Portfolio in Mexico

Lynette advises on whether to retain or sell a portfolio in Mexico

Lynette contributes to the Q&A Section of PW Global in March 2008, responding to an investor’s question: HOW SHOULD WE DECIDE WHETHER TO RETAIN OR SELL OUR PORTFOLIO IN MEXICO

First you should check out terms of the transfer to ensure you do not fall foul of any taxes, and employ a good local adviser. Do not underestimate the importance of the local notary (notario publico), who is appointed by the state governor and has the power to validate and certify documents. Take advice on tax residency as there is often confusion over who is eligible for tax exemptions.

Mexico is the world’s 13th largest economy and the eighth most popular tourist destination. It also has a chronic housing shortage, so there could be significant value increases. However, many remote locations are still not easily accessible, so check that the surrounding infrastructure is sound.

Make sure the properties are held through a valid trust structure if you are not a Mexican citizen and find out if the properties are in a protected zone – areas within 62 miles (100 km) of the frontier and 31 miles (50 km) from the coast where Mexico’s constitution bans direct foreign ownership.

It is crucial to investigate whether your company has adequate title insurance, in case you discover any associated liens. Under Mexican law, liens are transferred with the title deeds or when the property has previously been classified as ‘ejido’ – similar to common – land.

Check all the land taxes on the properties have been paid and make sure you are aware of any liabilities. In some parts of the country the bill may not be posted to you and you may need to go to a local property tax office to request it.

If you decide to hold on to the portfolio for investment reasons, check out any service charges and have them agreed in writing. As with any remote investment, find trusted local property managers who will report to you frequently.

If your company plans to sell all or part of your portfolio, be aware that local valuations depend more on prices per square metre of the land and construction costs. This is quite different to the UK.

[Source: propertyweek.com]