Why Two Different Price Structures?

On today’s show we are talking about two different construction costs in the same location. We are vacationing in Mexico for a few weeks and naturally the topic of real estate comes up in conversation as it does.

Our waitress by the pool is in the process of building a new house for herself and her husband in Playa Del Carmen. She shared what she spent for the land and the cost of constructing her new home. On today’s show we are going to compare what she is paying versus what a foreigner would pay.

There are restrictions on what foreigners can buy in Mexico. Within the restricted zones—50 kilometers (about 31 miles) from shorelines and 100 kilometers (about 62 miles) from international borders— foreigners can only hold property in a land trust. Typically, the trustee is a bank. Outside these zones, foreigners can hold direct deed to property with the same rights and responsibilities as Mexican nationals.

Apart form the legal title, there are other differences as well.

We have seen properties for sale to foreigners at prices that rival US prices. Condos having 1300 SF in Playa Del Carmen that are close to the beach are selling for $600,000 USD with a $515 per month condo fee. This comes to a sale price of $461 per SF.

Our waitress purchased a plot of land that measures approximately 40 feet wide by 80 feet deep, fronting on a street. The purchase price for the land was $10,000.

Her home will have approximately 1,200 SF on a single level. Her home will have two bedrooms, a single bathroom, a kitchen and a living room. It will also have a covered porch at the front of the house which is included in the square footage calculation. In the US or Canada we would probably exclude the square footage of the porch in the area calculation.

Our waitress will not connect to city services initially and will rely on well water that comes from a newly drilled well having a depth of 45 feet. Her total cost of construction is $30,000. So her house will cost her a total cost of $40,000. Maybe she’s not including appliances in that cost estimate. So perhaps her total cost is being slightly understated. But the two bedroom condo near the beach having the same square footage and no land is selling for more than 15x the cost of the detached home.

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Host: Victor Menasce

email: podcast@victorjm.com