|Why you Benefit if you Invest in Cozumel Land Now|
|Return to page 1|
Why Invest in Cozumel Land
The essence of any good investment is that it pays a nice return over some period of time. For land investments, that usually means the market price of the land increases over some reasonable period of time with relatively low carrying costs. Cozumel land fits both these criteria. First, as pointed out earlier, property prices in Cozumel are driven by real population growth, not government manipulation of the markets. There is government intervention in Mexico to be sure, but the results are different here. The governments actions have largely been to keep the pace of development slow and steady, and to at the same time protect the beauty of the island. The zoning law the went into effect in January of 2009 maintains that stance, and it is unlikely to change for a long time. (It took over three years just to get passed in the first place, and a few more before it started getting properly enforced!) When you put this together with the fact that contract law (on which property ownership and transfer depends) is strongly and fairly enforced in Cozumel, the property market outlook for Cozumel is likely to be very stable for the foreseeable future. The local land owners know this, and that is why prices have only been slightly affected by the hurricanes of 2005. But the US real estate crash of 2008 had a much larger impact, along with world economic problems. Most US buyers used to refinance their homes in the US to buy a vacation home in Cozumel. Since 2008, US banks make it very difficult for potential buyer do get cash by refinancing or borrowing. Since Mexican mortgage rates are 6-10%, many fewer potential buyers have access to the cash they did before 2008. That has greatly slowed property sales in Cozumel. People who come here looking for bargain prices get quite a shock much of the time when they find out many prices on many properties are largely the same as they were several years ago, though some properties have been reduced by around 20%. Even land owners who may very well need cash at times (unless desparate) will usually not lower the asking price for their land. They know they very likely can get more in the future. In this respect, land in Cozumel is a store of value, like gold. That is not to say the there are not bargains to be had. A few owners have accepted low offers, so it does pay to see what bargains may be available.
Taxes tend to be fairly low in Cozumel, especially for vacant land. Liability laws are also very different than some other countries, such as the USA for example. If someone enters a property here, trips over a log, and gets hurt, the burden of proof is on the trespasser to show that they did everything they could to avoid the hazzard in the first place. So it is more difficult for friviless lawsuits to be filed against land owners in Cozumel, and liability insurance is less necessary. Foreign owners do have extra carrying cost for land ownership as explained below, costs for a trust or corporation to hold title to the land for them, and for various fees and special taxes for corporations. Foreigners also have to pay a lawyer and accountant to keep their VISA and trust or corporation up to date, in compliance with any changes to the law, and all taxes paid. But all of this usually amounts to only about $1200 to $2000 USD per year, which is much less than in many other places.
However like other places, costs are slowly increasing in Cozumel too. Here are some additional details about taxes related to property sales that the author posted on the www.cozumemycozumel.com website.
"The main tax required for sellers who sell a property in Cozumel and show a gain rather than a loss is this one: The capital gains tax called ISR (Impuesto Sopa de la Renta). This tax must be paid within two weeks after a sale at the time of closing at the notario's office. (Buyers take note: If your seller does not pay the ISR tax, as the other party in the sale, it may fall on you to pay it. So be sure your lawyer and/or notario get the money from the seller at your closing!) The ISR can be as high as 33% if a foreign owner does not have a permanent resident VISA. So if you plan to own property in Cozumel, it is a good idea to get the Residente Permanente VISA. The value of the Mexican peso to the dollar can also cause the ISR tax to be much higher than foreign sellers expect. The reason is many foreigners tend to think in dollars, but the property value is recorded in PESOS on the property deed. If an owner sells a property for dollars and remember that value in dollars calculated when the peso was say 7 to the dollar, that value will be much LESS if the peso is 16 to the dollar. That can lead to much higher capital gain and higher (ISR) tax that needs to be paid. So be sure if you are selling a property to estimate your capital gain in pesos, not dollars, and be sure to subtract the peso value listed in your property deed (escritura or trust document) from the sale price converted to pesos to have an accurate estimate of your capital gain on the sale.
If you decide to invest in Cozumel land, be sure to find a meticuous, honest lawyer and accountant to help you with your investment. Land is a real asset, and like gold, it costs something to own it. In Cozumel, also like gold, land tends to hold its value. In addition to a growing population, building costs continue to rise, and sometimes that makes buying and remodeling a home less expensive than buying a lot and building a new home. This has been true for many years in the past, and should continue to be for many years into the future.
Why is Now a Good Time to Invest in Cozumel Land?
It is important to note that Cozumel has relatively little crime because it is well protected by federal, state, and local officials. This especially applies to tourists and the 10,000 or so foreign residents who live here along side approximately 80,000 Mexicans. The Mexican and US navies as well as the US Coast Guard patrol the waters around Cozumel. US Coast Guard cutters and US Navy ships visit Cozumel frequently. Drugs are not a big problem here like many other places in Mexico such as long the US border, nor is drug violence, though it has been slowly increasing. The island is so well protected because Cozumel produces a lot of income for Mexico, the Mexican government does not want that to change, and the President of Mexico has a home here that he visits regularly.
Recent problems of the world economic situation, drug violence along the US/Mexico border, and the flu scare of a couple years ago have slowed the economy of Mexico and Cozumel, so land prices are flat for the time being. Some have actually gone down if the owners are desparate for money. There are probably a few more property owners more likely to sell their land now than a couple years ago. Those are the deals to look for.
Another reason this is a good time to buy land in Cozumel is that in spite of the recesson with its very slow recovery. There are also millions of so-called "baby boomers" in the US retiring, and many will choose to retire in Mexico in the coming years. This means that now is the time to buy land while prices are flat to lower---ahead of the likely surge in population and prices that will likely come as the world economic recovery improves, even though that may take a few years to play out. It is the time to sub-divide a property you may own into lots, and prepare it for devopment. Out of all those millions of retirees from the U.S. and Canada, only a couple hundred need to chose Cozumel as the place they want to be to make a handsome profit from reselling an improved investment property in the future. Moreover, the necessary improvements can be done easily for a relatively small cost. But like most things in Cozumel, it takes time to get done because of the slower pace of life on the island, probably a year or two for the whole process. So now is when you should be considering investing in land or other property in Cozumel because the timing is about right for the next round of growth.
Options for Living in Cozumel if you Invest in Developed Land
Renting: Some investors may want to stay in Cozumel for a while as they set up their investments. (Ah, such a problem to face...) An appartment in town with A/C can be rented for about $2-300 USD per month. A 2-3 bedroom home in town without a pool can be rented for $500-800 USD per month, and a home with a pool for about $900-1500 per month. Homes and condos on the beach rent for $1500 USD per month and up as long term rentals and the same price per WEEK for tourist rentals.
Owning Property in Cozumel: Contrary to many rumors, it is legal for foreigners to own property in Mexico. The property deed or title merely needs to be put into a trust, which is somewhat like a Living Trust in the USA, except that is managed by a Mexican National bank. Larger properties (over 2000 sq meters) can be legally owned by a Mexican corporation, the stock of which can be fully owned by two or more foreigners. (Though if you are a US citizen, you must now report such ownership to the IRS.) The most important thing for foreigners who buy property in Mexico to remember is to carefully manage their investments. Contract law is strongly enforced here in Cozumel, but as anywhere, that only works in favor of a property owner if he or she is careful to continuously monitor their investment to make sure everything about it is in 100% compliance with federal, state, and local law. (Note: In other parts of Mexico that are more than 60 kilometers (about 37 miles) from a coastline or 100 kilometers (about 62 miles) from a national border, this requirement for a trust does not apply.)
The easiest way to buy property in Mexico is with cash. Mortgages are available in Mexico, though the rates are higher than in the US, usually between 6% and 10%. Though interestingly, there are fewer defaults in Mexico compared to many other countries, and that means residential mortgages are a good business for the bankers, which include foreign banks such as Citicorp, HSBC, and Santander. Several mortgage companies will offer loans for undeveloped land, and there are some non-mortgage loan options too, such as loans from stock you may own.
Buying a Condo or Home: Purchasing a condo or a home in Cozumel is not very different from doing so else where. You can pay cash or get a mortgage, though as mentioned above, interest rates a higher than in the US or Canada. Check out the following examples of condos, beach front homes, and the view's they provide their owners of the Carribean Sea.
The wonderful Caribbean ocean!
Solidly built homes
Late afternoon at the beach
Ah, a Cozumel sunset...
Buying Land to Build a Home: Most lots in Cozumel are relatively small, 10-15 X 20-30 meters (approx. 30-60 feet). However, that is large enough to build a nice sized home with a pool or a garden or both. Land in Cozumel varies in price depending in the location, as anywhere. For the following, keep in mind that a square meter is about 10 square feet. Rural land is $2-50 USD per sq meter, in town land is $50- 300 USD per sq meter, on or near the beach land is $300-1000+ per square meter, and in city commercial zones in Cozumel $500-1500+ per sq meter. So for example, in town you can buy a 350 sq meter lot for $40,000 to $300,000 USD depending on the neighborhood, but in a more rural area you can buy a 20,000 sq meter forested lot for about $80,000 USD, or less than $5 USD per sq meter. The problem with rural land is that most of it is in huge pieces of 50-70 hectares (250-300 acres), which have no services, and the owners do not want to subdivide these huge lots.However, this also makes the larger lots an excellent opportunity for investors because subdividing and putting in access roads is exactly the kind of improvements that will make this land more valuable.
There are, however, a few places where smaller parcels can be found, such as Mariposa Estates, a residential development on the southwestern side of Cozumel. Building costs for a turn-key finished home range from $1200-1500 USD per sq meter, or $120-150 USD per sq foot, depending on the contractor and building materials. Home construction takes about a year from architectual drawings to a finished home. Much of that time is for the permit process, which takes a few months because an environmental study is necessary to determine the impact of the "footprint" of the new construction on the forest. Here are some examples of what country living in the Cozumel forest is like.
A future forest driveway
Yes, there is electricity in the forest of Cozumel in Mariposa Estates, or you can go "off-grid" with solar and wind power.
Finished driveway and transportation to the beach!
Future home site
Garden path with shaded flowers
Tropical hardwood in bloom
A well and palapa house under construction
A different palapa house completed
A hot tub for chilly winter nights!
Ah, what a relaxing place for morning coffee...
Moving to Cozumel: Once you have the right visa (see visas below), you can move to Cozumel very easily, should you decide you want to be here on the island to manage your land investment directly. You can even bring your pets (with a valid health certificate from a vet within 10 days of your departure) and most of your belongings duty free. You can drive down with your belongings, have them shipped by truck, or by container out of Miami or Galveston. Any moving company that ships internationaly can give you the details.
Registering a Car: You can drive a US car to Cozumel and legally drive it here as long as you have a valid US driver's license and registration, and a temporary VISA from Mexcian Immigration (Note: The immigration law is changing - see visas below - foreigners who are Mexican residents can no longer legally keep and drive foreign plated cars). If you have an permanent VISA you can easily get a Mexican drivers license by answering a few questions, showing your documents, and paying a fee less than $500 pesos. Having one can make it easier at traffic stops. You will have to buy Mexican liability insurance for your Mexican plated car, but that costs less than in the US or Canada per year in most cases (rental companies provide insurance --- be sure to get FULL coverage!). If you do have a foreign car and a temporary VISA, the biggest problem is that very few parts are available in Mexico for cars built for sale in the US. So if you plan to live here for a long time, you are better off buying a car in Cozumel. The prices are much lower than in the US. A brand new small car can be purchased for less than $10-20,000 USD.
Options for Working in Cozumel
Jobs: If you decide to stay in Cozumel long term, you may need a job. There are not many jobs in Cozumel that pay wages US or Canadian workers are used to, except selling timeshares perhaps. But that requires a special kind of sales-oriented personality that most people don't have. And all jobs here are seasonal and depend on the number of tourists that arrive and their willingness to spend. So don't count on the local economy to make you rich. On the other hand, you can make survival wages here depending on your needs, or you can start a business on the Internet, and potentially do very well. But be sure if you work here, you change whatever VISA you have at immigration to a Working VISA. Mexico does enforce its immigration laws!
Starting a Business: On the internet, you could run a US company from Cozumel. Or, you can form a Mexican corporation and do business in Mexico, or both. But remember, you must now report that ownership to the IRS if your are a US citizen. Many people who have invested in property in Cozumel have successful businesses. The main advantage of having your own Mexican company is that you can then sponsor your own work VISA (see visas below), and not be dependent on your employer for your visa, a VISA which you could loose along with your sponsoring job. Business customs are very different here, as are tax laws and accounting practices, so if you start a Mexican business you will need a trustworthy Mexican lawyer and Mexican accountant too. But there are opportunities here to make a reasonable living with your own business in Cozumel. One business that could be profitable is hydroponics or aquaponics (raising plants and fish together). Both can be done here because there is plenty of fresh water and a need for garden fresh vegetables and fresh fish. Tourist medicine is another if you are a medical professional. There is also excellent medical coverage for very reasonable ratess and with a deductible of only about $600-800 USD per year (depending on the ratio of the peso and the USD.
VISAs and Citizenship: For many years you could move to Cozumel for a short time using a standard Tourist VISA. The immigration office at the airport usually gives 180 day (6 month) visas as their policy. If you fly out and return just before it expires, you will get another 180 day visa when you return. So you can stay as long as you want that way, if you don't plan on working or buying real estate. If you do, then you need a temporary VISA to enable you to legally sign documents, retire here with a retirement temporary VISA, or work in Mexico as a non-resident with a working temporary VISA. Your temporary VISA must be renewed annually, and if you sell a property you own in Cozumel, you will pay the highest 33% capital gains tax rate. You can get a permenant VISA (Residente Permanente) which makes you a permanent resident of Mexico and gets you the lower ISR tax rate. Later, if you want you can apply for Mexican citizenship. The following website has an excellent up to date explanation of the new Mexican immigration law, as well as many other interesting topics.
Copyright 2009-2016 All rights reserved.
Rojo Vivo Consultores, S.A. de C.V., Cozumel, Q. Roo, Mexico