Mexico Set to Become Latin America’s Standard for Creditworthiness

theyucatantimes.com

Mexico is close to rivaling Chile as a Latin American standard for creditworthiness due to the fact that, despite the insecurity and the domestic human rights crisis, more foreign investors are anticipatint that President Enrique Pena Nieto‘s administration will deliver on its promises of economic growth.

Their conviction stems from the constitutional changes pushed through by the 48-year-old president, from opening Mexico’s oil industry to private investment to spurring competition in a telecommunications industry dominated by billionaire Carlos Slim. Now, two decades after the country needed a $50 billion U.S.-led bailout to avoid defaulting, the cost to insure the nation’s debt against non-payment has tumbled. Credit-default swaps dropped below Chile, the region’s highest-rated sovereign, for the first time ever in June 2014.

“Mexico is truly a benchmark right now,” Gerardo Rodriguez, a former deputy finance minister and now a portfolio manager and investment strategist at BlackRock Inc., said in a telephone interview from San Francisco. “Mexico is probably right there at the top of a very small list of countries that have shown willingness to reform.”

Graphic: Bloomberg Visual Data

 

 

In his first two years in office, Pena Nieto pushed through the biggest economic overhaul since the North American Free Trade Agreement took effect in 1994. The government estimates that allowing companies including Exxon Corp. and Chevron Corp. to produce crude on their own for the first time since the 1930s will help lift annual growth to above 5 percent, a level not seen since 2010, by the end of Pena Nieto’s six-year term in 2018.

Default Swaps

The cost to protect Mexico’s debt with five-year default swaps has dropped 16 basis points, or 0.16 percentage point, since Pena Nieto took office on Dec. 1, 2012, to 86 basis points, data compiled by Bloomberg show. Similar contracts for Chile cost 76 basis points. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

The drop in Mexico’s bond risk during the first third of Pena Nieto’s term continues a trend from the end of Felipe Calderon’s presidency, when swaps tumbled from a record-high of 601 basis points amid the financial crisis in October 2008.

While Moody’s Investors Service raised the nation’s rating to an unprecedented A3 after the legal changes were passed, the country needs to generate faster growth and bolster confidence in the government before the nation will receive another boost, according to analyst Mauro Leos, who is based in Mexico City.

Latin America’s second-biggest economy is forecast to grow 2.5 percent this year, according to the median estimate of 28 analysts surveyed by Bloomberg, after expanding just 1.4 percent in 2013, about a third the pace of Chile. Moody’s rates the South American country three steps higher at Aa3, in line with Japan and Belgium.

Investors’ Perceptions

“We need tangible evidence of an improvement in terms of Mexico’s institutions, the legal framework, transparency, the rule of law,” Leos said in an interview on Sept. 10.

Alejandro Diaz de Leon, Mexico’s head of public debt, said macroeconomic policies that the government has had in place for many years combined with structural changes to the economy are helping boost investors’ perceptions of the country.

Mexico has “prudent management of public finances, monetary policy and appropriate regulation of financial markets,” he said in a Sept. 9 telephone interview.

Mexico’s drive to keep spending under control has its origins in the so-called Tequila Crisis of the mid-1990s. In 1994, U.S. interest-rate increases helped spark a peso devaluation that fueled capital flight. The recession the following year, when the economy contracted 6.2 percent, was among the worst since the 1930s. The government cut spending in 1996 as the economy returned to growth.

Pimco Investment

The nation’s gross debt as a percentage of gross domestic product will be 48 percent this year, compared with 67 percent for Brazil, Latin America’s biggest economy, and a 53 percent average for the region, according to projections from the International Monetary Fund.

Pena Nieto enacted bylaws to break Mexico’s seven-decade oil monopoly on Aug. 11, a legal change that he estimates will help bring in about $250 billion in extra foreign investment. He has called it the centerpiece of his presidency, winning debt-market advocates including BlackRock Chief Executive Officer Laurence D. Fink and Pacific Investment Management Co., the world’s largest bond manager.

“Mexico is a leader in the region, both in terms of the open architecture of its capital markets and its leadership in undertaking significant and positive structural reforms,” Michael Gomez, the head of Pimco’s emerging-markets portfolio management team, said in a Sept. 17 e-mail.

Story by: Ben Bain in Mexico City at bbain2@bloomberg.net; Eric Martin in Mexico City at emartin21@bloomberg.net


Editors: Brendan Walsh at bwalsh8@bloomberg.net; Andre Soliani at asoliani@bloomberg.net Boris Korby

Source: http://www.bloomberg.com/

Determining Offer Price for a Home

moneyinstructor.com

You know which house you want to buy and the seller's asking price.  What you don't know is how much you should offer.  Use the following suggestions to get a jump-start on coming up with that figure.

Research to Do
Do your homework before making a purchase offer even if you think you know market values in the area.

• Get a feel for the average asking prices of comparable houses by looking at advertisements. 
• Check on Realtor.com, a comprehensive real estate sites not associated with a specific brokerage. 
• Find out if the local Multiple Listing Service (MLS) allows some level of consumer access. 

Focus on properties with physical characteristics that most closely match those of the home you are buying, and remember that you are looking at asking price, not sales price.  As a consumer, you have more of a challenge finding detailed information about properties that have recently sold than real estate professionals do.  One possible approach that involves a bit of legwork is to watch for "Sold" signs in the area and then access public records for those properties.  An issue with this is timing.  Public record updates may not be completed in a manner that is timely enough to be useful in determining your price.

Online information may be more timely, but not necessarily more comprehensive depending on level of access.  For example, the web site domania.com has a free resource called Home Price Check.  It provides limited information without registration. Additional features are available if you register, but in doing so you agree to have your information forwarded to a network of real estate professionals.   Now, if you are already working with a real estate professional, he/she will handle pricing research for you.  Agents analyze listing and sales data for similar properties and provide you with a Comparative Market Analysis (CMA) that includes a price range.

Factors to Consider
A number of factors can impact a home's fair market value -- the price it will bring in an open competitive market.  You should consider such factors when deciding how much you will pay.  Examples include:

• Property condition.  Homes are either in excellent, average, or poor condition.   Think about that condition when you are calculating how much you are willing to pay.
• Time on market.  Look at how long the home has been for sale.  If the time on the market is short, sellers may be more reluctant to entertain low offers.
• Market type.  In a sellers' market, homes typically sell quickly and often attract multiple offers.  Sellers tend to look for offers near or even above the asking price.  On the contrary, if market conditions favor buyers, a seller may not immediately dismiss a lower offer.
• Seller motivation.  If a seller is in a distressed situation, such as quick relocation or financial difficulty, you might have more flexibility in price offered.
• Updates and upgrades.  Certain improvements actually increase the value of a home.  If the owners have made substantial value-enhancing updates or upgrades, take that into consideration when forming your offer price.

Your Bottom Line
When it is all said and done, you need to be comfortable with your offer price, financially and intellectually.  That comfort level is increased when you have done your research and made adjustments to the asking price based on influencing factors.  So do your homework, make your offer, be ready to negotiate, and decide ahead of time just how high or low you will go on price.

Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.

Oxxo's Store Debit Cards Are New Option for Mexicans

Amy Guthrie - Wall Street Journal
go to original
October 30, 2014

Over the past 10 months, Femsa has issued one million of its 'Saldazo' cards, for a rate of about 100,000 cards a month. The number of people actively using the cards is roughly two times the industry norm.

Mexico City, Mexico — Mexican convenience store operator Femsa reported on Tuesday that their new bank card appears to be a runaway success, opening another financial option for the many Mexicans who don't use banks.

Over the past 10 months, Monterrey-based Femsa has issued one million of its so-called "Saldazo" cards, for a rate of about 100,000 cards a month, Juan Fonseca, Femsa’s head of investor relations, told analysts during a conference call.

"This is the first banking relationship for most of the users of this product," said Mr. Fonseca, adding that the number of people actively using the cards is roughly two times the industry norm.

Every day, close to nine million people make a purchase at one of Femsa’s Oxxo stores, according to the company. It had 12,395 outlets across Mexico at the end of September, for a penetration in some areas on par with the convenience store market in the US.

Oxxo launched the Saldazo card in February together with the Mexican unit of Citigroup Inc. and Visa. It functions as a debit card that takes deposits of up to $7,000 Mexican pesos ($520) a month, allowing users to make purchases, withdrawals, and transfer prepaid airtime to their mobile phones.

Mr. Fonseca said the main benefit of the cards for Oxxo is to generate data, saying that the Saldazo cards don't generate a lot of fees. Once the retailer mines all the data, it hopes to use the information to tailor in-store promotions.

Attempts by some other Mexican retailers to migrate consumers to credit cards have largely received lukewarm responses.

Traditional bank accounts are also shunned by many, with the World Bank estimating that less than 30% of adults in Mexico having a bank account, compared to 56% in Brazil.

Original Story

Can You Compromise? Tips For Couples on When to Rent vs. Buy

realtor.com

By: Angela Colley 

 

 Many people dream of homeownership. But a purchase becomes complicated when you and your partner aren’t of the same mind when it comes time to buy.

If you’re ready to buy, but your partner wants to keep renting, you’ll have to reach a compromise that’s best for both of you. To get there, make sure you consider every angle on whether to rent or buy.

Talk it out

Before you plan your future, sit down and discuss your reasons for wanting to buy a house, as well as your partner’s reasons for wanting to rent. Here are a few questions to spark the conversation:

• What are the perks of home ownership?
• What style and size of home do you want?
• Do you want to relocate or stay in the area?
• What benefits does your partner see in renting?
• What lifestyle changes may occur if you keep renting?
• Will a home purchase alter your lifestyle in a negative or positive way?

Knowing what your partner is thinking and feeling about the big decision benefits you both and can help you reach a compromise on this rent or buy dilemma.

What’s ahead?

Buying a home is a huge commitment. You may have to live in your first home for several years while you build up equity. If you buy before you’re ready and wind up needing to move, you may take a loss when you sell.

To know if you’re ready, consider what lies ahead for you and your partner in the next five to 10 years. For example, if your jobs are stable and you like your area, buying may make sense. However, if your partner may have to transfer for work in the near future, it may make more sense to remain a renter.

Future family planning will also help you decide. If you plan to have children soon, you’ll need a house with enough bedrooms to accommodate everyone. If you want to add pets to your family, you may need a home with a large backyard.

Are you ready?

Buying a house is a large financial commitment and your partner may be hesitating because of financial concerns. Knowing where you both stand financially can help you reach a compromise. Keep your finances in mind as you prepare the following information:

• Your credit histories – Order a copy of your credit reports and scores. These numbers are crucial when you apply for a mortgage.
• Your income – You’ll need stable income. If you’ve recently lost your job or your partner recently made a career switch, renting may make more sense.
• Your combined savings – To avoid private mortgage insurance, you’ll need to put at least 20 percent down on your home.
• Your budget – Homeownership comes with a host of repair and upkeep costs renters don’t typically face. To be prepared, you’ll both need a rock solid monthly budget.

To rent or buy, that is the question. But considering these tips before you decide can make a big difference in how the decision ends up.

Your Primer for Buying Condos, Co-ops and Duplexes

realtor.com
By: Anne Miller

So much real estate information focuses on the single-family home, but that’s not the only option for many buyers.

Not all apartments are created—or their buildings governed—equally, however.

This is what you need to know about condominiums, co-operative housing and duplexes.

Condos

Just like a single-family home, a condo owner runs his or her domain. A condo owner has a deed for the apartment, pays real estate taxes for the unit, and can rent out their unit if they wish.

Maintenance is a different story. Condo owners pay fees to keep up the grounds and the building (or buildings, for a larger complex). On one hand, you don’t have to mow the lawn every week. On the other, you help pay for someone who does. Fees can vary greatly depending on the building, the lands, and how well those in charge of the finances run the place.

A condo can be a good option for retirees or a disabled person who can’t manage a whole house. The relatively quick approval process for buying some condos makes it good option for young home buyers. If you’re interested in lots of personal space surrounding your home … well, you’ll share walls with neighbors.

In order to determine the market value of the condo, check the sales prices of condos of similar size, age, location—and those that have similar maintenance fees.

Also engage in due diligence when it comes to the finances. You don’t want to move in only to find the building needs multimillion-dollar fixes—and now you have to help pay for that.

Co-ops

A co-op is a non-profit company that owns and operates a residential complex. Buyers lease one of the building’s units by buying shares of stock in the building’s corporation.

Buyers have to go through a complex approval process, don’t own their apartment and don’t have ultimate control over to whom they can rent, sublet, or sell their property. If renting, you may have to present your potential tenants to the board for approval.

Mortgage or tax bills aren’t sent to the co-op shareholders but to the corporation. A monthly co-op fee includes the mortgage payments, taxes, maintenance and utilities. This cost is usually higher than condo fees. And they often require a larger downpayment than other options—but also often cost less overall.

There are financial advantages of co-op living—including substantial breaks on real estate taxes, transfer taxes and a recordation tax that occurs in real estate transactions. According to bankrate.com, co-op owners can deduct the maintenance fees from their taxes.

Duplexes

A duplex can refer to a residential unit attached to another, with a small yard to maintain. In some areas, like New York City, a duplex describes an apartment with two floors, in any kind of building.

(This is a prime example of doing your homework to make sure you understand differences in local real estate nomenclature.)

If you’re not ready to purchase a single-family home, a duplex or townhouse can be an accessible option. You could purchase a two-family house and rent out the second unit, subsidizing your own housing costs with a real estate investment. Depending on location, you may be able to qualify for publicly-funded home improvement costs.

If you decide to move out, you can simply rent it out. Your rented duplex will then be 100% rental property, while your expenditures on it are tax deductible.

Keep in mind, though, that your on-site living arrangements won’t offer you as much privacy as a single-family home. And you’ll have to learn how to play landlord—you’re responsible for not only your backed-up toilet but your tenant’s as well.

Other duplexes, especially in big cities, may allow for two families to each own in one small building. Splitting costs can get tricky. But you may get more space than you would in a condo, without the cost of a full house on your own.

Moving forward

Before you decide which is the best option for you, consider these basic questions:

• How important is privacy?
• Is owning your own property a priority?
• Do you need professional maintenance help?
• Do you have less-than-perfect credit which could adversely affect an easy approval process?
• Would you like the option of being able to rent, sublet, or sell the unit to whomever you choose?

Research all your options to gain a better idea about which type of housing solution is best for you.

Educate yourself as much as possible while seeking the advice of a professional real estate agent who can help you.

With knowledge, patience and determination, you’re bound to find the right home.

Updated from an earlier version by Mortgagematch.com staff.

Buying an ‘investment grade’ property – Part Two

advice.realestateview.com.au

The property market is constantly evolving and just like everything in this world, it has its fair share of ups and downs. Given that only 10% of properties in Melbourne can be viewed as good investments, it can be difficult to choose one that will generate positive returns for you in the future.

However, the whole process doesn’t have to be hard work or stressful. If you do your homework, purchase within your budget and get some handy advice along the way, you’ll be in a strong position to secure a financially rewarding property that will set you on the path to greater wealth.

Check out the following guidelines to help make buying your next ‘Investment Grade’ property a little easier.

1. Property size

It’s important to narrow down what you’re looking for and buy according to your budget. It’s fair to say, that a larger property will always be a more solid and lucrative investment especially in terms of capital growth and financial returns.

Not only will it appeal to a larger demographic of buyers, it’ll be easier to sell because the demand for bigger homes is stronger.

The same rule applies with apartments. If you’re thinking of buying a small one bedroom or studio apartment, proceed with caution when applying for finance.

It’s not uncommon for banks to have lending restrictions in place for properties less than forty or fifty square metres in size. This is because smaller properties attract lower capital growth over the long term and are usually considered high-risk lending for most financial institutions.

2. Street appeal

There’s always a certain x-factor about homes located in quiet, residential and tree-lined streets.

If the property has easy access to public transport, shops, cafes and schools, you’ll be onto a winner. Lifestyle locations will generally be more sought after compared to busier, inner CBD suburbs. This is an important factor to think about when buying your next investment.

To maximise your earning potential, avoid properties located on busy main roads and homes that are too close to unattractive amenities such as factories and train lines.

3. Added features and amenities

Does your property tick all boxes when it comes to practicality, visual appeal and lifestyle requirements? If not, then it may fall short when it comes time to sell later down the track.

Picking a home with attractive amenities is the best way to help increase the value of your property. The main features to look out for include:

• A central bathroom with a bathtub which is popular with females and young children.
• A home with private laundry facilities as opposed to a shared/communal area.
• A practical floorplan that complements easier living. For example, having a separate entrance hallway rather than walking straight into a living area and avoiding homes that have bedrooms coming off the living area.
•  The flexibility to knock down walls and create open plan living areas. For example, developing extra space such as a study nook area or an extra bedroom if necessary.
• Additional built in features such as heating and cooling systems, dishwashers, gas cooking and gas hot water systems.

4. Potential to add value

The aesthetic appearance of your property will often determine if you get top dollar for your property or something far less than you expected.

The ability to add true worth and value is one of the up-sides of owning a property, because you can never lose. In some cases, small improvements can pay huge dividends in years to come.

To stay one step ahead of the rest, when selecting the right investment, it’s important to buy one that has a certain “WOW” factor about it. Look for unique features that will set it apart from the thousands of properties out there. Think about older style apartments with a fireplace, ornate interiors and period style homes.

Cosmetic renovations such as rendering, painting, new fencing, landscaping and adding security systems can make a huge difference in a short period of time. It’s an easy (but often an overlooked way) to add instant value to your property.

5. Focus on land value but not just any piece of land

Many investors make the mistake of buying larger properties on big pieces of land (usually on the outskirts of town) because of the incorrect belief that land appreciates and buildings depreciate. To some degree this is true, however, it doesn’t apply to all properties.

It’s not the land that’s important but more the “land value.” There’s no point buying a property in the country where buyer demand is low and scarcity isn’t an issue.

A smarter option would be to purchase something like an inner city apartment, located in a small boutique block of ten. The land value with this type of investment is greater due to higher land scarcity and strong buyer demand.

Caution: Avoid high-rise apartments that have minimal land value component and are usually over saturated with other apartments. This tends to reduce land value significantly.

6. Buy wholesale not retail

It’s not hard to figure out that good real estate will always make you money. Because good quality properties are hard to come by, you should always try and hold on to them for as long as you can.

Incorporating property as part of your long-term wealth strategy is a very clever way to boost your income earnings.

To create instant equity, consider buying wholesale rather than retail. An example of this is buying a property under $500,000 where 80% of people can afford versus buying a property over the 1 million dollar mark, where only 5% of people can afford to buy.

Summary

In summary, buying the right ‘Investment Grade’ quality property is all about following a blueprint that all successful investors follow.

Put simply, some properties generate better financial returns than others. To reduce your chances of buying a mediocre investment that might be problematic for you later down the track, it pays to be educated about the potential risks/disadvantages involved.

If you follow our proven ‘success strategies’, you can rest assured that you’ll be one step closer to achieving your wealth creation goals.

Buying an ‘investment grade’ property – Part One

advice.realestateview.com.au

Many investors become confused with what key characteristics they should be looking out for when it comes to purchasing an investment property.  As a buyer’s agency, we’ve had extensive experience, and have sold over 2,000 ‘investment grade’ properties for our clients over the last thirteen years. So, what features contribute to an ‘investment grade’ property which ensures tenants are queuing up to lease your property?  Here are our top tips;

1. Location, Location, Location

Some investors are lured by cheap and affordable properties overseas or interstate.  But it’s important to remember the three golden rules of property investment – location, location, location.

The property should be walking distance (fifteen minute maximum) to a train station, because as Melbourne’s population grows to seven million people by 2050 and our lifestyles become busier and busier, people will want to reduce commuting times and have easy access to the CBD and the rest of Melbourne.

An investment property should also be a short walking distance to lifestyle attractions such as cafes, shops, parks, beaches and any other positive amenities such as shopping centres, restaurants, and bars. Check out a property’s walkability or walk score on walkscore.com which rates a property on a scale of 1 (car dependent) to 100 (walk everywhere). If the score is less than 75, you should consider another property in a location that is closer to lifestyle amenities.

2. Carparking

An investment property should have at least one carpark allocated. A vast majority of the population still use cars for various reasons, such as visiting family and friends or going on social outings, even if they don’t use them to commute to work on a daily basis. Ideally, the carpark will be “on title” and it would be a bonus to have secure or undercover parking or a garage.

3. Security

Do your homework on the crime rate in the areas you are looking to purchase in, as there may be certain streets in the area which are considered to be ‘dodgy’ or high in criminal activities. Properties that have high security gates and fences and / or security intercom systems and alarms will be preferred by many tenants.

If you wouldn’t want your daughter living there, then you should choose a safer location. When buying apartments, avoid ground floor apartments that are more accessible to break into and choose apartment buildings with secure gates and a security entrance.

 4. Street appeal

They say you only get once chance to make a first impression when you meet people, and the same is true when a tenant first sees your property. Many tenants will use Google maps “street view” to check out the street appeal of your property and could rule it out instantly if it is not a quiet, tree lined residential location.

If the property looks shabby or rundown from the outside, many tenants will put your property towards the back of the queue. Be careful of buying properties on main noisy roads or properties adjacent to freeways or other negative amenities such as backing onto train lines, bus or tram stops, petrol stations, factories or schools.

5. Orientation and light

Get the compass application out on your ‘iPhone’ and make sure the living areas are facing north or north-west as most tenants prefer to live in “light and bright” properties that are more energy efficient and are naturally light all year-round without having to have the lights on all the time.  Avoid south facing properties and properties where the living areas face east as they will only receive brief morning sun or light

6. Aspect and views

Properties with a favourable aspect or appealing views will always be highly sought after by tenants. Properties that overlook attractions such as the city, water, parks and gardens will always have a certain “WOW” factor that sets them apart.

Many investors buy a property because it is “cheap” but it will always be cheap when they go to sell it too.

A savvy investor instead focuses on a quality property with views that you will always pay a bit more of a premium for, but it will be one that will usually achieve higher capital growth, better rental returns and shorter vacancy periods.

Make sure your investment property ticks the right boxes

In summary, buying an “investment grade” property is about focusing on the key criteria above to set your property apart from the competition. It will remove that stressful situation for landlords of having a rental property vacant and needing to attract a new tenant.