Series #6 Purchasing real estate in Mexico, for the most part, is a good investment
If you’ve been following my series, let’s cut to the chase. By now, I’m sure you want to know how much it costs to build in Mexico versus the United States. A lot depends on where in Mexico you build and the quality of materials you select.
When we first arrived in San Miguel de Allende in May 2005, the average per square foot cost for new construction was $65. But like the states, that number has continued to escalate following the devastation of hurricane Katrina, ever rising transportation costs and the increased demand for construction materials to rebuild New Orleans and the many Olympic stadiums in China needed to host the 2008 summer Olympics. In our case, our land cost was $110,000 for a 250 m2 or 5,000 square foot property. Our construction costs ran $300,000 to build 3691 share feet of livable space plus 1917 square feel of outdoor living area which includes a center courtyard, two terraces and a rooftop patio bringing the total construction area to 5608 square feet. We paid an additional $40,000 in architectural fees and $20,000 for professional Viking appliances which retail for twice that. Because my husband is a Viking employee, we were able to purchase these products at cost.
So given these figures, if we compute our square foot cost based on our total area ($470,000 ٪5608), our cost was $83.88 per square foot compared to $127.33 if we only consider the enclosed livable space. To make an accurate comparison with the United States, I asked Curtis Van Carter to provide square foot costs in Napa for the cheapest construction, for an average custom home and for high-end luxury properties. For a basic, simply constructed condo in Napa, average square foot costs range between $150-$200, for an average custom home from $400-$500 and for luxury properties from $1500-$2000. He estimated our custom designed Mexico home would run about $500 per square foot in Napa, or almost six times higher than SMA. Furthermore, our property taxes here are only $250 a year compared to an estimated $7,500 for a similar home in Napa.
Keep in mind, we choose top end plumbing fixtures, appliances and even custom designed our sinks made of copper and hand hewed pulido. We also have three kitchens: one in the main house, a 600 square foot teaching kitchen in the center of our complex and a small efficiency kitchen in one of our guest rooms or casitas. Add to that 3.5 bathrooms, three bedrooms and a two bedroom guest house/casita and you can see that you get a lot for your money in Mexico.
In reality, I believe we could have saved on construction costs if we hadn’t chose to build in stages. Over those three years, construction costs rose and we weren’t efficient using our construction crew stopping and starting the project twice. What took three years to build could have been compressed to 1.5 or 2 years at the most if we stayed on schedule.
So if you ever contemplated moving or building here, for me, it’s been a worthwhile investment. According to one local builder, in this down market, our home should sell for a minimum of $650,000. A year ago, it would be valued $100,000 more, but like NapaValley and the U.S., the market for outside investors is also down in SMA.
Now that you’ve heard my story, I’d like to end with some lessons learned that hopefully will make your building experience in Mexico more enjoyable.
1) If you plan to make SMA your permanent home, rent for a minimum of one month first before making that decision. For some—like my husband—SMA is better as a half time residence. He still longs for Napa….the food and wine experience just isn’t the same here, so make sure you are truly ready for that change before committing permanently.
2) Don’t live on site while your property is being developed. Monthly rentals are relatively cheap here. Spend the extra $350-$500 a month and rent a place nearby that allows you to supervise construction without being consumed by it.
3) Don’t apply for your FM3—which allows you to bring your belongings into Mexico one time in the first six months without import taxes–until your property is complete. We brought ours in early and incurred rain damage. Better yet, just buy new furnishings here.
4) Check out your neighbors before buying. We discovered after purchasing our property that the rear wall of our home backs up to the largest hierro/iron worker in town. On some days, when he is pounding on his anvil, our teaching kitchen reverberates from the concussion and it can be hard to hear and hard to take. On those days, we run our fountain at full blast.
5) When choosing between Cal (a traditional water color like pigment used here for centuries) versus modern oil based paint, choose the latter. While we wanted to keep with tradition using Cal, each time it rains the color of our home also goes down the drain.
6) There are many wonderful artisans in Mexico willing to custom make anything from your floor tiles to your lights and plumbing fixtures. We choose a beautiful hand painted floor for our teaching kitchen that looks much like a carpet. And while we love it and would make the same choice again, we had to accept that the tile colors varied from piece to piece and it was even harder to seal them without some discoloration. Be prepared to accept this fact or choose something prefab.
7) Caulk is the one product that holds all the homes together in SMA. So if you are moving here from the U.S., bring as much as you can carry to seal your doors and windows as you won’t find an equilivant performing product here in Mexico.
For more information on properties for sale here, contact Curtis Van Carter or drop me an email at email@example.com. Better yet, stop by for a visit on your next trip here.