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The Best Foreign Real Estate Market

The best foreign real estate market is an incredible opportunity that no one saw coming. A convergence of events that seemed impossible have resulted in this city rising out of the ashes to become the undisputed best foreign real estate market.

Please stick with me, because I have “some ‘splainin to do,” as Ricky Ricardo said.

As I said, this is an international real estate opportunity that no one say coming. If I’d published this article in January of 2017, I would have been laughed off the web. By January of 2018, it was an interesting but very high risk proposition… one I would have never recommended.  

And now, in January of 2019, this city is by far the best foreign real estate investment available. Demand is up 35% over the last year and prices are down! Two things that are not compatible, but are happening thanks to President Trump.

Ok, I’ve put it off as long as I could. The best foreign real estate market is Tijuana, Mexico.

WAIT, don’t click away yet!

I know this is hard to read, but TJ has become an insanely good opportunity for U.S. buyers. Here’s why:

First, President Trump has crushed (or finished off) the Mexican peso, pushing down prices for those paying in dollars.

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For years, the Peso sat around 12 to 14 to the dollar. Beginning in 2015, it began its race to the bottom. Then Trump came on the scene and the peso is hanging out between 20 and 22. It’s lost and 46.5% of it’s value since 2014 and 28% since Trump went on the attack.

And it doesn’t seem that Trump will relent on Mexico any time soon. Last week he caused Ford to pull a $1.6 billion investment in Mexico, moving the plant to the United States. Then he targeted Toyota, who will fall in line soon enough.

Mexico is panicking and I expect the pain to continue. As jobs and business return to the United States, the peso will continue to be hit hard. Some have predicted it will fall to 26.

None of this is meant as a political statement. I’m just pointing out that Mexico’s troubles are your opportunity. That Mexico is an amazing value proposition for those with dollars.

Pro Tip: Mexico is a great deal for those paying in US dollars. Not necessarily for those buying with a mortgage from a Mexican bank. Many bank loans are pegged to the dollar and interest rates are being adjusted upwards in 2018.

Second, demand for real estate in Tijuana is up 35% over the last year. Tijuana is the best foreign real estate market in 2018 because this level of demand can’t be found anywhere else in the world. Combine this with a currency in trouble and you have an incredible opportunity.

By May of 2018, demand was up by 20% over the previous 12 months. Since Trump, and the belief that the peso will remain under pressure, it’s jumped another 15%. 

Much of this demand is from Americans moving from San Diego, California to Tijuana. San Diego county has a population of over 3 million and some of the highest property values in the country. However, it’s median income is only $63,400 for a family of four.

Low wages and high home prices are causing San Diegans to look across the border for a better quality of life.

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The bottom line is that the average renter in San Diego can reduce her expenses by $1,000 or more each month by moving to Tijuana.

And, because of improved border crossings and the Sentri program, you can live in Tijuana and work in San Diego. A few years back, this was impossible because border wait times were hours long. Now, you can walk across in minutes or drive using the sentri line and never wait more than 30 minutes.

I rate Tijuana as the best foreign real estate market because prices are low, demand is high, and opportunities are plentiful. It’s a market with a major upside and long term potential. Because of it’s proximity to the United States, it’s uniquely positioned to cater to San Diego workers seeking lower costs and higher quality of life.

 

Is Tijuana Safe?

The number one comment I get is that Mexico in general, and Tijuana in particular, are dangerous. Our perception is that TJ is run by drug dealers who roam about killing and kidnapping willy nilly.

Take a read through Most Dangerous Cities in the Word. St. Louis, Baltimore, and Detroit are all rated as more dangerous than Tijuana, which comes in at #35. When this list is next updated, Chicago will probably beat them all. Living safely in Tijuana is about knowing your limitations. Of course there are parts of town you should avoid… as there are in all major cities.  If you stick expat friendly areas, you’ll be fine.

 

Banking in Tijuana

Hold your cash outside of Mexico. Most high net worth Mexicans I know keep a low profile. They don’t want bank tellers reporting how much money they have. Focus on privacy while in the country. I recommend a Panama company and bank account to hold your cash outside of Mexico.

Also, you can use your US retirement account to invest in Tijuana. You can either send funds into escrow directly from your IRA or move your entire account offshore. In either case, you won’t need hold any money in Mexico.

Likewise, you can use a local property manager. They will take in rental income and handle local payments. They can then transfer the net to you each quarter or at the end of the year. Again, the objective is to minimize banking activity in Mexico.

 

Get Residency Outside of Mexico

If you’re going to live and operate a business in Mexico, you’ll want to be a resident of another country. Mexico will attempt to tax your worldwide income if you spend more than 183 days a year in the country.

You can reduce the risk of the taxman looking for you by operating your business through a Panama corporation and being a legal resident of Panama. You can also setup a Panama foundation, which will act as an offshore trust providing asset protection and international estate planning.

I suggest Panama because this country won’t tax your business profits (unless you are selling to locals) and will give you residency even if you don’t live in the country. This combination of tax free and no physical presence requirement for residency make Panama unique.

The most efficient residency program in Panama is their Friendly Nations Visa which requires an investment of only $20,000. For more on this, see: Best Panama Residency by Investment Program

 

Conclusion

I understand that Tijuana has had a bad reputation for many years now. But, things are changing quickly. TJ has become a vibrant city with culture, food, craft beer (a big motivator for me), and great wine if you know where to look. This city offers the value investor a very high quality of life combined with proximity to the United States not available anywhere else in the world.

 

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