LA MISION, Mexico -- Every weekend, Carmen
Tetelboin joins the Baja boom.
After work on Fridays, the Los Angeles resident drives four hours across the
border to Baja California, where life is so good and living so cheap, it
beats the other California, she contends.
Owning a condo on the coast, she and her husband
are part of an American colony exploding during the past five years along 75
miles of pristine beaches, cliffs and towns south of Tijuana. What's drawing
them are oceanfront homes at a fraction of the multimillion-dollar prices on
the U.S. side.
A native of Chile who is bilingual and a U.S. citizen, Tetelboin jokingly
calls this swath of Americans "gringolandia."
"I never speak more English than when I'm in Mexico," said Tetelboin, 51, an
adviser to international students at UCLA.
Equivalent to a small city unto themselves, the Americans in Baja, who
number about 250,000 according to one unofficial estimate, have created a
curious twist on the U.S. immigration crisis bedeviling Congress and the
White House.
"We complain about Mexicans illegally crossing the border for a $6-an-hour
job ... in an attempt to take back the country, when in fact we're buying
Mexico one lot at a time," said Patrick Osio, 68, of Chula Vista, Calif., a
former consultant who leads conferences on Baja real estate.
Indeed, the high-rises and gated communities dotting the coast exude a
United States ambience, advertising in big English signs--"Beachfront
condos. Models open here"--with San Diego or U.S. toll-free phone numbers.
Even traffic signs on the coastal toll road are in English.
Prices are appealing
Last October, Christine McCusker and her husband, John, bought on first
sight a 2,800-square-foot house for $450,000 that's a one-minute walk to the
beach in the Punta Piedra development. In Southern California, such a house
would cost a few million dollars, she said.
"If I were to sit and think about a whole bunch of adjectives for Mexico, I
have to think of beautiful, warm, I love it," said McCusker, 61, who with
her husband and two daughters operates two private grade schools in
Temecula, Calif. "It's not for everybody, believe me, but they have to get
past that mentality of people on the street begging."
Mexico's Constitution forbids foreign ownership of land within 62 miles of
the border and 31 miles of the coast, but Americans have been able to get
around that ban thanks to the Mexican government's creation of real estate
trusts in recent decades.
Designed to encourage foreign investment, the 50-year trusts are an
agreement between a buyer, a Mexican bank and a seller. The bank trust holds
the land and lists the foreigner as the beneficiary; they're renewable for
an additional 50 years, after which they can be bequeathed.
But what's really ignited the Baja buying spree is money created by the
recent U.S. home refinancing binge, experts said. As they near retirement
age, Baby Boomers are leveraging cash from their homes and buying Baja
properties as second or permanent homes.
Driving the boom south of the border are U.S. title insurance companies and
U.S. mortgage companies, if the applicant has good credit, though many Baja
properties are bought with cash, experts said.
Former Baja California Gov. Ernesto Ruffo said the two Californias are
blending: "Actually, the region is one, economically speaking."
But rip-offs and risks abound, as they have since several Americans were
defrauded out of retirement homes in San Antonio Shores south of Tijuana in
the 1960s and later in 2000 when Mexican police evicted scores of American
retirees in Punta Banda, near Ensenada, following a title dispute.
There's also the matter of establishing and maintaining legal residency.
Cesar Romero, spokesman for the Mexican Consulate in Chicago, acknowledged
that many Americans live illegally in Mexico by not obtaining or letting
lapse the retiree visa, which must be renewed annually. But he could provide
no figure.
"I hear it's a very common practice," Romero said. "It's a problem there."
Crime remains a concern too, so American enclaves employ shotgun-toting
armed Mexican guards, who patrol the grounds at such places as Playa del Mar
Club Station, where Sandra Moffat, 58, lives year-round.
Formerly of San Diego, Moffat said she feels secure
in the condo she bought 3 1/2 years ago, joined by her cocker spaniel Cindy. But
panic-stricken U.S. friends often send her e-mails about Baja crime.
"I feel as safe here as in the States, and I have two hearing aids and I take
them out at night and I'm completely deaf," Moffat said.
Ignoring the perils
Potential perils haven't stopped boosters from holding seminars throughout
California on how to buy Baja property, including one at UCLA in September.
As an indicator of Baja activity, more than 16,000 condos, houses and lots are
for sale in present or planned projects, representing $4.1 billion, in the 75
miles between Tijuana and Ensenada, said Gustavo Torres of RE/MAX Baja Realty.
He estimates 250,000 Americans live in Baja, but experts say no reliable
official census figures exist.
Up to 80 percent of Baja sales are to Americans, mostly as second homes, and 10
percent of them are retired or living there permanently, said Nathan Moeder,
principal of the London Group Realty Advisors Inc. of San Diego.
So frenzied has been the buying that one real estate consultant, Tom Harkenrider,
sold a $250,000 condo at Residences at Playa Blanca
to a stranger next to him on a flight from Los Angeles to Cabo San Lucas last
year.
The buyer, Arvin Sarroca, 36, of Chino Hills, Calif., said he liked the cost and
the ability to rent out the condo when he can't visit it.
"I know there were problems," Sarroca, a day-spa owner, said of past real estate
controversies. "But now they have a bank trust and I feel a lot more comfortable
now. And the security title [company] is in the United States."
If there are any emerging downsides, it's that fast profits have diminished,
such as flipping properties for gains amounting to 30 percent a year, experts
say.
"The [profit] boom is over, but the market is strong," Moeder said.
Not everyone welcomes the newly arrived Americans, including some of the expats
who have been living in Baja for decades. The mass migration will raise prices,
they say.
"It's scary," said Maggi Wagner, 71, who moved to Rosarito 16 years ago. "A lot
of people buy sight unseen. ... They don't know what they are getting into. You
don't know the true ownership of the land. It gets tricky down here."
Many local Mexicans dislike how open beaches are now sealed off by the American
communities, said Juan Manuel Higuera, 22, whose family has owned a beachfront
house in Ensenada for 50 years and has rejected Americans' buyout offers.
"People say, `Oh, here's another new house, but it's the gringos,'" Higuera
said. A cigar store clerk, he added that American dollars have been good for
business, however.
- - -
Beware of pitfalls in buying across border
U.S. experts and Americans in Baja California warn of pitfalls in buying across
the border:
Real estate agents: Look for a Mexican agent who is a member of La Asociacion
Mexicana de Profesionales Inmobiliarios. Buyers can also use a U.S. broker/agent
with expertise in Mexico and a work visa.
Titles: Get a title search and title insurance.
Financing: Many buyers pay cash, but U.S. mortgage companies are providing loans
for 75 percent or more of purchase price under 15-, 20- and 30-year terms if you
have a good credit rating. But a second home in Mexico may not be eligible for
U.S. tax deductions.
Down payment: Place it in escrow if the home isn't built. Developers want to use
it for construction costs; avoid this.
Trusts: To buy land within 62 miles of the border and 31 miles of the coast,
Americans use a fideicomiso. The trust costs $400 to $500 a year, lasts 50 years
and is renewable. The beneficiary can sell the land or bequeath the land.
Common sense: Don't believe a Mexican seller when he or she cuts corners
because "we do business differently down here."
--Michael Martinez