Should we buy or should we rent

One of the questions we keep mulling over is whether or not we should buy or rent when we move down permanent. I have heard from many people that we should rent for a least a year before any decisions are made. I would like to hear what you have done and why?

If you get to know the area you can make an informed decision about where to live. Most new arrivals are better off renting first, so they can learn their way around. We did a lot of research before moving here, including renting for a few weeks before making a decision on where to live. I think deciding WHERE you want to live is the first decision, then find a house. Don't fall in love with a house until you're sure you want to live in that neighborhood. We bought before we moved our stuff and have never regretted our decision.

Good advice David. We have been down 4 times now (soon to be 5). Each time we stay for a minimum of 4 weeks. We have been down in both spring and fall and have rented places in central Chapala, west Ajijic and San Juan Cosala (El Limon). Each place is so unique I can't even say what I prefer. For next spring we rented a place in downtown Ajijic. We usually rent a car for the whole month so getting around isn't a problem. Last March we drove around the lake and visited Foca Tonal (near Ocotlan), Mezcal and all the towns on the Southside. We have also been on roadtrips to Morelia, Patzcuaro, Paracho, Tequila and Manzinillo.

Rent first of course. Look to where you'd want to live, fracc or village, etc. Also money is a factor. Some people can't buy or can only buy in the ghetto so they have few choices.

Owning has its benefits, you are never forced to move, you can remodel as you like and or build but then you are also tied down and time to sell is long. Buy if you have the money, desire and find the area you love and the home you can't live without that is priced well for your circumstances.

I rented for a few months then bought my house. I rented in El Parque which is very nice and handy but not the type place I wanted to live in. It all depends on the amenities you want. I don't care about having a pool of fracc/association rules myself. I wanted an area where it is possible to walk to a couple restaurants or small markets but didn't want to be in the boonies. Didn't care about socializing with neighbors & didn't want the parking issues that can be a problem in a village such as Ajijic. Also didn't want the noise associated with it.

It all depends on what YOU need and your price. I don't care about resale since I'll be here until I die.

CanuckBob wrote:One of the questions we keep mulling over is whether or not we should buy or rent when we move down permanent. I have heard from many people that we should rent for a least a year before any decisions are made. I would like to hear what you have done and why?

My advice: Rent first and get acquainted with Lakeside.

PM me if you want to hear of my experience over the last four years.

Rent First. When we came down we bought a house. After a couple of weeks the neighbors starting having parties, the local grocery store started broadcasting his daily specials over a PA system at 6 in the morning. We were miserable. We bought another home and now can't get rid of the first home. That was 1 year ago. With this economy no telling how long it will take to sell.

RENT FIRST.
We didn't. We bought a house in San Miguel de Allende within our first month there. Big fat mistake for a number of good reasons, but we put it on the market just in time for the economy to crash. Got it rented out now, and bought in Ajijic Village.
Ajijic Village is one of those places where it's either going to be noisy or not, depending on which part of town and on which street you buy. If you are on the street with the bus traffic, you'll hate the endless noise.
If you don't get a place with OFF STREET PARKING, you'll have a world of grief.

We bought on a quiet street and we have off street parking. We are happy campers.

Bobby, I would definitely rent for a while.
I think buying is overrated. The lease is a strong contract in Mexico and is difficult to break.
Lease, and if something happens, like an earthquake and the floor separates, you can walk away. Own it and it's your problem.
Same thing if neighbors move in who have loud parties, or 6 barking dogs, or 4 screaming, bickering children... or all three. You can't move away if you own. A lease runs out, or if you helped write it, maybe there is an escape clause.
Lastly, who will inherit this house when you go to the Great Sandbox? Do your loved ones love Mexico too? You must have a Mexican will for your Mexican property which will go through probate in Mexico.
This is just a very short list. Ask lots of questions of lots of people on both sides of the argument. Have fun.

Just my take on it, Bobby
So please weigh all the pros and cons before you make your decision. Best of luck, Lizzy

Renting while you get to know the area is a good idea. We have friends who've rented for the last 5 years. We bought five years ago. His cash is in the stock market, mine is in our house. Whose went up? When you rent here you're responsible for everything. If the water heater blows, you pay for a new one. You want a new light fixture, you pay, same as owning. If you have both names on the deed you don't need a will and it doesn't go through probate. If you do rent be sure to get a legal translation of the contract. Read it before you sign.

Well, Lizzy gave me the incentive to relate a bit of my story that I didn't include in the PM.

After the first year of my lease I extended for another year, relatively happy with the place in Riberas del Pilar; so after the second year I extended for two more, even though I had expressed dissatisfaction with the so-called "gardeners" and was doing most of the gardening (weeding, pruning, mowing, planting, etc.) myself. They had been chopping up flowers that I set out, but letting the weeds grow all over the place; weed-whacking the grass down to the dirt; overlooking fungus in the fruit trees, "pruning" with no knowledge of what they were doing. I informed the "gardeners" that I would tell them what I wanted done and what portions of the yard I wanted them to leave to me. (For what were they being paid????? They don't know beans about gardening!)

After I was "locked in" for two more years, the next-door neighbor to the west was divorced and began to throw parties for his "bachelor" friends, over the weekend at irregular intervals!! The parties began at 6:00 pm and went to 5:00 or 6:00 am -- with stereos full-blast from automobiles on the street!!!!

Although the property next-door to the east had been vacant for years, a relative of the owner rented it in April of 2008 and made it into a holding-place for fighting cocks (which he was selling). If you aren't familiar with their behavior, they don't have set hours for crowing; it goes around the clock!!! They crow at all hours of the day, each challenging the other. Just try sleeping in that environment.

My wife and I decided to run fans (ventilators) during the night, to drown out the noise of neighbors on both sides. It worked for the roosters, but when the stereos from the other side were full-blast, NOTHING could drown that out, since it rattled the windows!

Finally, assessing the situation and alternatives, we did not renew the lease in September of this year, and instead moved to Tizapán -- south shore of the lake. Funny, but the roosters here are not so bothersome; but consider that they are not right next door.

And the windows don't rattle from all-night parties on weekends.

These are just some of the things you would be trapped with, if you bought without knowing the neighborhood beforehand.

David wrote:When you rent here you're responsible for everything. If the water heater blows, you pay for a new one.

David, I'm wondering if you meant what you wrote or got mixed up with what you were trying to say. I'm confused, because -- actually -- when I was renting in Riberas del Pilar, the water heater sprung a leak and was squirting water all over the laundry room. There was no way to turn off the water, so water continued to pour into the room while we waited for a repairman. The landlady paid for a new water heater and installation. She even took my advice to have a cut-off valve installed above the water heater so that the inflow could be shut down in case of any future problems. This valve was a blessing when it came time for me to flush the water heater of calcium deposits.

I guess it depends upon the wording of the contract -- but a renter shouldn't be responsible for permanent fixtures.

:face:

"Shouldn't" but it isn't standard here.

Our contract made us responsible for only the first $50.00 of any repairs and none of the structural repairs. (Of course, structural repairs were ignored, and nothing that needed repair in the house cost less than $50.00!!!) But a lot of the small repairs -- wiring, plumbing, etc. -- I did myself.

I don't know where the water heater fits in, but it didn't cost us anything.

YMMV.

@ David:
V qba'g xabj jung gung zrnaf!!!

Lehrer wrote:@ David:
V qba'g xabj jung gung zrnaf!!!

Oh, never mind! I did a Google search:
Your
Mileage
May
Vary

Clever!

I think in general you should rent first. We had done enough research and knew where we wanted to live so that when we saw the truly exceptional home we loved just where we wanted to live we decided to buy it. We haven't regretted it for a single moment, this is the best house we ever owned and we love every day in it.

Still, that approach was risky IMO even with our experience in RE ownership and investing. The rental market is moderately soft here now which should make renting easier. So you'll probably want to go that route first.

It is true that many rentals here make you resposible for stuff you'd never expect to have to pay for NOB so make sure your lease clearly spells this aspect out before you sign. Nothing worse than having all the hassles of home ownership with none of the benefits.

The only thing that might argue for buying sooner is that prices are soft right now. This RE market is not dependent on the U.S. but is instead propped up by many Canadian and affluent Mexican buyers and even a few Europeans. Having said that, it shouldn't change all that much in a year.

Concerns about buying a home at Lake Chapala

I read an article in the June 2012 issue of Judy King’s online magazine, Living at Lake Chapala, about the pitfalls of buying a home at Lake Chapala. It mentioned that that most houses there are on the market for 3 to 5 years.

According to another article from the September 2012 issue of the same publication:

Many asking prices have little to do with the replacement value of the home, and may actually be priced according to the price being asked for the house of a neighbor or friend. An old adage says that houses are worth what someone will pay...and that's exactly what is happening at Lake Chapala these days...not as many folks have been willing to pay.

It sounds like inflated asking prices are a major reason why so many houses are on the market for such a long time.

Since johninajijic aka joec has posted so many details about his own house, I’d like to use his house as an example. John says that he built it in 2001 for $197,000 on a lot that he bought for $81,000.

johninajijic wrote:These were my building costs broken down from my total cost of the house in the year 2001. I bought a house in the Los Arroyos Sur development from builder Job Hernandez. The land is approx 800 m2, cost $ 81,000. USD, but you pay for unobstructed view lots. The total house was $ 278,000. USD less $ 81,000 USD for the land = $ 197,000. USD for a 2800 sq ft house including a 450 sq ft casita unfinshed. That is I just had to add a small kitchen and appliances and add a bathroom vanity and closet for $ 2,500. USD. Figuring the house complete is $ 70.35 per sq ft.

CanuckBob wrote this about the cost of houses at Lake Chapala:

CanuckBob wrote:Today (in this market) it is worth about the same as they paid for it 10 years ago (maybe slightly more).

If what Bob wrote is correct, then John’s house today would be worth less than $300,000. Yet John first listed his home 16 months ago for $529,000. His asking price has gradually been coming down over the past year and is now $425,000, but that is still $147,000 more than its original cost.

If this example is typical of the houses that are for sale at Lake Chapala, it’s not very encouraging to a potential home buyer. Is it the norm for houses to be listed at unrealistically high prices?

I also have a question concerning the cost of home maintenance in the Lake Chapala area. I had assumed that home maintenance costs would be cheaper in Mexico than in the U.S. But then I saw this post that John wrote about the cost of maintaining a house at Lake Chapala:

johninajijic wrote:HERE'S THE KILLER: Repairs and Maintenance of a house.
Repairs, Maintenance and Misc: $ 58,221 pesos/year or $ 4,851 USD/year or $ 404. per month

You can pay Property Taxes on your house in the US with the repair costs here in Mexico.

REFERENCE: Monies spent on House Repairs and Maintenance by Year
2005------$ 43,515. pesos/year or $ 3,626. USD/year
2006------$ 37,402. pesos/year or $ 3,116. USD/year
2007------$ 19,268. pesos/year or $ 1,605. USD/year
2008------$ 10,327. pesos/year or $ 860. USD/year
2009------$ 43,260. pesos/year or $ 3,605. USD/year
2010------$ 58,221. pesos/year or $ 4,851. USD/year

Why would a relatively new house require such expensive repairs and maintenance? Is John’s house a worst case scenario, or do the rest of you homeowners have to pay that much for repairs and home maintenance? If so, why is home maintenance so expensive there?

Marishka wrote:Concerns about buying a home at Lake Chapala

I read an article in the June 2012 issue of Judy King’s online magazine, Living at Lake Chapala, about the pitfalls of buying a home at Lake Chapala. It mentioned that that most houses there are on the market for 3 to 5 years.

According to another article from the September 2012 issue of the same publication:

Many asking prices have little to do with the replacement value of the home, and may actually be priced according to the price being asked for the house of a neighbor or friend. An old adage says that houses are worth what someone will pay...and that's exactly what is happening at Lake Chapala these days...not as many folks have been willing to pay.

It sounds like inflated asking prices are a major reason why so many houses are on the market for such a long time.

Since johninajijic aka joec has posted so many details about his own house, I’d like to use his house as an example. John says that he built it in 2001 for $197,000 on a lot that he bought for $81,000.

johninajijic wrote:These were my building costs broken down from my total cost of the house in the year 2001. I bought a house in the Los Arroyos Sur development from builder Job Hernandez. The land is approx 800 m2, cost $ 81,000. USD, but you pay for unobstructed view lots. The total house was $ 278,000. USD less $ 81,000 USD for the land = $ 197,000. USD for a 2800 sq ft house including a 450 sq ft casita unfinshed. That is I just had to add a small kitchen and appliances and add a bathroom vanity and closet for $ 2,500. USD. Figuring the house complete is $ 70.35 per sq ft.

CanuckBob wrote this about the cost of houses at Lake Chapala:

CanuckBob wrote:Today (in this market) it is worth about the same as they paid for it 10 years ago (maybe slightly more).

If what Bob wrote is correct, then John’s house today would be worth less than $300,000. Yet John first listed his home 16 months ago for $529,000. His asking price has gradually been coming down over the past year and is now $425,000, but that is still $147,000 more than its original cost.

If this example is typical of the houses that are for sale at Lake Chapala, it’s not very encouraging to a potential home buyer. Is it the norm for houses to be listed at unrealistically high prices?

I also have a question concerning the cost of home maintenance in the Lake Chapala area. I had assumed that home maintenance costs would be cheaper in Mexico than in the U.S. But then I saw this post that John wrote about the cost of maintaining a house at Lake Chapala:

johninajijic wrote:HERE'S THE KILLER: Repairs and Maintenance of a house.
Repairs, Maintenance and Misc: $ 58,221 pesos/year or $ 4,851 USD/year or $ 404. per month

You can pay Property Taxes on your house in the US with the repair costs here in Mexico.

REFERENCE: Monies spent on House Repairs and Maintenance by Year
2005------$ 43,515. pesos/year or $ 3,626. USD/year
2006------$ 37,402. pesos/year or $ 3,116. USD/year
2007------$ 19,268. pesos/year or $ 1,605. USD/year
2008------$ 10,327. pesos/year or $ 860. USD/year
2009------$ 43,260. pesos/year or $ 3,605. USD/year
2010------$ 58,221. pesos/year or $ 4,851. USD/year

Why would a relatively new house require such expensive repairs and maintenance? Is John’s house a worst case scenario, or do the rest of you homeowners have to pay that much for repairs and home maintenance? If so, why is home maintenance so expensive there?

It isn't that high and maybe John should realize that advertising such a high maintenance cost could and probably is discouraging buyers.

We've been visiting the area since 2004 and have lived here for 2.5 years and know the real estate and rental markets well. My short answer to this question (which would never be published on TOB) is that renting is the only sensible choice, unless you have money to burn.

There's a 3-5 year inventory of houses on the market, new construction still going on, a clear transition to wealthy Mexicans rather than gringos as the dominant players in the local housing market, the area is still in play for the narco cartels, crime rates are high and the U.S. economy is still in the toilet.

What is the upside of owning? You are highly unlikely to experience any price appreciation in your lifetime, will have to take a small or huge "bath" to sell, and when and if the ^%$# does hit the fan with more serious crime you will be stuck. Rents as a percentage of property values are still high here but are slowly falling to realistic levels, and if you rent and need to leave - be it to another part of Mexico or NOB - you can do so in a matter of hours. I'm not picking on Lakeside here - I would say the same rule applies to living as an expat anywhere in the developing world, and for that matter most places in the U.S.

For peace of mind and flexibility renting makes more sense, and the older one is the more sense it makes, as capital tied up in a (stagnant or depreciating) asset is money that could be used to fund "bucket llst" adventures.

coffeeguy wrote:We've been visiting the area since 2004 and have lived here for 2.5 years and know the real estate and rental markets well. My short answer to this question (which would never be published on TOB) is that renting is the only sensible choice, unless you have money to burn.

There's a 3-5 year inventory of houses on the market, new construction still going on, a clear transition to wealthy Mexicans rather than gringos as the dominant players in the local housing market, the area is still in play for the narco cartels, crime rates are high and the U.S. economy is still in the toilet.

What is the upside of owning? You are highly unlikely to experience any price appreciation in your lifetime, will have to take a small or huge "bath" to sell, and when and if the ^%$# does hit the fan with more serious crime you will be stuck. Rents as a percentage of property values are still high here but are slowly falling to realistic levels, and if you rent and need to leave - be it to another part of Mexico or NOB - you can do so in a matter of hours. I'm not picking on Lakeside here - I would say the same rule applies to living as an expat anywhere in the developing world, and for that matter most places in the U.S.



For peace of mind and flexibility renting makes more sense, and the older one is the more sense it makes, as capital tied up in a (stagnant or depreciating) asset is money that could be used to fund "bucket llst" adventures.

Some of us don't live on your budget coffeeguy....and take a lot of pride in owning their home! When I factor in the low interest rates on savings, I find that after 7 years of owning and enjoying my home, vs renting, I will break even, +/- 10%. Your words of wisdom, fall on deaf ears for me! You sound like a person that can't afford home ownership, and "YOUR BUCKET LIST" Chose what you can afford! I am a happy camper, as most of us are that made the decision to locate here, and own our homes.....BTW, there is a nice Casita for rent in the safest Frac @ Lakeside.......Cheap!

I think you've made an assumption that may not be true Jim.
I happen to agree with Coffeeguy and we choose not to buy at this time in our lives. We have owned twice in Mexico and sold both homes at a profit...one after living in it for nine years and the other for six years. When you get close to not being sure of which side of the grass you're going to wake up on, there are other considerations that help form your decisions.
Mexico's rules regarding capital gains exemptions on a principal residence have changed for the worse IMHO....two years I could plan for...five? not a chance.
YMMV

Ferret....? YMMV....You make me vommit? Just tryin to understand the meaning? LOL Beyond that....own mine and happy......if I wake up on the wrong side of the grass....probably won't care and it won't be my problem! Coffeeguy should be posting on Mexconnect, certainly most of us have been here longer than he has. I consider his post self serving....

Coffee guy is welcome to his own opinions and predictions. Having lived here for nearly 8 years I think he's off-base on both. I own and have since 2005. IMHO my home is a good investment and now is a good time to buy. I never try to predict the future and certainly don't give any credence to newcomers who attempt to. 30 months here and he's predicting the future of the real estate market? Sheesh!