Foreign Nationals

Buying real estate in the U.S as a Mexican investor

By Milo

February 12, 2024 8 min read

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Buying real estate in the U.S as a Mexican investor

The U.S. continues to be the primary destination for foreign investment, with real estate being a significant sector attracting Mexican capital. In 2021, the U.S. welcomed US$156 billion in foreign direct investment, with Mexicans leading the charge in the real estate segment by 2022, investing US$2.9 billion, surpassing other Latin American nations. Multifamily properties, representing 25% of North American foreign investments, are particularly favored due to their income-generating potential.

Overview of Mexican investment into the U.S real estate market

Despite a decrease in the number of properties purchased by Mexicans in the U.S. from over 30,000 in 2010 to about 15,900 in 2023, the value of these investments remains substantial at approximately $4.2 billion in 2023. This indicates a continued interest and significant investment in the U.S. real estate market by Mexicans, albeit with a more focused approach to high-value transactions.

Florida, California, and Texas are the top U.S. destinations for foreign buyers, including Mexicans, reflecting the diverse U.S. investment opportunities. The NAR report also highlights that all-cash purchases are common among foreign buyers, with a notable portion of Mexican investors opting for this payment method, as they are not familiar with the financing options available or how these programs can be more beneficial to their long-term investment goals instead of an all-cash purchase.

At Milo, we specialize in guiding international investors through the intricacies of investing in U.S. real estate, particularly focusing on those who seek investment properties without planning to reside in the U.S. full-time. Understanding your residency status is the cornerstone of this journey. Mexican investors, whether on temporary visas or as permanent non-citizens, have distinct opportunities in the U.S. property market, largely influenced by their residency status. For international investors not intending to live in the U.S. full-time, investment properties and vacation homes become viable and attractive options, supported by Milo's expertise in financing such ventures.

With residency considerations in hand, our Mexican clients can explore a wide array of property types. The U.S. market is open to foreign nationals purchasing investment properties and second homes, with no federal ownership restrictions. Financing these investments typically requires a substantial down payment, often more than 30%, reflecting the commitment to a non-primary residence.

Prime locations such as Florida, New York, and Texas are particularly appealing, offering high rental demand and the potential for consistent passive income. Understanding your residency status and the type of property you are eligible to purchase is the first step. With this knowledge, selecting a location that meets your investment and lifestyle goals becomes significantly easier, ensuring a successful venture into the U.S. property market.

Exploring Non-QM Mortgage Programs for Mexican Investors

Non-QM mortgage programs present an attractive route for Mexicans eyeing the U.S. market, catering to the diverse financial backgrounds of international investors. These programs, including Income-Based and Rental Income-Based loans, offer flexibility and are tailored to the specific needs of foreign nationals, ensuring Mexicans can navigate the mortgage landscape effectively.

Income-Based/Full Doc Program The Income-Based Program is ideal for those with verifiable income streams and a solid financial standing. It scrutinizes income sources, from salaries to investment and rental incomes, assessing the ability to repay the loan. The Debt-to-Income Ratio (DTI) is critical, indicating financial health through the percentage of income dedicated to debt repayment. Assets and collateral, including additional properties and savings, are also evaluated, providing security beyond regular income. This program offers competitive rates within a 30-year mortgage framework, appealing to investors with robust financial profiles.

Rental Income-Based/DSCR Loan Tailored for properties with high income-generating potential, this program focuses on the property’s revenue capabilities. It examines the monthly rental income after expenses, assessing the property’s contribution to mortgage servicing. The Debt Service Coverage Ratio (DSCR) measures available cash flow for debt payments, with a DSCR over 1 indicating sufficient income to cover loan payments. Asset evaluation complements this assessment, ensuring a comprehensive financial overview. This option includes the stability of a 30-year mortgage, suited for those prioritizing property income.

Bridge Financing For investors with immediate financing needs, bridge loans provide short-term solutions. These loans use the property as collateral, emphasizing its value for loan support. A key component is the exit strategy, detailing repayment plans through property sale, long-term financing acquisition, or other methods. Bridge loans, given their specialized and temporary nature, may carry higher interest rates and typically span 1-2 years.

The Mortgage Process on a U.S. Property for Mexican Investors

The process of acquiring property in the U.S. for Mexican investors involves several key steps, from selecting the right lender to navigating the closing process. Recent trends show a preference for all-cash purchases among Mexicans, aligning with the overall trend of foreign buyers in the U.S. This approach, coupled with strategic market selection and tailored financing solutions, empowers Mexican investors to achieve their real estate objectives in the U.S.

Here’s a streamlined overview of the process once you’ve found a property and made an offer:

Research and select a lender: Start by identifying lenders experienced with international clients, focusing on those offering loan programs tailored to foreign investors. Milo, as a specialized direct lender, provides customized financing solutions for Canadians looking to invest in the U.S. market.

Loan processing and underwriting: Upon acceptance of your offer, your loan application moves into processing and underwriting. The lender reviews all documentation in detail to finalize the loan terms.

Appraisal and inspection: An appraisal is required to confirm the property’s value, while an inspection assesses its condition. These steps are crucial for ensuring the investment is sound.

Closing: The final step involves signing a multitude of legal documents to transfer ownership and finalize the loan. Closing costs, which include various fees, will be settled at this time. International investors may often complete this process remotely.

Streamlining U.S. property investment for Mexican investors

For international investors eyeing U.S. property investment, partnering with a specialized direct lender like Milo can significantly streamline the process. Milo's tailored financing solutions cater specifically to the unique needs of international investors, simplifying the journey from application to closing. By focusing on strategic property selection and leveraging expert guidance, Mexican investors can navigate the U.S. real estate market with confidence, unlocking opportunities for growth and diversification in their investment portfolios. With the right approach and resources, the dream of owning U.S. property is well within reach.

The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

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