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Escrow, tool for financial security

When an investor makes a decision to purchase property, one of the tools that is available to mitigate risks, and which is used in major developed markets, is the financial figure of the escrow account.

When a real estate transaction is said to be in escrow, this means that a negotiation has taken place between the purchaser and the seller. The parties involved have agreed on the terms and at least some earnest money has been deposited in an impartial third account that will hold the funds in custody until the conditions the parties have agreed upon have been fulfilled.

The escrow agent acts as a neutral third party to receive the required funds, from the initial deposit of earnest money to the different milestone payments to complete the transaction.

Escrow services are available in Mexico and have become widely accepted for use in the completion of thousands of transactions. Indeed, escrow has become a great tool for providing safe and secure financial transactions.

 

Here are some of the reasons why every investor should consider it:

For the protection of investment money

  • Escrow funds are held by an independent third party who will protect the money of the buyerand the seller by following the written instructions that they have provided.

To avoid potential misunderstandings

  • As the conditions for the release of funds are clearly written in the escrow instructions, there can be no room for misinterpretation regarding the conditions for payments.

For protection and reputation of realtor and agent

  • If a realtor recommends to clients that they use an escrow agent, this not only shows that the realtor is truly working with the best interests of the clients in mind but also demonstrates the realtor’s professionalism and credibility. Using an escrow agent also protects the realtor’s own interest as realtors get paid commissions directly by the escrow agents.

Above all – To ensure transparent transactions 

  • Both parties can have a clear financial statement regarding how the money is managed and disbursed. Every milestone is communicated when conditions are met, and it is clearly stated who pays when and to whom the money is released. All closing costs and third-party payments may be handled through escrow and the instructions will clearly state the details of such disbursements. This means that the entire process is transparent, which gives additional security to the investor.

 

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The consolidation of Puerto Cancun: 15 years afters its iniciation

ByYahaira Gavidia – RP Guide

Since the conceptualization of Cancun as an Integrally Planned Center (CIP Cancun in its Spanish-language acronym), Puerto Cancun has been considered an important part of the urban master plan for this tourism destination. The unique location of Puerto Cancun, connecting to downtown Cancun as well as the Hotel Zone, offers it a high urban impact. This is also a result of the fact that it has its own amenities, such as the shopping center, golf course, and residential and mixed-use areas. Certainly, it is a vital part of real estate development in Cancun.

After a great deal of studying and planning for the needs of a new generation, the urbanization of this mega-development began in December of 2013. Preserving 25% of the land originally earmarked for development as a natural reserve, Puerto Cancun offers greater verticality in building construction and it provides more green areas. It also generates less hotel rooms, since it was the local population that demanded more real estate development in a luxury community with everything nearby.

Today, fifteen years later, the building and commercialization of its properties by MIRA and third-party developers still continues. But it can already be appreciated that Puerto Cancun is a consolidated community where more than 6,000 inhabitants live and where first rate commercial and leisure services are offered.

For the first time, this allows residents to live on beachfront property while still being only a short distance from all the services of a city – in a safe place, with ample green areas, and even with their own marina and places for enjoying the outdoors. Without a doubt, Puerto Cancun is one of the greatest attractions for those of us who live in this city…being able to live the sea.   

At the same time, Puerto Cancun is also a driving force in tourism diversification since it has attracted high-end travelers to golf, boating, and luxury second residences. Recently Marina Town Center opened its doors in a space that has also become a gathering place for locals and visitors alike.

During the next decade, we will continue being witnesses to the development of more residences and commercial spaces in this community. Above all, we should keep our eye on the construction and opening of a commercial marina – the last of the great elements contemplated in the master plan. With that, we will see the complete consolidation of Puerto Cancun.

 

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A nautical community in the heart of Puerto Cancun

Marina Canal Homes is an integral community in the heart of Puerto Cancun, strategically located between the Hotel Zone and the downtown, a short distance from everywhere. Fifteen town homes in front of the marina provide all the advantages of living with the comforts and independence of a house, together with the possibility of enjoying luxury amenities in the safe environment of this housing complex.

Each residence is three floors and approximately 4,198 square feet of construction, with the possibility of having a private dock just outside the lot, and covered parking space for three cars. Its modern design based on the nautical cities of Europe comes in two different typologies alternating in an environment that is perfect for the enjoyment of life near the sea, with the option of three or four spacious rooms.

This development, especially designed for lovers of navigation, is located in front of the canal, with access to the main dock of the marina and direct access to the Caribbean Sea. It has 35 own docking positions to receive boats up to 45 feet in length.

The residents of Marina Canal Homes can also enjoy outdoor walks through the marina’s walkway, which connects all the way to the Beach Club, passing by Marina Town Center, this destination’s most chick shopping center, with more than 120 options in gastronomy, entertainment and shopping.

Luxury Amenities

An open terrace with recreational and swimming pools, bar, sundeck, outdoor multipurpose area, paddle tennis court, fully equipped gym, playground, and marina serves as meeting point and common area for residents. They will also have direct access to the ~1.3 miles pedestrian walkway in front of the marina, which will connect to the Marina District, once finished.

This area is shared with the 20-story Marina Condos tower: 112 luxury condos and four exclusive penthouses with spectacular views to the Caribbean Sea, the skyline of the hotel zone, the Nichupte Lagoon and the mangrove swamp.

Marina Condos & Canal Homes will be complete and ready this very 2018. There are units still available. Schedule an open house visit calling us at (998) 898-3306 and 07, or visit the sales room located on Blvd. Kukulcan km 1.5.

Los-Amigos-tulum

Los Amigos: At the forefront in sustainable development

Interview with Nicolai Wilmes, Los Amigos co-founder.

 

Nicolai Wilmes (Germany) and Marc Levy (United States) are two friends who met five years ago during a trip through Central America. Upon arriving in Mexico, they fell in love with Tulum, and so they decided to work together and establish Los Amigos to undertake a mission: to inspire people, providing high-level vacation experiences that follow avant-garde sustainability strategies. Today, with more than 10 properties in its portfolio, Los Amigos is the largest developer in Tulum. It has become a brand that undoubtedly leaves a green mark in this paradisal destination.

Nicolai tells us the history and vision of this young and promising company, which has managed to perfectly bring together two big goals many real estate investors have: sustainability and profitability.

Where does the idea of ​​developing high-luxury, self-sustaining residential complexes in Tulum come from?

In my country, Germany, most house roofs are covered with solar panels, although we don’t even have that much sun. So, the first time I came to Mexico and didn’t see any solar panels, I thought “how much potential!” because this dynamic country needs a lot of energy! This made me think of the huge opportunity to make a contribution with sustainable developments here. Tulum is a destination that stands out for its rich nature, and so sustainable development is key to keeping it that way. Remember that sustainable basically means that it is not done at the expense of the environment. Keeping this in mind, we try to inspire and show others how to do it [while] presenting technologies that are already available today. Knowing that we can make a contribution in that direction motivates us to get up every day.

Which renewable and self-sustaining technologies do you incorporate into your developments?

We are passionate about researching the latest technologies in renewable energy so that we can bring them to residential developments here in Tulum. For example, this year we will introduce here the most advanced wind system in the world: a system that comes from England, which produces 100% sustainable energy from wind. This will make us the first company in the history of Mexico to make use of this technology, a situation similar to the one we experienced two years ago with the SmartFlower Solar system. This technological solution is 40% more efficient than a traditional solar cell system since it synchronizes with the sun, turning around to capture the greatest amount of energy. Besides these two tools, we also have the technology—already available in Mexico—to make sustainable, non-chemical water treatment by means of bacteria, thus making a significant contribution to the environment. The latest innovation that we are incorporating, being the first company in Riviera Maya to do so, is transparent solar panels that allow light to pass through, but still produce intelligent energy. For example, we have a zero-emission gym, whose energy consumption is provided by a 25 kW solar system.

What is the most outstanding feature of The Panoramic Tulum?

The 360-degree infinity pool on the roof, the first of its kind in the world. Its design is inspired by the nature of the region, with water falling 12 meters toward an artificial cenote, where light reflections are spectacular. Work is almost done, and by the end of the year we will be able to deliver the units.

What is your favorite project and why?

My favorite project is always the upcoming one. We get very excited two years in advance, when we are designing the next project. Right now, we are working in Central Park Lagunas; when we sold more than 50 units in about a month, without even laying the first stone, we knew that many people understand our vision and agree with our philosophy.

What is the approximate return on investment in these developments?

Riviera Maya is a region that is booming, and the market of Tulum is so striking that our products, once the works are finished, are already sold. We offer people incredible opportunities to invest in the pre-sale stage, also taking advantage of the added value that can be generated in the construction stage. For example, in Central Park, owners made 40% annual returns on the added value. Plus, they can also rent their units in the vacation rental market in hotel modality, considering all the amenities they have: gym, spa, Sugarfree restaurant, and a beach club. These returns on investment are impossible to achieve anywhere else in Mexico.

How would the cancellation of the free trade agreement between Mexico and the United States affect the real estate sector in Tulum?

We are not worried about it as approximately 80% of our clients are Mexican. They are proud to invest in their country; they understand that Riviera Maya, and Tulum particularly, are peaking. Although people from abroad are usually interested in our projects, it is more difficult for them to invest because they have to find out how the trust works. Mexicans, on the other hand, are fast with their down payments.

That vision you had more than five years ago; is it a reality now, is it not yet achieved, or have you already gone beyond it?

We are the largest developer in Tulum. Last year we had revenue of 30 million USD. However, we feel that we are just starting, because we really think that we can reach the moon. Fact is, we are designing a project that has to do precisely with that. Let me just state that we are a very young and ambitious company, with a great vision for a Tulum that still has a lot of growth potential.

Business Tourism: an alternative with great economic spillover potential

On August 15, the 17th edition of the Expo Deconarq took place in the facilities of the now Cancun ICC (formerly the Cancun Convention Center). This event brings together up to 95 exhibitors of important products and services, linking the construction, workforce, maintenance, architecture and finishing markets, positioning itself as a benchmark for development and construction in Quintana Roo. In spite of still not being as big as other events taking place in Las Vegas, Mexico City or Guadalajara, Expo Deconarq does bring together a sample of great quality for our market, especially taking into account the qualities and value of the exhibitors, the influx and effectiveness of visitors, as well as the potential that this event represents today due to the way it has already paved for itself. Expo Deconarq is clearly shaping up to become a national-level event in the mid-term, with great possibilities of making the most out of the international market in the long term.

Quintana Roo betting on the Business Tourism market is of great importance, given its strategic location, the hotel infrastructure it has, and the significant economic impact that this type of tourism generates.

Business Tourism, also called MICE Tourism, represents important figures in cities such as Guadalajara, where it makes up to 30% of the income generated from tourism. During 2017, this city registered an economic spillover of 3,300 million MXN, meaning income from lodging of up to 1,000 million MXN.

In two of the most important expos in the city of Cancun, Exphotel and Deconarq, the spill per exhibitor exceeds 100,000 MXN in lodging, food, car rental, transportation services, freight and logistics, among other expenses. To estimate actual results, this same figure must be multiplied by at least two, for short and mid-term sales, and another one for the long term. These results may vary according to the type of product, its demand in the market and the luck of having made an important contact during the event.

Business Tourism is a multiplying factor for promotional efforts. In addition to economic spillover, it contributes by triggering general commercial activity, not only that of providers of tourist services. It also helps to regulate the seasonality of tourist demand, improving occupancy in low seasons.

It is for these reasons that the Consejo de Promoción Turística [Tourism Promotion Board], the state tourism trusts and, above all, the representatives of the state and municipal governments, must consider the importance of encouraging and boosting this effort made for Quintana Roo’s Business Tourism, both today and in the coming future.

Three Tourism Complexes To Be Promoted in this State

The Federal Ministry of Tourism announced the launching of three large-scale projects in Quintana Roo. The first one is Laguna Holbox, slated as a sustainable tourism development project covering 10,980 hectares with an estimated investment of 400 million dollars. The second is called Blue Lagoon, in Bacalar County, the purpose being to create a community for retirees and convalescents. To be established on a 236-hectare property, this residential real estate complex will offer senior and healthcare services with added leisure time activities; investment on this project is set to reach 360 million dollars. And finally, plans are in the making for an enormous aquarium to be called Mundo Marino, next to Chankanaab Park in Cozumel, which would require nearly 56 million dollars for construction of a multi-level building housing reef tanks and a commercial area.

Grupo Inmobilia in the Mexican Stock Exchange

Since last July 25, 2018, Grupo Inmobilia [Inmobilia Real Estate Group] is officially the first company in southwestern Mexico to place investment capital on the Mexican Stock Exchange (BMV). It has issued Development Capital Certificates (CKD’s) with a value of up to 6 billion pesos, set to generate investment project capital totaling 20 billion pesos. Inmobilia will place the instrument on the stock exchange in order to finance a portfolio of 28 new projects to be developed in the next few months. These projects are located in Merida, Cancun, Tulum, and Playa del Carmen; it also includes other cities expected to benefit from the government agency decentralization announced by the upcoming presidential administration, such as Tuxtla Gutierrez, Ciudad del Carmen, and Villahermosa.

Construction of Terminal 5 in the Cancun International Airport

Grupo Aeroportuario del Sureste (ASUR) [Southwest Mexico Airport Group] is set to begin construction of Terminal 5 in the Cancun International Airport. This terminal will have a capacity for receiving nine million passengers per year. ASUR seeks to accommodate the continual growth of passengers in the Cancun airport; it has shown a reported increase of 7% so far this year, making it the second busiest airport nationwide. According to what has been foreseen for the total Cancun airport investment planned by ASUR for this period, 995 million pesos will be invested in 2019, 2.25 billion in 2020, 1.27 billion in 2021, 971.1 million in 2022, and 391.4 million pesos in 2023.

 

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Tax Obligations in a Real Estate Transaction

In a real estate transaction where property ownership is transferred, it is important that the parties involved are aware of the obligations resulting from said legal act. Regardless of the nationality of the buyer or the seller, the following taxes must usually be paid:

Property Tax is continually levied on a real estate property or on possession thereof. It is directly related to the property value and is based on obtaining the best land use assessment of the property. This tax is paid by the owners or by the persons who have the right to use the property, regardless of their nationality; it is levied on a yearly basis and does not vary, unless there is an increase in property values.

With respect to the real estate market, Income Tax is levied on the earnings obtained from selling the property, provided it is not the taxpayer’s residence or, if so, provided it does not go over the maximum amount of 700,000 UDIS [investment units used as a protection against currency devaluation, updated daily according to National Consumer Price Index]; or unless acquisition of a property below the operating value, the appraisal value, or the tax assessment value, whichever the case may be, is greater than 10%.  In the case of Mexicans, after having determined the taxable earnings – whether the deductions allowed by the same law have been applied or not – the respective rate is applied to the income level accrued during the fiscal year. Foreigners, on the other hand, have two possibilities. The first is to apply a rate of 25% on the amount of the purchasing price. The second is to pay a rate of 30% on the taxable profit, whether the deductions expressly authorized by law have been validated or not, and provided the foreigner has a representative in Mexico and the sale was formalized in a public deed witnessed by a notary public.

Value-Added Tax directly taxes the purchase; the 16% rate is applied to Mexican nationals and foreigners alike. In real estate, value-added tax is applied directly on the value of the buildings whenever the type of land use indicates that the property is for non-residential use, i.e., for commercial or mixed use.

The Tax on Real Estate Acquisition is incurred due to acquisition of any real estate property, regardless of the nature for which it was acquired, provided it is not found within the exceptions the law establishes thereto. It is based on the operating value, the tax assessment value, or the value of the appraisal made by an expert who is authorized to perform this transaction. Anyone who acquires ownership of a property is subject to this tax, regardless of nationality. The applicable rate in Quintana Roo is 2%; however, for Benito Juarez County (Cancun), Puerto Morelos, and Cozumel, the rate is 3%.

The Additional Tax for Tourism Development, System for Integral Family Development, Social Development, and Cultural Promotion is incurred at a rate of 10% on the taxes the buyer must pay, which constitute the base. The persons subject to said tax are any entities that acquire ownership of a property in this state, specifically in Benito Juarez (Cancun), Puerto Morelos, and Cozumel. This tax makes no distinction whatsoever with regard to nationality.

In view of the types of taxes described above, it is always important to have a good understanding of your fiscal obligations whenever you intend to acquire ownership of a property or whenever the purchase is made. If you have any questions regarding your tax obligations, before undertaking the real estate transaction consult with the notary public who will be formalizing it – or anyone you trust or who has the needed knowledge – in order to clear up any doubts you may have.

 

Joint Mortgage Loan, your best option

Today it is not necessary to be married to be able to pool your income with that of another person and request more bank credit–you can invite your significant other, parents, or children to be co-borrowers in the mortgage process. This will increase your possibilities of obtaining said credit and the amount of the loan you can receive. This credit system is known as a “Joint Mortgage Loan”. You can obtain it through a bank, which will take into account your income and that of your co-borrower in order to determine the amount that can be loaned to you.

The requirements for taking out a Joint Mortgage Loan are basically the same as for an individual mortgage; however, in a joint mortgage, both persons requesting the loan must provide the required documents (which may vary from one bank to another, as every institution requests the documents they deem necessary). Also, if one of the two borrowers has problems with the Credit Bureau, this will have repercussions on the loan process.

In order to obtain the loan, both parties must sign the contract. The person contributing the most income will be recognized as the borrower, and the other will be the co-borrower. However, their status will be the same and they will have the same responsibilities and benefits. In this way, both are obligated to pay the loan as agreed and, when it has been paid off, both of them will be owners of the property in equal parts, regardless of who contributed more and who contributed less.

 

Insurance

Once you have obtained the loan, there are different factors that may put your equity at risk or affect your ability to pay it off. When you sign your contract, the institution offering the mortgage will stipulate the different insurance policies that must be covered during the life of the credit offering.

It should be remembered that the death of one of the borrowers is something that could occur. If that happens, the surviving borrower must immediately notify the credit institution and the insurer in order to proceed with processing the life insurance. As long as the loan is active, both parties will be covered by the life insurance. In case of the death of either of the borrowers, the insurance will fully pay off the remaining balance of the debt, provided the policy includes the spousal joint coverage plan.

 

To Take into Account

Remember to include the extra expenses involved in acquiring your mortgage loan, which are at the contracting party’s expense. These include:

  • Appraisal
  • Credit opening commission
  • Deed registration

 

And finally…

Don’t forget to consult with your broker, who will advise you and determine which plan has the best loan conditions based on the financial profile of both borrowers.

The Joint Mortgage Loan is an excellent option for purchasing a better house or apartment by pooling the incomes of both parties.

Tips

  • Do not change jobs while you are undergoing the loan approval process.
  • The house to be purchased may not be intestate and the seller may not have any legal impediment whatsoever for carrying out the sale.
  • Make sure the house is not in a danger zone and check that it has all utility services (water, drainage, electricity, and sidewalks).
  • Do not sign a sales contract or give any down payments until your loan has been authorized and you know how much they will loan you.

 

“Never depend on a single income. Make investment to create a second source.”

̶ Warren Buffet