foreign ownership of land within 62 miles of the border and 31 miles of the coast, but Americans have been able to get around that ban thanks to the Mexican government's creation of real estate trusts in recent decades.

Designed to encourage foreign investment, the 50-year trusts are an agreement between a buyer, a Mexican bank and a seller. The bank trust holds the land and lists the foreigner as the beneficiary; they're renewable for an additional 50 years, after which they can be bequeathed.

But what's really ignited the Baja buying spree is money created by the recent U.S. home refinancing binge, experts said. As they near retirement age, Baby Boomers are leveraging cash from their homes and buying Baja properties as second or permanent homes.

Driving the boom south of the border are U.S. title insurance companies and U.S. mortgage companies, if the applicant has good credit, though many Baja properties are bought with cash, experts said.

Former Baja California Gov. Ernesto Ruffo said the two Californias are blending: "Actually, the region is one, economically speaking."

But rip-offs and risks abound, as they have since several Americans were defrauded out of retirement homes in San Antonio Shores south of Tijuana in the 1960s and later in 2000 when Mexican police evicted scores of American retirees in Punta Banda, near Ensenada, following a title dispute.

There's also the matter of establishing and maintaining legal residency. Cesar Romero, spokesman for the Mexican Consulate in Chicago, acknowledged that many Americans live illegally in Mexico by not obtaining or letting lapse the retiree visa, which must be renewed annually. But he could provide no figure.

"I hear it's a very common practice," Romero said. "It's a problem there."

Crime remains a concern too, so American enclaves employ shotgun-toting armed Mexican guards, who patrol the grounds at such places as Playa del Mar Club Station, where Sandra Moffat, 58, lives year-round.

Formerly of San Diego, Moffat said she feels secure in the condo she bought 3 1/2 years ago, joined by her cocker spaniel Cindy. But panic-stricken U.S. friends often send her e-mails about Baja crime.

"I feel as safe here as in the States, and I have two hearing aids and I take them out at night and I'm completely deaf," Moffat said.

Ignoring the perils

Potential perils haven't stopped boosters from holding seminars throughout California on how to buy Baja property, including one at UCLA in September.

As an indicator of Baja activity, more than 16,000 condos, houses and lots are for sale in present or planned projects, representing $4.1 billion, in the 75 miles between Tijuana and Ensenada, said Gustavo Torres of RE/MAX Baja Realty. He estimates 250,000 Americans live in Baja, but experts say no reliable official census figures exist.

Up to 80 percent of Baja sales are to Americans, mostly as second homes, and 10 percent of them are retired or living there permanently, said Nathan Moeder, principal of the London Group Realty Advisors Inc. of San Diego.

So frenzied has been the buying that one real estate consultant, Tom Harkenrider, sold a $250,000 condo at Residences at Playa Blanca to a stranger next to him on a flight from Los Angeles to Cabo San Lucas last year.

The buyer, Arvin Sarroca, 36, of Chino Hills, Calif., said he liked the cost and the ability to rent out the condo when he can't visit it.

"I know there were problems," Sarroca, a day-spa owner, said of past real estate controversies. "But now they have a bank trust and I feel a lot more comfortable now. And the security title [company] is in the United States."

If there are any emerging downsides, it's that fast profits have diminished, such as flipping properties for gains amounting to 30 percent a year, experts say.

"The [profit] boom is over, but the market is strong," Moeder said.

Not everyone welcomes the newly arrived Americans, including some of the expats who have been living in Baja for decades. The mass migration will raise prices, they say.

"It's scary," said Maggi Wagner, 71, who moved to Rosarito 16 years ago. "A lot of people buy sight unseen. ... They don't know what they are getting into. You don't know the true ownership of the land. It gets tricky down here."

Many local Mexicans dislike how open beaches are now sealed off by the American communities, said Juan Manuel Higuera, 22, whose family has owned a beachfront house in Ensenada for 50 years and has rejected Americans' buyout offers.

"People say, `Oh, here's another new house, but it's the gringos,'" Higuera said. A cigar store clerk, he added that American dollars have been good for business, however.

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Beware of pitfalls in buying across border

U.S. experts and Americans in Baja California warn of pitfalls in buying across the border:

Real estate agents: Look for a Mexican agent who is a member of La Asociacion Mexicana de Profesionales Inmobiliarios. Buyers can also use a U.S. broker/agent with expertise in Mexico and a work visa.

Titles: Get a title search and title insurance.

Financing: Many buyers pay cash, but U.S. mortgage companies are providing loans for 75 percent or more of purchase price under 15-, 20- and 30-year terms if you have a good credit rating. But a second home in Mexico may not be eligible for U.S. tax deductions.

Down payment: Place it in escrow if the home isn't built. Developers want to use it for construction costs; avoid this.

Trusts: To buy land within 62 miles of the border and 31 miles of the coast, Americans use a fideicomiso. The trust costs $400 to $500 a year, lasts 50 years and is renewable. The beneficiary can sell the land or bequeath the land.

Common sense: Don't believe a Mexican seller when he or she cuts corners because "we do business differently down here."

--Michael Martinez

Published Monday, December 11, 2006 10:19 AM by Kanoa Biondolillo


# re: Americans go gaga for Baja

Tuesday, November 6, 2007 6:29 PM by Richard Bustamante

Yes, Excellent information, I too would like to purchase in Mexico. But I do plan on researching all history and resources before we invest in some valuable beach property as I do reccomend everyone else should also. But all in all I do find this interesting to say the least, Hopefully GOD willing we will be able to retire, relax, and resume our remaining days in the sun, surfing, on the tennis courts and swimming a few laps daily   God Bless, Richard Bustamante

# re: Americans go gaga for Baja

Sunday, January 13, 2008 7:59 AM by Javier

This is good info. That's why having a good real estate company makes sense.

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