The Appeal of an 'OTZ' Property in Mexico
 Stephen Slater - blucroix.com
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September 03, 2009
 |  | After searching OTZ for years, at final real estate decision time, as usual, we bought when we could walk in and say, 'this is the one.' |  | | |
During our search for a second home upon the soil of my wife’s native land, a realization struck us, as we visited a lovely home in Conchas Chinas (Puerta Vallarta.) The property was a dream on the hill, overlooking the ocean. We paused however, when we learned the neighbor to the left was from Phoenix and to the right, from San Francisco.
Combined with the tourist crush at the PV Airport, being bordered on both fronts by N. Americans inspired our quest to search "OTZ." I created the acronym OTZ, to simply describe those properties in México that are "Outside Tourist Zones." The primary tourist zones being Cabo San Lucas, Cancun, Puerto Vallarta, San Miguel Allende, Chapala (retirement), etc.
OTZ properties are not for everyone. They do however offer an opportunity to intimately become part of the heart and soul of México that is not quite as prevalent "WTZ," or "Within Tourist Zones." OTZ areas (which make up most of the country) offer properties that are typically designed, developed and sold to the domestic market. Architectural gems wait to be found. Contracts are frequently only in Spanish, multiple listing services (MLS) are prevalent but are also in Spanish and the Seller will rarely, if ever, be from Phoenix or San Francisco. For those from the north that prefer the path less traveled by, OTZ properties are worth the look.
After searching OTZ for years, at final real estate decision time, as usual, we bought when we could walk in and say, "this is the one." I have been in corporate real estate, working for a fortune 50 corporation and running my own consulting practice for 25 years. Every time we close on a property, we go through the same process, I do the research, I visit the sites, and I narrow to the "short list" and then bring in "La Doña," to make the final decision.
Generally, higher end OTZ markets can exhibit very different market dynamics than mass WTZ markets:
• Buy and hold mentality is more prevalent. Flipping is not as common.
• Short term developer speculation is less prevalent; buyers and sellers are typically stronger.
• In most cases, developers will have deeper pockets and are not as reliant on buyer deposits for cash flow.
• In accord with historical patterns, properties are more likely to be purchased with cash or on very short terms. Transactions and contracts can be simpler. Seller financing is often built into a transaction via interest added to short term payments. It is not uncommon to have interest free short term seller carry-back.
• High end USD priced properties in premier colonias will retain relative value in a recession; liquidity will lengthen before price will drop.
• Old school values such as reputation and family name are more apt to be involved, offering enhanced levels of confidence for buyers.
• Escrow and title insurance is not as prevalent; under the right circumstances and pending confidence levels, frequently, they are not as important to the transaction.
• US based or US originated residential real estate service providers (title, escrow, financing, realtors, etc.) are concentrated in WTZ’s, primarily due to market depth, efficiencies and the economies of scale they can achieve. Rest assured, excellent domestic bilingual professional representation is abundant and accessible in OTZ areas.
As a bicultural family, today our second home is in Zapopan, which is part of metropolitan Guadalajara. It is an OTZ property and we are very thankful to have made the choice we did. So much so, that I see our Los Angeles home rapidly transitioning towards becoming the second home.
Stephen Slater is CEO of Blu Croix Ltd. He has completed numerous transactions in México and Latin America and can be reached at s.slater(at)blucroix.com. |
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