Property Investment Case Study
Being in a pre-retirement age, a married couple from Minnesota decides to look into buying a second home somewhere south of the border so they could retire in a mild climate. They decide to purchase a 1800sq ft 2-bedroom beachfront condo for USD400 000.
Outline & approximation of associated costs*:
Condo Price: USD400,000
Number of bedrooms: 2
Parking lot: yes
Completely furnished for: USD15,000
Used car (year 2000): USD10,000
Becoming a legal owner:
Obtaining a title:
Title, legal fees, & taxes (incl. acquisition tax of 2.2%) - USD$17,728.60 (5% of price)
Fideicomiso:
Establishment cost incl. permit at the Foreign Affairs Ministry - USD$2440
Financing:
Optional plans:
- 30 years 20% down (30/20) – fixed interest rate 8.75%
- 30 years 30% down (30/30) – fixed interest rate 9.25%
- 20 years 30% down (20/30) – fixed interest rate 7.99% for first 4 years, the reminder 4.5% + Libor (max 12%)
Monthly payments:
- 30/20....………………USD$2517 30 years
- 30/30 ……………….. USD$2931 30years
- 20/30 ……………….. USD$2102 first 4 years, then flexible
*Property insurance is included in every loan in construction financing.
After purchase:
Insurance:
House contents (basic): Yearly premium - USD$194
Auto insurance (basic):
- Yearly full coverage - USD$260
- Yearly liability - USD$165
Medical insurance for both (basic package): Yearly premium USD$3,096
Rental income:
Based on location and condo & resort amenities; monthly rates are 85% of weekly rates;
High season: Mid-December to Easter
Average rental income/occupancy in %: Weekly income USD$750 - $1500/90%
Shoulder season: Easter – June & Mid-October – Mid-December
Average rental income/occupancy in %: Weekly income USD$750 - $1500/30%
Low season: July – Mid-October
Average rental income/occupancy in %: Weekly income USD$750 - $1500/5%
*All costs are indicative only and are subject to change (March 2007)