Ask a Realtor...

Q: I just purchased a condominium in the marina. I want to retire here in four years, but until then, I will just be down for vacations.

What bills will I have and how can I take care of them?

What if I want to rent the unit when I am not here? Howard S. Denver

A: Typically as part of the closing process, the utilities will be changed over to your name.

If not, ask the previous owner to sign a letter authorizing this action and then register the change with the corresponding utility.

Your electric bill will come every second month, and your telephone and cable TV arrive monthly.

There is usually an option to “pre-pay” these bills if you will be away from PV for an extended period.

You should also open up a bank account here in PV.

In order to do this, you will probably need a copy of the deed you just signed (“escritura”), your photo ID and one of the bills we just talked about.

My advice is to find a bank where you can check your account and pay bills on-line.

An institution with some idea of customer service is recommended, so if you see the line headed out the door as you approach the bank, and only one teller on duty, this is not a good thing!

Gas and water are often included in your monthly condominium maintenance fee, ask your building administrator.

The maintenance fee is typically paid monthly (in advance), some associations pay quarterly or offer discounts for advance payment.

Your property taxes (“Predial”) need to be paid yearly at City Hall next to the main plaza downtown.

You will need to provide your Tax ID number or “Cuenta Catastral”.

Bring your bill from the previous year if you still have it, if not bring a copy of your escritura. Typically if you pay in January or February you receive a discount. You can also pay these online at: https://enlinea.puertovallarta.gob.mx/PredialEnLinea/Default.aspx

There is a checkbox in the top right hand corner where you can change the language to English.

You also need to check with your building administrator to see if there is an insurance policy in place against major damages.

You can also insure your contents. I recommend using a large well established company in the event you ever need to make a claim.

Also, please note that many policies are written in pesos, so make sure you take out enough insurance!

You will also need to pay your bank trust yearly. Typically this takes place on the anniversary of your closing with the first year paid in advance.

Again, do not expect the bank to send you a bill; it is your responsibility to make the payment, so mark your calendar!

Rental income is a great way to subsidize the above-mentioned payments. You may have been told that you can rent your condo here and receive the money in the U.S. (or Canada) and not pay taxes on it.

WRONG!!! It is completely legal to rent a property located in Mexico, but the income generated by this rental is taxable in Mexico!

The Mexican tax authority “Hacienda” is getting tougher each year and if you rent your property and do not declare taxes you are running the risk of having the tax authority put a lien on your property or worse.

So get yourself registered and declare your rental income.

Does all this sound like a lot of work and no fun? Of course it is!

That’s why they invented Property Managers! My advice is to ask around and find a good one and let them deal with all of the above and more.

here are many competent bilingual experts in town with access to specialists in law, accounting, cleaning and maintenance.

By renting your property an extra day per month, you can probably cover this cost. And when you come to PV on vacation, you can actually enjoy yourself!

Do you have a question about Real Estate in Puerto Vallarta? Just ask!
Active in local and national Real Estate boards; published author and acknowledged expert on Puerto Vallarta Real Estate, Michael Green moved here in 1997 to take advantage of the unsurpassed lifestyle PV offers. Mike can be reached at:
pvgetaways@hotmail.com

Ask a Realtor...

Q: I have been searching for a place here for a few years. I just found a great option; it has an ocean view, a big kitchen (I love to cook), nice terrace, elevator, second bedroom and allows pets! I would really like to buy it now, but my friend thinks I should wait for the price to go down. What should I do? Kim J. Toronto

A: Great question! After giving this careful consideration, I have come up with a magic formula that will tell you the exact time to buy, right down to the day!

There are clearly some good buying opportunities right now. Last year’s global economic crisis, large inventory of available properties, and security concerns, brought fear and uncertainty in the marketplace. Nobody wanted to be the one who “overpaid” for their home in paradise. My experience is that sale prices here in general have fallen approximately 25 percent.

We are seeing a lot of buyers return to the market, and Canadian buyers are out in force based on the strength of their Dollar.

February and March were very busy months. Fortunately, many sellers are still willing to negotiate in order to make a sale.

There are some factors unique to our area that has helped stabilize prices:

1. The vast majority of sellers do not have a mortgage on their property. Hence, they are not under tremendous pressure to make a mortgage payment. Many owners are retirees, already have their “nest egg” and are not concerned about an imminent job loss.

2. In the last couple of years mortgages have become readily available for new buyers. This increases their buying power and greatly increases the amount of potential home buyers.

3. The “baby boomer” generation is reaching retirement age and even with this current economic downturn, is the wealthiest generation ever.

4. Our area is still seen as an inexpensive haven in comparison to many other world class vacation and retirement destinations.
So that may be a bit of bad news for you now, but it will be good news when you are ready to sell. From your letter, it looks like you have several important criteria that you are looking for in your property.

If you were willing to settle for just any generic condominium, you could probably wait to see what happens, as I do not expect the market to turn around overnight.

However, if the property you are looking for must have several unique features, you should give serious consideration to purchasing if you find just what you are looking for.

I can tell you from experience that, there are active buyers looking in the market right now, (we had a multiple offer scenario last month) and your “dream home” could certainly be purchased by someone else.

Well, enough of this.

Let’s get down to the reason you have read this far, the “magic formula”. It is really quite simple; the exact day you should buy your dream home down here is: the day you decide to quit worrying about what everybody else thinks, (myself included) and invest here with a time horizon of at least the next 5 years!

Anything else will just lead to “analysis paralysis” and frankly, you are just better off renting.

The time to buy is when YOU decide the time is right.

So make your decision, and when the time is right, go out there and make the best deal you possibly can, quit stressing out about it, and enjoy your new home in the sun!

Do you have a question about Real Estate in Puerto Vallarta?
Just ask!

Active in local and national Real Estate boards; published author and acknowledged expert on Puerto Vallarta Real Estate, Michael Green moved here in 1997 to take advantage of the unsurpassed lifestyle PV offers. Mike can be reached at: pvgetaways@hotmail.com

Ask a Realtor

Q: I am trying to buy a fixer-upper house in downtown directly from the owner.

He says that it is standard practice here to give the seller a deposit in order to guarantee the sale and is asking for $10,000 USD. Is this safe? Joe, Pittsburgh

A: No way Jose! We have an old saying in our office, it is: “Don’t leave your brains at the border!” Now Joe, if you were going to buy a home in the steel city, would you give the owner cash before closing? Of course you wouldn’t. (Or at least I hope you wouldn’t.)

In the event your transaction does not close, it would be difficult, expensive and time consuming to recover your deposit.

For that reason, the standard practice here is to draft a formal contract of sale, which both buyer and seller will sign. This contract should state the agreed price and terms of the sale and stipulate that any deposits shall be made to a neutral third party escrow account established specifically for the transaction. There should also be provisions to return your deposit if the transaction does not close, as well as agreed upon penalties in the event one of the parties fails to comply with the terms of the contract.

There are several established financial institutions that are able to handle escrow accounts here, First American Title, Stewart Title and Monex are some of the most common.

Typically the buyer is responsible for the cost of the escrow (approximately $500 USD per transaction) but this is a small price to pay for the peace of mind that your money is in a safe place. These fiduciary institutions have the legal responsibility to guard your deposit and not release it unless both you and the seller agree in writing. In the event of a dispute, a judge would rule on final disbursement.

For new construction, it is common to give the developer a deposit with the sales contract and make progress payments as the building is being constructed.

For this reason, you want to make sure that the necessary plans and permits are in place and the developer has a sound business plan and proven track record.

You should also ask for a completion bond in order to guarantee your deposit, or insist that your deposits remain in an escrow account, only to be released upon certain pre-established stages of completion.

Please note that Spanish is the binding language in the sales contract, (with English translation often provided as a courtesy) so I strongly encourage you to enlist the expertise of a bilingual local Realtor who is a member of AMPI.

Joe, I hope you can see that the days of unprotected real estate investments in Puerto Vallarta are long gone, so “Don’t leave your brains at the border!”

Do you have a question about Real Estate in Puerto Vallarta? Just ask!
Active in local and national Real Estate boards; published author and acknowledged expert on Puerto Vallarta Real Estate, Michael Green moved here in 1997 to take advantage of the unsurpassed lifestyle PV offers. Mike can be reached at: pvgetaways@hotmail.com

Ask a Realtor

Q: I heard that the Capital Gain tax law exemption for foreigners has changed. Is this true?

George M. Flamingos Beach, Nuevo Vallarta

A: The law has not changed, but the interpretation and enforcement have. It is very important to remember that the intent of the exemption granted for Capital Gain tax on the sale of a primary residence is supposed to be just that; YOUR PRIMARY RESIDENCE!

That means you can’t have your primary residence in the US and exempt your capital gain tax there and do the same here in Mexico. The SAT (Servicio de Administración Tributaria), also known as “Hacienda”, is the federal tax collector.

They collect all federal taxes such as the ISR (Income or Capital Gains) tax, the IVA (Added Value) tax and the IDE (Tax on Cash Deposits).

Recently, the director of Hacienda has issued a memorandum stating: “The foreigner who does not have a valid immigrant status before the proper Mexican authority is assumed to NOT be a resident of the country and is subject to the capital gain tax.”

A valid immigrant status is considered an FM-2.

So tourist visas and FM-3’s are no longer acceptable as valid immigrant status for the purpose of proving your residence.

So if you DO NOT have an FM-2 visa, the sale of your property is considered VACATION OR SECOND HOME OR A RENTAL PROPERTY and no exemptions are permitted.

The tax on non-exempted transactions is 30% of the difference between the value declared in the deed (in pesos) and the value of the new sale, less allowable deductions or 20% of the entire amount of the transaction, whichever is less.

Therefore, when you buy your property in PV, you must insist upon having the full amount of the sale declared in the deed, in order to avoid overpaying taxes upon sale.

It is also vitally important to ask for a “factura” (official tax receipt) when doing any capital improvement on your property. In the event you have not done this, it is possible to have your property re-appraised by an authorized appraiser and this increased amount can be credited towards your tax basis.

So if you do not have an FM-2, be prepared to get one prior to the sale of your property, or be prepared to pay your Capital Gains Tax here in Mexico. Now some good news:

There is no “double-taxation” on the sale of your property here. So if you pay your Capital Gain tax here in Mexico, you will not be subject to another tax in the US and you can re-patriot the funds legally.

Please remember that your friends who may have avoided the Cap Gain tax here previously are STILL subject to audit here in Mexico (for up to five years) and Cap Gain Tax in the U.S.! So nobody gets off for free, legally.

The tax authorities in the U.S., Canada and Mexico work together and share information.

Every day there is more cooperation between the countries due to tax treaties.

It is no longer possible to own a property in one country, enjoy income from that property, and not report it in BOTH the country where the property is located, and the country where the owner lives.

Failure to comply means the owner is subject to double taxation and heavy penalties when the omission to file and declare is discovered.

So if you are considering selling your property here in PV, you should consult with a tax expert here and also your accountant in the US in order to determine the best way to file your taxes.

Here is something else to ponder; paying Capital Gains tax implies you have made a gain on the sale of your property.

Congratulations!

Would you rather have lost money, so you would not have to pay tax?

Do you have a question about Real Estate in Puerto Vallarta? Just ask!

Michael Green moved here in 1997 to take advantage of the unsurpassed lifestyle PV offers. Mike can be reached by e mail: pvgetaways@hotmail.com