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Can In-House Financing Help Trigger the Next Baja Real Estate Boom?

Can In-House Financing Help Trigger the Next Baja Real Estate Boom?

California - With a slow housing market trending the real estate world and economic uncertainty glooming over millions, Baja real estate developers may yet attract buyers with purchasing plans very much within their affordable grasp.

The number of housing and condo developments in the Baja California coast increased significantly in these past years; as a result of the boom in constructions and the current market conditions opportunities are arising for the knowledgeable investor who can expect a significant return on the investment after the market has recovered, or the American retiree considering moving to Mexico.

Baja California has been attracting retirees for decades with its perfect weather, affordable beachfront housing and accessibility to U.S. services; in response to this the medical infrastructure has been updated with state-of-the-art hospitals covered by some US insurance companies; assisted living services have been created which combined with the continually increasing purchasing power of the dollar against the Mexican peso, have given these retirees not only a secure economic future but an upgrade on their lifestyle as well while extending their income by 3 years per each 10 of retirement funds.

The number for Americans living in Mexico was reported to have increased by 17 percent from 1990 to 2000 in regards to the previous decade; this number could very well double for this decade since the people looking to relocate to Mexico are not just baby boomers anymore, but people sent by businesses, families, some commuters who could not afford the rising real estate prices in California a few years back chose to live in Baja and work in the U.S.; others such as men and women in their thirties and forties looking for a slower pace of life have started their own companies and also settled here.

The Baja peninsula is currently estimated to have around 250,000 of American expatriates , with approximately 12 percent of them living along the Tijuana - Ensenada corridor and almost half of them choosing Rosarito Beach . For these people neither health concerns nor security issues are enough to drive them away from a place they have come to call home, instead they speak out against the negative publicity Baja has received expressing their likes of life in Baja.

Considering the above reasons of why acquiring Mexican real estate is an appealing option, the question is then, how come the Mexico real estate market and particularly the Baja California region which is one of regions leading the retirement trend are faced with a slow turn out in sales? The answer could be simple: financing. The slow down in the economy has significantly reduced the number and type of loans the financial institutions are issuing, including those who in previous years offered loans for investment in Baja real estate . With fewer institutions providing loans for these kinds of investments qualifying becomes more and more difficult, even serious buyers are sometimes turned down.

In response to this current situation some developers in Baja are starting to offer In-house financing, which alleviates the dependency of this real estate market on financial institutions by providing loans to buyers directly from the developers or the developments. Some of the advantages this type of loan gives buyers are the following:
  • It requires no property appraisal.
  • There is a higher possibility to of getting customized loan terms not provided by other lenders.
  • It is not a rigorous screening process, which makes it available to people with lower credit scores.
  • It identifies a financially sound seller.
Not all Mexico real estate developers or developments can offer in-house financing, since in order to provide it they need to have enough money to cover expenses and cash flow.

Kathy Katz has been a resident of Baja California for 18 years and a reputable broker specializing in Baja California Real Estate, with years of experience in this area she knows very well that a buyer must be careful and work closely with their realty company in figuring out who is offering the best options. These are the key things she mentions you must look for in an investment and their in-house financing options if available:
  • It is important that title is transferred into the buyers name and a lien placed on the property, much like in the US.
  • Ask about pre-payment penalties if any.
  • Make sure that when the all payments are made you have the developer sign off your lien in front of a Mexican notary.
  • It is important to get a statement of your closing cost.
  • Always ask for a certificate of No Liens
In house financing brings the possibility of more buyers coming in to the Baja real estate market; as more capable developers begin to offer this opportunity to buyers, the demand for beachfront property will continue to increase since it will not entirely depend on banks and other financial institutions for providing the buyer with funds to complete a housing transaction. With this, the chances of getting more for less money will steadily or rapidly decrease; as was the case with the previous boom that started early in the decade which had prices rising 10% to 15% per year.

The demand for coastal real estate in Baja California still exists, the lack of purchasing power brought about by the economy is one of the reasons for the slow market; when you make funds available for the prospect buyers and combine it with the current prices the possibility of a next boom is not so far fetched.