Tales of buying property south of the border

Ten years ago, Americans who wanted to buy a vacation or retirement home thought of places such as Florida, Arizona or Hawaii. Today, they’re just as likely to consider Mexico or Central America.

Last week, in the first part of this two-part series, I cited a number of reasons why more Americans are buying real estate abroad.

Mexico and Central America are attractive, especially for Californians, because they’re close and inexpensive.

Some countries are easing restrictions on foreigners owning property and actively courting North Americans.

Each year, International Living magazine rates the best places to retire based on costs, health care, safety, taxes and other factors.

This year, it named Mexico No. 1, citing its “perfect mix of centuries-old traditions and contemporary lifestyles.”

Panama, which had been No. 1 for six years, dropped to fourth place, mainly because of rising property prices and new visa restrictions.

Buying property in a developing country is not without risk. Many don’t have the same property rights and judicial system we do.

Americans who failed to do their due diligence have bought homes from people who didn’t have the right to sell them.

Corruption and bribery are not uncommon. Health care might not be up to U.S. standards. And the infrastructure we take for granted often doesn’t exist.

Americans buy oceanfront property “and then find out the roads are bad, there’s not a mall five minutes away. Right outside their beautiful complex is a lot of poverty,” says Margaret Hussey, supervising producer with “House Hunters International” on HGTV.

Here are stories about Northern Californians who bought property in Mexico and Panama.

On the cheap in Panama

Glenn and Reinhild Gamboa were planning to sell their restaurant, home and cabin near Yosemite in five to eight years and retire somewhere cheaper, perhaps India or Bulgaria. But when they visited Panama last year, they realized they could do it immediately.

Panama had everything they wanted – warm weather year-round, cheap real estate and low living costs. Because Panama’s currency is the U.S. dollar, there were no exchange-rate worries.

Finding a place, however, took some sleuthing. “There are no Realtors in Panama,” Glenn Gamboa says. “You go through a lawyer or go to the mayor of the village and ask what’s for sale.”

Driving around, the Gamboas found a half-acre lot with a river on two sides in El Valle de Anton, a village in an extinct volcano.

“We found a lawyer (in Panama). The lawyer called the owner, we got together, made an offer and settled. It took about four days,” Glenn Gamboa says.

They flew home and put their properties on the market. They all sold within 90 days.

The Gamboas paid $52,000 for the land and $90,000 to have a 3,400-square-foot cinderblock home constructed. Building in Panama takes patience and a certain inattention to detail. “They don’t think it’s important to have the tiles line up,” Glenn Gamboa says.

Americans in Panama have to get used to seeing guards with Uzis in storefronts, and the food “is pretty bad,” he says.

But for $430 a month, the Gamboas pay for a gardener; a maid; water; electricity; garbage; Internet; and life, homeowners and car insurance. They don’t have health insurance. If they have medical problems, they’ll pay out of pocket or, when they’re Medicare-eligible, return to the United States.

The Gamboas have opened a cooking school, which brings in about $1,000 a month.

Panama is “safe, clean and the people are generous, amazing,” Glenn Gamboa says. “I’ve been stopped five times (for traffic violations) by the police. But I’ve never gotten a ticket.”

Coastal Mexico

Bill Karr, an outdoor writer from Placerville (El Dorado County), has been visiting Mexico for 40 years. He had long thought about buying property on the Baja Peninsula but was worried about the restrictions on foreign ownership.

The Mexican Constitution prohibits foreigners from owning property within roughly 62 miles of its borders and 31 miles of its coastline.

In years past, Americans tried to get around those restrictions in various ways, such as buying property in a Mexican’s name, sometimes with disastrous results.

To encourage foreign investment, the Mexican government created a way for outsiders to own residential property in the restricted zone indirectly through a bank trust known as a fideicomiso. The bank holds title to the property but the buyer has all the rights associated with ownership.

The trust has lured more North Americans to Mexico, fueling a run-up in prices.

“Things were escalating in Los Cabos. I figured they’d be out of hand before too long,” Karr says.

So last year, he decided to look for a place in Los Barriles, a once-sleepy fishing community south of La Paz on the western shore of the Sea of Cortez.

He asked real estate agents whether there was anything under $200,000. They chuckled and sent him to a place listed at $275,000.

En route, he saw a house for sale by owner. Inside he found the owner, who had driven there from Florida with her 93-year-old mother. The owner was asking $200,000 but Karr snagged it for $165,000.

Even though it had no air conditioning and needed some work, “it was an absolute steal,” he says. It has three bedrooms and three baths in 1,600 square feet, and it’s a one-minute walk from beach.

Karr hired a local title agent to assist with the closing but handled escrow through a company in Denver that specializes in Mexican property.

“Don’t even attempt to handle this yourself,” Karr warns. “There are just so many different, intricate steps” involved in buying property south of the border.

Karr has a car and a boat in Mexico and visits about six times a year. His neighborhood, Spa Buena Vista, is mostly Americans. “I have Mike and Molly from Montana next door and Ed and Ella from Stockton across the street,” he says.

What attracts them? The cost of living, for one. “I could live there for $500 a month easily,” Karr says.

He pays $15 a week for a gardener, $15 for a half-day of housekeeping, $50 to $60 a month for electricity and $300 a year in property tax. He pays a neighbor $15 a month to pay his bills.

“If you shop like a Mexican, you can eat cheaply,” he says, although “the meat is very expensive and tough.”

Thanks to appreciation and improvements, the house is now worth about $300,000. Even so, “When you sit down and figure out the cost of a (vacation) house, you’re probably better off staying in a nice hotel and renting a cruiser,” Karr says. “But I love the tranquility, the feeling that I now own something outright, furnished the way I want in a beautiful place.”

Inland Mexico

In 2003, Annie Reutinger and Jay Clark sold their home in the Oakland hills and moved to San Miguel de Allende, an artsy, colonial town in central Mexico often compared to Santa Fe.

The couple rented for two months before buying a five-bedroom place in the center of town for $370,000 in cash. Because it was not in the restricted zone, they could own it outright.

Two years later, they sold it for $600,000 and put the money into a 4,000-square-foot house on a bigger lot 2 miles from town. Property tax is only $400 a year.

Shortly after moving to Mexico, Reutinger got the chance to buy a small business that rents properties owned primarily by North Americans to vacationers.

Getting a work permit was not easy. She had to hire a lawyer and prove she was not taking jobs from Mexicans.

Reutinger charges owners a commission of 16.5 percent to handle vacation renters only. Most owners hire a separate property manger to oversee upkeep at a cost of $100 a month.

Reutinger says she makes a six-figure income from the business.

There are a few downsides to living in Mexico. Heating costs tend to be high. (San Miguel is at 6,500 feet.)

“There’s a lot of bureaucracy,” she says, and “I miss family and friends. I love to go back and go shopping. I’m 5-foot-10, and it’s hard to find clothes here to fit me.”