How to Buy a Pre-Construction Condo?

Developments and Investors in Mexico

As more beachfront real estate is developed in Mexico, demand is increasing bringing a record number of investors and buyers to this capital gains market.

Some arrive with their financial knowledge that they have managed to obtain from their adequate and correct investments in other parts of the world, such as the real estate markets from Las Vegas.

Now, the most active real estate investors, with US markets slowing and correcting, are expanding their investments into new growth and rising markets.

Real Estate Investment in Mexico

In this new century with a more open global market community, international investment does not seem as adventurous as previous years, for many of the local real estate experts in the United States, Canada and the United Kingdom, the Costas of Mexico in real estate Roots are a logical superior choice.

Despite everything here in Mexico, the markets are not as developed as those of Canada, the United Kingdom or the United States. Since the same real estate regulations do not apply here in Mexico, as those of our countries of origin.

This is often seen by some as a glass half empty, although some see it as a glass half full.

With less regulation, there is more risk, but the potential is much greater when it comes to profit.

In these last 10 years, the pre-construction and commercialization of condos in Mexico has changed as more developers have appeared on the ocean fronts.

“It is worth mentioning that in the early years, local developers were the options available to the first pioneering international investors here in Mexico.“

As soon as regional developers and real estate agents began investing in raw land seeing signs that large numbers of international end-users were flocking to Playas de México

Today, we are working with large multinational developers who place their fingerprint signatures throughout Mexico.

“You, the investor, are in a very unique investment moment here in Mexico, as you can find a variety of pre-construction condominium options in Mexico.“

Preconstruction Condominium Traditional Reserve

As we have mentioned, local developers began to offer purchase options:

1. To reserve a specific unit $10,000 USD.
2. 30% – 50% of the total value of the condominium unit is paid to the developer with the signing of promissory contracts.
3. The buyer makes monthly payments to the developer during the construction period.
4. Up to 90% of the unit is paid with the physical delivery of the condominium in Mexico.
5. The remaining 10% is paid with the legal delivery of the condominium.

A New Payment Programs

Although the price could increase a few percentage points as larger developers had higher cash flows, which would be reflected in the final price of the unit, these payment schedules could include:

1. To reserve a unit $10,000 – $ 20,000 USD.
2. 30% – 40% of the total value of the condominium unit paid to the developer with the signing of the promissory contracts.
3. Payments made at construction milestones (complete first floor payment of 20%, windows doors inserted, 15% for example).
4. Up to 90% of the unit is paid with the physical delivery of the Condominium Mexico unit.
5. The remaining 10% is paid with the legal delivery of the condominium.

Thanks to the introduction of several American and European mega developers, their large investments have opened the market for us to more accessible payment programs.

But, as we will see little by little, risk controls cost money, and these end up being transferred to the price per square meter.

Multinational Developer Payment Programs

From the above payment programs we can find a notable financial difference in the amounts of payment plans and a variety of multinational developers with similar programs:

1. To reserve a unit $15,000 – $ 20,000 USD.
2. 30% of the total value of the condominium unit, which is paid to the developer and, sometimes, as escrow.
3. No payment is required during the construction period.
4. The missing 70% will be settled with the legal and physical delivery of the condominium.
5. Some developers at this point begin to offer in-house financing for 5 years or up to 20 years.

Some have immovable conditions, others are flexible in the negotiation

Things You Should Do When Buying a Pre-Construction Condo

The first thing is to make sure that the money in your reservation is refundable. You, as an investor, along with your Mexican real estate attorney, need a few days to study and analyze the proposed promissory contract. 

Most developers in Mexico offer 8-16 days to reserve a unit and will also offer the reservation check to be refundable 100%. 

Other developers, especially in a seller's market, encourage quick decisions and prefer to work with investors who have already qualified the region and the project during the pre-construction condo sales stage in Mexico.

“Such developers may not allow refunds“

The second thing is to try to negotiate the payment plan based on the stages of construction and the milestones of your progress. In Mexico, since most contracts describe payment plans according to dates, rather than progress.

The third thing is to find a good Real Estate Investment Team. Certainly Mexican law does not require you to be trained, educated or certified to sell real estate or your property in Mexico, but it is an excellent investment to legally guarantee and secure your assets through legal instruments effective for you.