Webinar
Everything you need to know about Cabo San Lucas featuring Nick Fong, broker of Los Cabos Agent and Scott Fuller, Founder of www.LeavingTheBayArea.com
Webinar originally recorded for LeavingTheBayArea.com
FULL TEXT TRANSCRIPTION:
My name is Scott Fuller, founder of LeavingTheBayArea.com, and I wanna welcome you to our Market Insider series, where every episode we travel the country to talk to a lot of our premier agents, and talk about what's going on in those areas. So today, I'm super excited, we are actually traveling south of the border today, we're gonna be heading down to Cabo San Lucas Land's End, and we've got Nick Fong with Los Cabos Agent joining us today, so Nick, welcome. Appreciate you being here today.
- Thanks, Scott, I'm glad to be here.
- Awesome. Okay, so if you're looking at Nick right now, and you're saying "This guy looks familiar, I think I've seen him before," it's probably because you've seen him on HGTV's Mexico Live series, where Nick's been on there, how many episodes have you done for HGTV now, Nick?
- Yeah, so myself and my team have done 15 episodes so far.
- Fifteen episodes, okay. So not on only are you a rockstar agent down there in Los Cabos, but you're also a TV star around the world, and for people who haven't seen that show, it's actually, it's a great show. It makes you feel like you're kind of on vacation. You're just kind of relaxing, and you're, an hour at the beach type of a thing, but the premise, and tell me if I'm wrong on this, Nick, but the premise is that somebody is interested in relocating to Cabo San Lucas, it might be a family, it might be a couple, and you're helping them look at some different properties that they might be interested in purchasing, and then at the end of the show, they buy a property and there's kind of the end result. But I think what they don't really get into too much is, what does it take as far as the due diligence, the research to get to that point before they come down and they meet with you. And that's really what we're gonna go through today, right Nick, is to talk about what are those things that you need to know about before considering either making a move to Cabo or potentially even investing in Cabo. So Nick, thanks again, appreciate you taking the time with us today, and why don't you give me some background, you've got a really interesting background, so why don't we start off by telling us a little bit more about yourself and how you ended up in Cabo?
- Yeah, so I'm originally from Chicago, born and raised, I have a real estate degree from the University of Illinois, Champaign Urbana, and I graduated from college in the late 90s and decided I wasn't ready for... doing, well, what I thought the corporate world was, so I talked to my career counselor before graduating and said, "What kind of a job can I do where I can just travel?" And they said, well
- The dream job, right?
- Yeah, right? And they said, "Well, you wanna go into consulting." And I said, "Well, what am I going to consult? I'm 21 years old, I don't know anything." And they said, "Well, IT is a big thing, the whole Y2K thing is blowing up, and there are consulting firms that will hire you and train you." And I said, "Great, sign me up." Got a job, graduated, and... was doing IT consulting for five years. And what I started seeing happen was the real estate market was going crazy. You can be in the mortgage business, in the real estate sales business, and so what I decided to do was to do both. And I was doing that for a couple years in Chicago, got out of the IT consulting arena, and in 2001 I actually came on vacation, not as a real estate professional, but just as a tourist, and managed to meet my wife on the second night that I was here. Yeah, so
- Great story.
- So she's Mexican, she was... She's relocated from Mexico city, a lot of people aren't from Cabo even if you're Mexican, and not unlike a lot of places in the US, like California, I hear that a lot, that a lot of people relocate to California, not originally from California, Cabo San Lucas is kind of like an extension of California for us in the States. We're south of the border, a thousand miles from San Diego, and so my first introduction was a vacation. It was spring break, 13 guys, two houses in the
- We won't ask too many questions about the trip itself.
- Yeah, so great time, met my wife here, did the long-distance relationship, 2004, December, moved down here. And it's been nearly 15 ago.
- Yeah. It's interesting, because a lot of people when they're going to a tropical destination vacation, right, you spend a week or two, and then you're sittin' there going, "You know what, I just don't wanna go home, I wanna stay here," and you've actually figured out a way to do it. And obviously you've been very successful with it, so congratulations, that's awesome.
- Yeah, it's definitely living the dream. My friends say it all the time. It is a lot of work, but I don't know. I mean I gotta be in Chicago for the snow, but I'm on the beach in the sunshine.
- Livin' the dream. Well it's funny because the inside joke in Cabo is everybody goes to Medano Beach, and you've got the bar restaurant called The Office, and so everybody takes the selfie, right, and says, "Oh, rough day at the office," right? But for you, you actually, that's your work environment. So it's just a lot of fun.
- Funny you say that. I was actually there this morning at The Office, having breakfast with clients.
- Were you really? Okay. Awesome view right there, Arco and everything else. Perfect spot. Okay, well, Nick, let's get started. I know that we're gonna cover a lot of information, we're gonna go through it pretty well in detail here, but maybe let's start off, you know the questions that we get is, what are some of the more popular communities in the area and what are some of those price points? So if you can take us in a little bit farther into some of those communities, and what can you get for the money, to find out if it's feasible for people.
- Okay, cool, so when I first came here in 2001, I actually rented a house in the Pedregal. Pedregal is kind of considered the Beverly Hills of Cabo San Lucas, cause it's perched up on the mountain, overlooking the Cabo San Lucas Bay Marina, and it is one of the oldest gated communities in all of Los Cabos. People rent their villas there, people are full-time residents in the Pedregal, so you can get in a condo there, let's say a two-bedroom condo starting under $300,000, and you can go up to an $11 million house that's currently for sale and going to auction in the Pedregal, that's an eight-bedroom home, 10,000 square feet plus, a mansion.
- Is that, by the way, is that Jace and Giani's place?
- It is, it is, yes.
- Okay, yeah I noticed that, that that went to auction yesterday and I think it's today and tomorrow, right? At three of the auctions.
- Correct.
- So it's interesting to see where that ends up.
- Yes, so $10.9 million, no reserve, we'll see what happens.
- Yeah.
- And then, you can back it off and get outside of the downtown Cabo San Lucas area and be in a community like, let's say the more affordable, but still really nice finishes, great community, great amenities, a community called Ventanas. And it's been an extremely successful development that has several phases in what we call the tourist corridor, that's the 20 miles in between our two cities. So, everyone knows Cabo San Lucas, the Arch, Medano Beach, our sister city is San Jose del Cabo, and San Jose del Cabo is actually where you fly into when you come into Cabo. And that space, that 20 miles in between the two cities is where a lot of our hotels, a lot of our beaches, a lot of our housing communities are located, Ventanas being one of them.
- Right, okay.
- And, so you can get a condo there, one-bedroom condo around $100,000, you can get a two-bedroom, a three-bedroom condo in the $2-300,000 price range, and you can also be... in a house starting in the mid-200s, going up to 600,000.
- So 600,000, and that's, what size house are we talking about for that?
- So the upper end in a community like Ventanas, you're probably looking at around 26, 2700 square feet, three to four bedrooms, three to four bathrooms, two-story, rooftop terrace, amazing ocean views, you have the Arch, downtown, city lights at night.
- And are these typically gated communities?
- Uh, yes. So these are gated communities with a clubhouse, community swimming pool, fitness center, depending on what phase you're in, it can have a spa, a restaurant, so it has a lot of amenities.
- Yeah, it really does. And so what does it look like as far as, since those communities have all of those amenities, what type of homeowner's association dues would you expect to pay either monthly or quarterly in addition to the price?
- Yeah, roughly speaking, it's about 200 bucks a month. It includes a lot, the clubhouse, the security, three times a week garbage removal, which is, blows my mind.
- There must be a lot of garbage being put out of the houses, right?
- Yeah, it's just different. I'm used to once a week, here in Mexico it's three times a week, in some communities it's every day.
- You get used to once a week, especially after the holidays, it's like piling up, and you're like, okay, you're setting the trash bags next to your dumpster because it's not gonna fit anymore, but three times a week, that's pretty good.
- Yeah, it's amazing, and all the clubhouse amenities and common area of maintenance, the roads and things like that, the lighting, so I find it very affordable, I live in a gated community, and it's fantastic. And for our clients that aren't here all the time, it gives them the security that a lot of us want in what we think can only be provided in a condo complex. But it can be provided also in a gated home complex, and then you get your own yard and more space, too.
- Yeah. Yeah, no that's great, that's really unique, and kind of going into that a little bit more, so a lot of the people that we talk to who are maybe moving out of California or considering some different areas, a large demographic of that are retirees, and so... down where you're at, I mean really everything is retirement-based, or could be retirement-based, I suppose, right? Because it's built around these amenities. Tell us about maybe some of the more popular spots that you're seeing, maybe along the corridor, especially some of those beautiful golf courses that you guys have down there.
- Yeah, so the two communities I mentioned already, the Pedregal, the Ventanas, those are definitely some of the two more requested communities of our clients, both from a perspective and purchasing, but other communities like Cabo del Sol, that's a great golf course community that's in the corridor, you're closer to the Cabo San Lucas side of town, just an eight-minute car drive into downtown Cabo San Lucas, but not very far from San Jose del Cabo, 15 minutes, and you have beautiful beaches, you're in a community that has over 1800 acres, three, well, currently there are two hotels on site, the Sheridan and Fiesta Americana, the Four Seasons is coming into town in that development, and the Park Hyatt.
- And I heard that Ritz-Carlton is also doing something there?
- Yeah, that's in the San Jose side of town, but the Ritz-Carlton, yep.
- Yeah. Oh, that's gonna be awesome. So we talked a little bit about... Some people might come down there and say, "My goal is to retire down there and be there full time." Others might say, "I'm interested in purchasing a property," however, maybe it's gonna be as a second home, so we might go down there a couple months out of the year, maybe AirBnB it or rent it out for the rest of the time. What are the visa requirements depending on how long your plan is to stay on the property or your ownership intention?
- Okay, so... Time requirements or?
- Well, let's say if my... What I'm looking to accomplish is to be able to move down there specifically, what type of visa do I need, and at what point do I just go down there, I buy a property but I'm not down there very often? What are those requirements and how are those different?
- Yeah, good question, so... most of our clients, they start, they come down on a tourist visa. And a tourist visa, people don't realize, but it's just a small little piece of paper that you get in the airplane or right before customs when you land in the airport here in Cabo.
- Yeah.
- You have to fill out your name and it'll ask you, "How many days will you be in Cabo?" And that's your tourist visa. That's something that they will stamp and then you have to hold onto that and return it to the check-in line when you get your boarding pass to leave Cabo.
- That's the thing, you're always coming back to the airport, you're scrambling, like, oh my gosh, where did I put that piece of paper?
- Exactly.
- I don't think a lot of people really realize that, yeah, you kinda have to keep that piece of paper to get back into the United States, right? And then you're like...
- Yeah, absolutely. Otherwise there's a fine you have to pay, it changes all the time, it's $50, $100, but that's your tourist visa. It can be issued up to 150 consecutive days that allows you to stay in Mexico and not have to leave.
- Okay.
- And so that's great, costs you nothing. And even some of our clients to this day own property, and they only have a tourist visa that they get at the airport every time they come into Mexico.
- Oh, I was just gonna ask you, so the people who are just coming down and they're staying in their property for a short period of time, what is it that, what are they doing with the property while they're not there? Is it sitting vacant, or are they trying to get some cash flow out of it, maybe renting it out short-term?
- We have a combination of all the above. So we have probably half of our clients that are not interested in renting, people using their condo or house, and then we have the other half that are really jumping on that bandwagon, the AirBnB kind of phenomenon, it's really in vogue and the cool thing to do, the whole DIY, a lot of the reality TV shows have given a lot of fuel to the AirBnB phenomenon that we see here. We hear it globally, and so half of our clients are interested in doing that, half of them are not.
- Okay.
- And so, very conservatively what we have found our clients are able to do, at least cover their holding costs by renting it out, but we have some clients that do a really good job, and they can make 10-15% return after expenses on their properties.
- Yeah, and I think for a lot of people maybe they're looking at the option, saying, "Do I do a time share type of a thing, or do I actually buy deeded property?" And then you can have a consultation with them, Nick, to say, "Okay, here's maybe a strategy we can put together to where if you wanna have something work, you have it available, at your disposal to use for a couple months out of the year, but here's how we can put together the income stream to at least break you even," Right?
- Yep.
- Seems like that's kind of a win-win, right, for a lot of people.
- Yeah, because you can then have a zero-cost property, except for the initial purchase price, and then you can have a paid vacation every time, any time you wanna use the property, and that's the majority of our clients are interested in that, but I would say in the last few years, more clients are only going to buy it if there's an ROI on the property.
- Got it. I wanna address a question that just came up, and to the folks that are watching this, please, if you have any questions, we're gonna try to cover as much information as we can, but... Nick, a question for you: "I have an existing condo already in Cabo, but I'm looking to upgrade to a larger condo or home. How is the process for selling in Mexico and re-buying?" Second question to that is, "do you sell property in the Campestre area?" I probably hacked that.
- Yeah, no, it's okay.
- Was I okay on that? All right.
- Yeah, you're good.
- "If yes, what's the range for a three-bedroom and the HOA?"
- Moving from the Bay Area to Cabo San Lucas
- Okay, so there's a few questions in there. So, if you already own a property in Cabo, a lot of our American clients, they're very accustomed to a 1031 exchange, rolling your profits into another property, that potentially could exist. So if, Paula, if you have a property that you bought at a good price and you would stand to make some money on it, you could do the, for the US government purposes on taxes, do a 1031 exchange. For Mexico, not so easy. You would have to have the property titled in a Mexican corporation to realize any tax-saving benefits, but the selling process is very similar to back home. You will hire a real estate agent, sign a listing agreement, get it listed, when it's sold, the money will be dispersed from escrow into the account that you choose, and we have clients that, actually my meeting today at The Office was a client just like what we're talking about, they'd sold a condo, and the money was held in escrow from the sale proceeds, and they're buying a new construction project, and the escrow company allowed them to just hold that money in escrow to move it to their purchase.
- That's great.
- And so, they don't have to send the money back up to the States and worry about more wire transfer fees, and so, Paula, it's definitely doable, we do it all the time for clients, this client this morning was, part of meeting them was for that purpose. Campestre, yes we do sell Campestre properties, lots, condos, and houses. So houses, we had a client buy a three-bedroom there just over a year ago, and it was in the high 300s, and the HOA fees, don't quote me on this, but it was somewhere, I think, around 300 a month. And that's gonna be kind of your entry-level, and then it goes up from there. You have houses there that will be over a million dollars.
- Awesome. Okay, Paula, thanks for your question, and Nick, like I said, you guys have some really good strategies, I know, to be able to perform some of those little bit more difficult transactions that may be kind of dependent on another thing happening, so that's great. Kinda leads into what I wanna talk about next is, what is the average days on market right now? Would you define it as a sellers market, a buyers market, is there even such a thing down there? Or, what does that look like?
- Yeah, so, people are just absolutely shocked to know that our average days on market in 2018 was over 400 days.
- Is that right? And is that kind of across all price ranges, or is that skewed more towards maybe the higher end and not the lower end?
- Okay, so definitely price-sensitive, the days on market, but also community-sensitive. So we have many micro-niches in our market, and so we have properties, with that being said, that we will list a property, and within a week it sells, or before it even gets to the market it sells. Those are definitely the five-percenters, but I would say that if you're a seller, your expectation, generally speaking, is, "I'm gonna have to wait a year before it sells."
- And so they're probably contacting you well ahead of time, based off of what their strategy is and when their end goal of wanting to be sold is, I would imagine.
- Yeah, and also what time of the season, or what season are we going to the market. So our seasons are a little flip-flopped from, I would say, the more traditional real estate market. When I was selling in Cabo, we tended to be busier during the spring/summer time, and when the weather was nicer. For us, our busy time is actually fall to spring, including the winter. And the summer time, typically, is our slower time, because it's hotter down here, and people are not wanting to get away from that cold winter in Calgary, Canada... and so they're enjoying their time back home during the summer and then coming down here and snow-birding.
- Yeah, I guess when you get into October and November, you're in the US, especially, maybe some of the colder reasons, you're thinking, "It's getting really cold, wow, wouldn't Cabo be nice?" "Let's call up Nick and take a trip down there and see," and so yeah, you're kinda like, you know, that's a great time to do it.
- Yeah, no, absolutely. We definitely see a peak in our business, like tour, property tours, in the wintertime and spring, so we're kind of coming off of our high season right now, we still stay extremely busy during the summer. The business just kind of shifts a little. So we're working with sellers in the summertime to get the properties ready for the fall.
- Got it. So let's talk a little bit more about, I think there might be a misconception that there's no financing available in Cabo, can you talk a little bit about that, how it works for maybe seller-financed opportunities, general financing, or do you really need to come in with cash?
- Yeah, so, for the longest time, Cabo was just a cash game, and in the early/mid-2000s, it changed, and there were several lenders lending money to foreigners to purchase in Cabo.
- Okay.
- Just like in the States with the economic meltdown, the banks contracted, they stopped lending in Mexico, and for the past, I would say, six years, we've had no bank financing, until just recently. We now have a company called Global Mortgage, and they will finance a foreigner, we just actually closed our first loan last week, and...
- Oh, so this is really recent.
- Yeah, really recent.
- Wow, okay. Timing's good on this then.
- Yeah, and the only thing is, people aren't super excited about the loan terms, but as we see Global Mortgage get more traction, I believe the terms are gonna get better, but right now, 50% down, 9.99% interest, and a 15-year loan, no pre-payment.
- Got it, okay. And then, what are some typical seller financing terms? How much do you have to put down, how long is the note for, rate, that sort of thing.
- What we typically see is 35-50% down with seller financing, an average of 6% interest, and a loan term no more than five years, but a loan amortization up to 30 years. So you'd have a feature after the five years.
- And what's the strategy for the purchaser in that situation, if they've got a five-year term on it? Is it to have paid off that loan within five years, or is it to do some other alternative financing for that?
- What I've seen with our buyers looking for seller financing, cause seller financing definitely is, you're gonna be able to negotiate seller financing terms better with a seller that's motivated to sell the property than a bank that says, "This is my criteria, here is what I have to do per my underwrited guidelines." And so the... seller financing buyers are... typically selling a business, they're nearing retirement, they're gonna get a big bonus from work, and... or they're gonna be able to start drawing on retirement funds... and so the three-five years, they can more easily, in their minds, say, "I can pay off that loan, or I'm gonna by then retire and sell my house in California, have more than enough to pay off the loan on the house in Cabo San Lucas."
- It gets them in there, gets them into the property, they have a strategy to be able to pay that off at some point, based off of some financial event or life event coming up, and it gets them some time spent down there, so that's great, win-win.
- Yeah, and then for the five years, like talking about that 50% of the time buyer, where they're wanting to rent it out, the cash flow is paying for the mortgage.
- Absolutely. So, let's talk a little bit about... I think there's a lot of confusion on this. When you buy a house or a property in Cabo, or in Mexico, period, do you actually own the house, do you own the land, or what do you own or not own?
- Yeah, that's a big misconception. People think it's leasehold property, the property actually is freehold. The, where it gets confusing is, as a foreigner, American or Canadian to Mexico, buying in Cabo San Lucas, you have to set up a real estate trust, and... It's really no different than back home, when I was selling real estate in Chicago, I had clients that had a living trust, family trust that they were buying real estate. And so, the... Generally speaking, the legal structure is such that a bank will be the trustee, they set up a legal entity, this trust, and you, as the buyer, homeowner, are the beneficiary of that trust. And the trust is set up for a 50-year term, and after that 50 years you can renew it, and you can renew those trust and perpetuity. There's no expiration of your ownership.
- Now how do you pronounce that? Cause I'm gonna...
- Kind of, it's Fideicomiso. Fideicomiso.
- Okay, okay. Awesome. And what's generally the cost to set something like that up?
- Okay, yeah, so if you're setting up a brand-new one, it's roughly $2,000 to set up. That will include your first-year maintenance fee and every year your maintenance fee on average is $500.
- So it's really, I mean, aside from the maintenance fee, it's not much different than the structure of what you're talking about, where you're setting up a trust here, your living trust, right, for your assets and other things that you put your own property in, so it's a very similar concept. So, Nick, as far as like people who, if I decide, okay, I've decided I'm gonna go move to Cabo, I'm gonna sell my house here in the Bay area, I've got a lot of furniture, I have a car, what do I take with me? Because obviously when we're talking about, you know, a move within the States, it's pretty simple, I mean you're gonna have a larger cost if you're taking more items that you didn't necessarily need, or that you might re-purchase when you get there. Obviously those costs could be a lot higher when you're taking it out of the country. So what do you see most people do as far as their furniture, cars, personal items, things like that?
- Okay, so, what I see, without a doubt, probably 90% of the time, our clients that are buying something here and relocating, or relocating at least half of the year, they're not bringing their stuff down. They're buying brand-new here, or the majority of our properties when they're sold on re-sale, they're sold furnished, and...
- Nice.
- The main reason why, is, it's typically a foreigner that owns it, an American or Canadian, and the furniture is set up for that house or condo. It just doesn't make sense.
- And they're clearly not gonna take it with them, to wherever their next destination is, right?
- Correct.
- Yeah.
- So... That was very odd for me coming from Chicago, it's like, you never saw properties sold furnished. And the flips on properties here in Cabo. So the majority are sold furnished, and so most of our owners don't have to furnish their properties, and so when they're thinking of relocating here, they're not having to ship their furniture and personal, you know, clothes and stuff like that, of course.
- Yeah, personal items.
- Exactly, and vehicles, kind of the same thing. I would say maybe 50-50, our clients are driving their vehicles down or shipping them down, and then you can still have a US plated car in Cabo San Lucas, no problem whatsoever. You just have to maintain those license plates current.
- Okay. So for the person who lives somewhere between, let's say, San Jose and Cabo San Lucas, does it financially make sense to even have a car down there if you have the taxi system and if you have Uber, compared to what the cost of maintaining your car, cause the roads are probably not the best, right, in some areas, so you're gonna have maybe higher maintenance costs, you're gonna have insurance, gas, things like that, so what do you see people do, what would be your recommendation?
- It really depends where you buy your property. So a lot of our clients that are buying in the downtown marina area, they don't need a car. In fact, parking is very scarce in those areas. So you might not even have a place to park your car if you have one. And so, and then you can walk everywhere. And then for the occasional Costo, Walmart-type visit, you just get a taxi or an Uber, and... by comparison, though, if you're in the corridor, you're not getting to necessarily downtown walking. So the clients that are in the communities like the Ventanas or Cabo del Sol that I mentioned earlier, you're gonna have your own car. Or cars, for that matter.
- And I think the goal is, for a lot of people who are moving to Cabo, they just wanna keep it simple, right? It's like, we're coming down here to enjoy beach life, to simplify, downsize, and so one less thing that's gonna provide stress is probably the better thing, right, to keep it real simple.
- Yeah, and what's really cool, I mean, we're in the Baja, off-roading is big, so the Baja 1000, so a lot of people get their ATVs or their Polaris RZRs, and they're completely street legal, and you can just cruise around town on one of those and then if you need to go off-roading, go on the beach, go up into the mountains, so a lot of our clients
- Do you have one of those, Nick?
- I don't because I wouldn't have time to use it, I'm working a lot, but I've contemplated, I actually had, for a period of the time, a golf cart getting around our community, and I just wasn't using it, so.
- Oh, you weren't using the golf cart either to get around the community, huh?
- No, I wasn't, no.
- But you kinda like, you felt cool while you were driving it around the community, but then you're thinkin, I don't really need, it's kinda pointless, right?
- Exactly. Just taking up space in the garage.
- Yeah, exactly. Kind of on that subject, let's talk a little bit more about recreation. Obviously, I mean, that's why people are going there, so many tourists, going there and people moving there. What are some of the really popular things that people are going there to do?
- You know, the two top things that have put Cabo on the map is golf, we have top golf courses, and also the fishing. And so, we have actually the largest fishing tournament in the world held every October called the Bisbee Black and Blue. And it's a multi-million-dollar fishing tournament and it really put Cabo on the map a couple decades ago when it got started, and it's just super popular. And so starting with those two sports, activities, fishing and golf, there's ATVs, there's surfing, kite-boarding is huge, windsurfing in the area that we call the East Cape in most for relays, they have an international tournament every year during the summer, and that's super huge. We also have skydiving, ziplining... bungee jumping.
- Pretty much everything, right?
- Boating.
- There's just, there's so much to do.
- Yeah. Anything around water or outdoor mountain biking, mountains, desert, people that like to horseback ride, we just had a client contact us last week, "Can I bring my two horses down to Cabo?"
- Okay, yeah.
- We actually have a real estate agent on our team, Laurie, that is a horse lover, owns horses, has been here for 20 plus years, so she's like our horse expert, right?
- Oh, that's great, yeah.
- And then, we have people that, big boaters, they'll get a boat and go sailing, my son was doing sailing classes this year, so that's, there's a lot of activity. Tennis is big, it's really a destination for tennis over the last four years, we have now an annual ATP tennis tournament every July and August... and a lot of international recognition from that.
- So what things are you involved in? Are you the one that's doing the kite surfing, or ziplining, or where do you fall into this whole thing?
- So I play tennis, I've done the golf, the surfing, I'm not a golfer, I'm not a surfer, but I've done all those things. I've skydived, but not in Cabo. I think once you get a little bit older, you get married and you have kids, you kinda assess things a little bit differently.
- It changes quickly, that's true.
- Oh, you know, like snorkeling, going to the beach with the family, scuba diving is big. We have Cabo Cuomo, which is a beautiful area, Jacques Cousteau considered Cabo and the surrounding area like the most beautiful area, the most bountiful in terms of sea life in the whole world, and so he spent a lot of time in and around this area when he was alive.
- Yeah. I mean it pretty much has everything to offer, I love it. You're making me wanna come down and take a trip, Nick. Let's talk a little bit about the taxes there. So how does it work as far as like property taxes, and then what are the sales tax rates on sales items?
- So our sales tax is 16%, we call that the IBA, and, or VAT, as some of you know, and our transfer tax when you purchase real estate is 2% when you purchase real estate. And that 2% acquisition tax is paid for by the buyer, and your annual taxes is ridiculously low. On average, it's one tenth of one percent of the property value. So...
- Relocating from the San Francisco to Cabo San Lucas
- One tenth of one percent?
- Yeah, so our half a million dollar property owner is paying 500 bucks a year in real estate taxes.
- That's incredible. How about insurance?
- So... If we're talking health insurance...
- Well, let's talk about, so let's say, to insure the property first.
- Okay, yeah. So we have insurance brokers that are both in the States and here in Mexico that can underwrite your house policy and contents, from what I've found, it's very comparable to what you'll find back home, and so... you have to be careful because if you're buying into a condominium you need to know, does the condominium complex provide the insurance for the building so I just have to do contents, for example.
- Right, just personal property policy, basically.
- Exactly, so that would be a lot more affordable than getting the actual structure itself. And then... Yeah, so that's housing insurance, very similar to back in the States.
- So you kind of alluded to the other type of insurance, and a lot of people, especially seniors or retirees or soon-to-be-retirees, one of their biggest concerns is healthcare, right? What kind of access to healthcare are we gonna have, and obviously that would be even more, a little bit complex maybe where you're at. What kind of providers and hospitals are in the area, and how does it work as far as having US-based insurance, or do you have to have different insurance, or how does that work?
- Yeah, so, when I first moved here it was a lot different than what it is now. And there's bigger hospitals now, more skilled surgeons and physicians, most of them are coming from mainland Mexico, big cities like Mexico City, Guadalajara, and what I have found, I actually just did a video segment on this a couple weeks ago with Dr. Mejino, who is... Like a knee and hip replacement doctor, he did his residency in Ohio, and so these are doctors that are from Mexico, they get their, do the residency in the States, and then they come down to Mexico where they're from, and start practicing at a fraction of the cost of what we would find back home. So I was amazed that you can do hip surgery for like a third of the cost that it's down in the States.
- And you've got some highly, highly trained physicians down there as well, right? So it's not what you'd think of. It's kinda the underground doctor that you're going to to get it done for half the price.
- Right, no. Very skilled and in fact, the medical tourism is growing by leaps and bounds. So it could be as simple as getting a root canal or getting cosmetic-type surgery to things like replacing your hip. And so... Yeah, I'll share that with you, Scott, later, we did a video, it's in the editing process right now, and we'll put that out on our YouTube channel and we can share with your viewers.
- Awesome. Okay, that would be great. I think that we've covered pretty much everything that I had. Again, if anybody who's watching this right now live, if you have any questions, let us know. Nick, is there something that maybe we didn't cover that you wanted to throw in there that's probably important for people to know?
- Yeah, one of the misconceptions that not only you can't own property in Cabo, which we've already discussed, but that it's really expensive to own property and live in Cabo San Lucas, people know Cabo San Lucas because the celebrities, the rich and famous vacation here, and although it's one of the most expensive places in all of Mexico to live, by comparison to most of the big metropolitan cities back home, the States and Canada, it's very inexpensive. And this is one example that just blew my mind. So when I was living in Chicago, I never had a maid, I did my own laundry, in the fifteen years that I've been living here, I have maybe done one load of laundry, I don't... I don't clean my own house, I don't do the dishes,
- Do you cook?
- We literally have a maid come eight hours a day, five and a half days a week.
- Okay, so what does that cost on average per week? You got me intrigued on this, so what's the average cost per week to have somebody come in and do that type of work?
- So, we're, and we, our family pays on the higher end, okay, so for a week we pay $150 a week.
- A hundred and fifty dollars a week to have all that taken care of.
- So they cook, they clean, they iron, they, if you have dogs, walk your dog, just, and someone just to be at the house, you know? If you have kids, they come home from school, and my wife and I both work, it's like a babysitter also. So it's really ingrained in the culture in Mexico, Mexico is a very warm, loving culture, very family-oriented, and that's some of the more simple things to life, where it's real fast-paced back home, that when you come out here, the blood pressure lowers, everything slows down.
- Right when you get off the plane, it's just like, ah. Right? Relax a little bit. You know, you brought up a good point, because you talked about, you have kids, for families who are thinking of moving there, because obviously there's a lot of people who can work remotely, whether in tech or in some other industry, so this is an option for them. For their kids who are maybe first to 12th grade, how does it work bringing kids down there who obviously don't know the language, don't really understand the culture very well, how hard is it to assimilate and what are the school options for the kids?
- Yeah, so we have, most of our schools, we have public schools but most of our foreign buyers that are moving down with family, with kids, they're putting their kids in a private school. So my kids go to a private school, bilingual, and so it's very... easy for the non-Spanish-speaking clients that are moving down here with their kids to assimilate into the culture, the schooling industry, and so it works out really, really well. It's not... Without its challenges, for sure, you're learning new language, a new culture, but, I mean, at least for adults, you don't have to speak Spanish to survive in Cabo. So many people speak English.
- Yeah. That's awesome, and you're, obviously, you're fluent in Spanish, I think you mentioned to me that you studied it through school, and once you live there, I'm sure, for a short period of time, it's pretty fast.
- Right. No, absolutely. So I... So, my question to you, Scott, when are you moving here? So the times, every time me and my wife go down there, and we're on, it's usually like a three-day, maybe four nights type of a thing, and by the end of the trip, it's like, okay, how do we stay here and not have to leave? Cause nobody wants to leave, right? But you've gotta get back to reality, so. I don't know, but Nick, we'll have to take this offline and we'll have to talk about it over breakfast at The Office sometime down there.
- Sounds good, at The Office. Okay, well I think that we've actually run, we said we were gonna be 45 minutes, Nick, we've nailed 45 minutes. On the dot. So, anyway, hey listen, I really appreciate you joining us, Nick, a lot of really great information, and we do have this recorded for anybody who's online who has... Oh, let's see here. Looks like we might have somebody who would like to message something, let's see if this works here. Oh, we got somebody who wanted to try to, who raised their hand, but it looks like with an older version of Zoom they're not able to use the voice feature on it. Anna, if you had a question, go ahead and just type it into the chat, and we should be able to take that and answer your question for you. But while we'll doing that, again, we'll have this recorded so if anybody who is on this recording wants to have a copy, we can certainly send you a copy if you wanted to share that with somebody else or kind of go through and watch it again.
- Moving to Cabo San Lucas
- If we have Actually, I'm noticing one of your viewers, Sheila, has a few questions, I can answer those real quick.
- If Sheila's on there, go ahead, pick it up, cause for some reason I'm not seeing it on my end, so please do.
- So Sheila, one of your questions is, "If you're living there two to four months, when it comes to restaurants, are you competing with tourists when it comes to prices in restaurants?" So a little secret here Sheila, there are a couple companies that, for example the Cabo Passport, where it's a group of restaurants and activity companies where you can get anywhere from 20-50% discount if you have this card, it costs 80 bucks, so if you're here for two to four months, it's well worth it to get that card, which is good for a whole year, and usually, in the first purchase, second purchase, it pays for itself. With that being said, also for us local residents to have a driver's license that can show that they're permanent or semi-permanent residents here, most of the restaurants give 20%, 10% discounts. You just ask your waiter, and what I have found, the majority of the restaurants do offer discounts. So that's one of your questions... The other question
- I think we had the, was there another question from her also?
- Yeah, "What about a Canadian citizen who may choose to purchase with Canadian dollars against US dollars?" So, our real estate market is in US dollars, weird as that might sound, being in Mexico, so our Canadian clients do have that exchange rate risk, cause they're converting from Canadian to US, and then unfortunately the Canadian dollar is like 70 cents to the US dollar right now, so really there is no other way, other than from time to time there will be a Canadian seller, and they would be interested in an offer in Canadian dollars, very rare. Very, very rare, and the reason why is our Canadian sellers wanna get the benefit of the US dollar when they sell.
- Right, the exchange rate right?
- Yeah, exactly. So it's very unrare. Just so you know, my hundreds of transactions I've done, never seen it happen. So it could happen, but very rare.
- Are you guys doing, actually we have the question from Anna, so Anna, thanks for posting this. "Wanna know if you sell an income property in the States, can you do a 1031 exchange to Cabo?" I love that question, that's a great question.
- So unfortunately, no. You cannot because it's not a light property exchange. The US IRS will look at that US property not like a Mexican property cause it's in a different country. With that being said, if you bought a Mexican property and sold it and then bought another Mexican property, yes. You could do a 1031 exchange.
- How about, are you seeing people buy it with their IRA?
- Yes.
- Do they have like, okay, so if you've got money saved up in an IRA, then how does that work to be able to make the purchase through your IRA? Let's say self-directed, or what does it have to be?
- Yeah, so it's a self-directed IRA, and you set up a US LLC that is the name of the custodian of that self-directed IRA, and the US LLC is the beneficiary of the real estate trust you set up here in Mexico. And so the IRS has strict guidelines on how that money is handled so that it's still, you still have that tax shelter, so you can't use the property for personal use, it has to be used as an investment, where it can get a little bit tricky is with a self-directed IRA you could do 50% of the purchase with the self-directed IRA funds and 50% from post-tax funds, so that's where it could be a little bit looked at, well, if I use that property 50% of the time, but the other 50% of the time I rent it out, that's where it can get a little bit gray, and we just defer to our client's consultant with the US account IRA.
- Yeah, so you wanna have obviously a set of CPA tax plan or maybe a wealth manager, everybody kind of involved to make sure the strategy's the right way to do it, but obviously you guys can get it done. Just, I have to ask. Cryptocurrency, is anybody buying houses with Bitcoin yet? Cause everybody talks about it and they want to, right?
- Not yet, not yet.
- It's not really happening here too much either. I mean, a little bit, but yeah, it's not common flux.
- Yeah, and typically Mexico, it trails the US market in what it's doing and what's happening by a year or two, so when it becomes more prevalent in the US, give it a couple years and then we might be able to start seeing it here in Mexico.
- Yeah, okay. Great, I don't see any more questions, do you see any over on your end, Nick? Wanna make sure that we've got everybody covered here.
- Sheila just had one more question.
- Yeah, go ahead, Sheila.
- "If you were to move down full-time, what is the legality of permanent residence for Canadian citizens?" So, if you move down full-time, permanent residency, good question, whether you're American or Canadian, I have an immigration attorney that can walk you through that whole process. Just to give you an idea, it'll take a month to two to go through that whole process, and about 700 US dollars. But not a problem whatsoever, a lot of our clients get a permanent resident visa. It's my recommendation when you buy property to go ahead and do that, cause then you can go ahead and also set up a Mexican bank account.
- That seems pretty quick, a month or two. For the whole process.
- Yes, yes.
- Wow, all right. Okay, I think that we might have hit the end. Again, if there's any questions if you're seeing this on a recorded version online, contact us directly, we'll get you in touch with Nick and his team down there. Again, they've got everything covered as far as buying to move or investing in real estate in Cabo, so you can reach us at info@leavingthebayarea.com, and Nick, again, this has been great. A lot of fantastic information, appreciate you taking the time to join us.
- You got it. It's been a lot of fun.
- Okay, awesome. All right, take care, everybody, thanks again.
- Bye.
- Okay, bye now.
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