TOP 5 INSIDER TIPS FOR BUILDING YOUR VACATION HOME IN LOS CABOS

Building a house is always a daunting task, and doing it in a foreign country can feel especially scary. However, building your vacation home can be a positive experience – if you learn a little about the process and take advantage of my insider tips for home construction in Los Cabos. I have compiled this list after spending more than ten years in the industry and I love to help clients feel involved, organized, and comfortable as they work through the home construction process.

1. Define your construction contract format: Cost Plus or Budget.

A Budget contract will set up a price for an all-inclusive scenario. With a Budget contract, you know that the contractor will have to complete all of the building for less than what the contract states, in order to still earn a profit.

A Cost Plus contract will charge a percentage on top of the actual cost of construction on the invoice. On average, you will see a 16% fee added, but the range is 10-20%. In general, I recommend a Cost Plus contract because you have more control and can see where everything is going.

2. Request a total cost in the form of “price per square foot” that includes everything.

It is common for contractors to keep certain expenses separate from the main quote, such as interior decoration, home audio, and retaining walls (if applicable). However, to maintain an accurate idea of the entire cost of the building project, I recommend getting a total cost, in the form of price per square foot, that includes these types of expenses. Then, in addition, you can ask for a summary of allocation of costs for more specific details.

3. Be aware that 40% of your actual expenses will be in pesos and the remaining 60% will be in dollars.

The most expensive items for your home will always be paid for in U.S. dollars (USD) since they are imported from the United States. This usually includes air conditioners, pumps, water heaters, pool heaters, paint, irrigation systems, lighting, and more.

That being said, it is very important to establish, at the beginning of the project, how the builder will use your exchange rate savings. The exchange rate between USD and Mexican pesos will fluctuate during the entire construction process and usually, there is a positive balance in your favor. I recommend keeping any savings of this type for possible contingencies that come up during the build.

4. Use technology in your favor, especially when you’re monitoring progress from far away.

I highly recommend that you ask your builder to create a Facebook page for your home, where they will regularly add photos and videos of the building progress. This way, you will be able to see the actual progress on your second home even if you live thousands of miles away! Plus, you will see the progress being made before sending the next month’s construction payment. In general, it is really nice to have documentation of the entire building progress from start to finish and you can easily go back to review and confirm things, without any doubt of what was done, how it was done, and when.

5. Make sure your construction license is based on how much you are actually paying to build the house.

This is not the place to try and save your nickels and dimes. If you sell your house, the tax institution of Mexico will allow you to deduct the cost of your construction taxes from your capital gains. To do this, they will use the recorded value from the official construction license so it’s important for that number to be accurate.

Remember – it is very important and beneficial to have someone guide you through this process when buying your lot. Depending on the development you are in, the recommended cost per square foot will vary. Clearly, you don’t want to build a super high-end home in a mid-level development or vice versa. In Los Cabos, the cost can range from $150 to $1,000 USD per square foot.

To see the list of categories in a sample construction schedule, and how the cash can flow, please contact me and I will send you my recommended “Construction Schedule and Cash Flow Model.”

The information provided on this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.