BUYING A HOUSE IN PUERTO ESCONDIDO

By Barbara Schaffer

Living in Puerto Escondido is heavenly, and owning your own house here is divine. Whether you buy a house or land to build on, your chances of being satisfied are greatly increased if you take your time and are well informed (ask lots of questions). There are no multiple listings in Mexico, so you may want to consult more than one realtor. A good realtor will help you through the buying process, including everything you need for closing.

Mi casa

As the proud owner of 353 square meters in Puerto, on which I built my dream house - within budget - I offer the following advice: know what you want. Do you want a swimming pool? A unit to rent out? A condo? There are so many options. I designed my house before I bought my property, so I knew what kind of property I wanted. Some people find the perfect property first and go from there.

Foreigners are not permitted, under the Mexican Constitution, to own land within 50 km of the coast. They are, however, allowed to set up a 50-year, renewable, bank trust (fideicomiso) which gives them all the rights and responsibilities of ownership. But bank trusts can only be made on private land; i.e. land that has a deed (escritura). In Mexico, what isn't designated as private land is communal. Large parts of Puerto Escondido, specifically parts that belong to Santa Mar'a Colotepec, are communal. Communal land can only be bought and sold by Mexicans; title on this land is through an Act of Possession. Thus it behooves the foreign buyer to make sure that the property has a deed. If not, it may be possible to buy it by forming a Mexican corporation.

If you are considering buying or selling real estate here, be advised that Oaxaca law changed in June. Now the property being sold must be assessed for tax purposes by a licensed assessor. In the past, it was common practice to understate the price of a property on the deed, so that the seller could avoid paying the full amount of the capital gains tax. (It's 28% for foreigners and 15% for Mexican nationals - unless the house was the primary residence of a Mexican citizen for at least five years, in which case there is no tax.) Under the new system, the assessed amount is closer to real market value.

House warming July 2007

If you are selling a property, you can deduct the cost of improvements - such as building a house or adding a pool - from your capital gains tax. Speaking of taxes, if you rent out some or all of your property, you must pay a 25% tax on your rental income with no deductions permitted. You need as accountant to get you through all this.

A little bit of history:
Back in 1970, when there were only a few thousand families living in Puerto, all the land from what is now the airport to the Hotel del Magisterio on Zicatela beach was expropriated by the federal government for the purpose of privatizing the property for tourist development. Over 1,500 hectares were affected, including what are now Bacocho, Rinconada and Carrazalillo to the west, parts of Lazaro Cárdenas to the north and Los Tamarindos to the east.

Jorge Guerra

However, for reasons much too murky and complicated to go into here, there was a land dispute between the counties of San Pedro Mixtepec and Santa María Colotopec over ownership and jurisdiction. The conflict has still not been resolved. This explains why one property in Lázaro Cárdenas, for example, may having a deed from Mixtepec and its neighbor an act of possession from Colotepec. On the other hand, the conflict has helped keep real estate prices relatively low, and it is probably the main reason that Puerto did not become a mega resort.

Sol de la Costa, December 2008