My wife and I just returned from a 4 day trip to Rocky Point. We rented a house in the Costa Diamante area, close to Las Palmas. On the last day we stopped into the sales office for Encántame Towers and were blown away but their model in the sales office.
This is a review of my brief encounter with these people. I’m not saying that they’re doing anything wrong but if you are looking for an investment property in Rocky Point, perhaps a place you can live in part-time and rent part time, read below and then decide if it’s right for you.
Encántame Towers is a 3 building high rise about 25 minutes east on Playa Encanto. It’s about 40% complete and they have delivered the first few condos in the main building at the time of this post. Our sales rep is a former real state agents form the US. He was friendly and personable. Everything seemed on the up and up…. or so it seemed.
The condo we looked at was $550,000 with the option to pay in full or put 50% down and finance the rest at 5.9%. Thats obviously higher than what banks charge in the US but this is Mexico and the builder is likely putting up the money to finance so that seemed OK. If you have equity in your house in the States, you could potentially get a home equity line that would be slightly cheaper and allow you to claim the interest on your tax returns.
So, we toured the property, saw some units under construction and generally fell in love with the whole thing. I encourage you to go on their website https://encantametowers.com and look at some of the photos - very compelling. On the way home we reserved a unit and our sales rep told us we had 72 hours to wire a $5,000 non refundable deposit.
Problem #1 - 72 Hour Due Diligence Period
Three days is simply not enough time to do even a cursory investigation on a 1/2 million dollar investment. I was a little frustrated by this but no sooner had we reviewed the initial document, the sales rep was one the phone congratulating us and that the price had just been increased by $40k but we got in at just the right time.
Problem #2 - Created an unnecessary sense of urgency
This is a common pressure sales tactic and I didn’t expect it here. Teasing a $40k price increase unless we sign now is a cheap move and usually motivated by greed.
Problem #3 - Entire deposit is non-refundable
Remember I said the purchase price was $550k? $275k is due in regular payments over the course of 6 months. When I enquired how that money was held and who the beneficiary(s) were, I got crickets. Turns out the entire deposit is paid to the developer and is completely non refundable, regardless.
This in itself is a monumental risk. Once you wire the money, it’s GONE. If for any reason you fail to make the deposit according to the down payment schedule, or the developer fails to deliver your condo for any reason, you potentially loose everything. Red lights are flashing.
Problem #4 - Questionable water supply
Three days is not time enough to do much due diligence so I decided to focus on water, given this property is literally miles and miles away from any civilization. Turns out there is NO MUNICIPAL WATER anywhere near Encantame Towers. All the properties scattered along this remote stretch of beach have to rely on “pipas” or regular water deliveries by truck in order to survive. I was able to learn that the developers pump well water from about 20 miles away and then treat it onsite. I asked for any studies on the health and capacity of the wells and got nothing. I know this information exists but it seems the developers do not want to share it. Red lights flashing, bells are ringing.
I thought back to our tour of the building and noticed there were no hurricane shutters anywhere so thought to ask the Sales Director for a copy of the insurance declarations on the building, specifically where property owners are covered in case of loss. This could be anything from a weather event like a hurricane or tropical storm, a fire or unexpected structural issue or even the unthinkable like an an active shooter incident. Pretty much any event that would make the property uninhabitable. Crickets.
Problem #5 - Building is either not insured or underinsured
Fearing the worst, I decided to register on the Encantame Towers Facebook Group and asked my question there. I figured someone much smarter than me would have already researched this and had a good answer. To my shock, all I got was a bunch of nonsensical replies reminding me how nice the view is and don’t worry about the rest.
So what happens when the next hurricane hits this building? which by the way is currently the tallest in Puerto Penasco, does significant damage, making most or all of the units uninhabitable? The developers will still want their monthly payment regardless and now you can’t live in it or rent it. I can just see the headlines in the Tuscon news.
The next morning, my Facebook post was removed from the Encantame Group and my access deleted. You just know you’re getting somewhere when you get cancelled for asking a good question. Lights, bells and sirens going off at this point.
Bottom line - There are risks in any real estate transaction, less so in the US, more so in some countries. Mexico is the wild west. BE CAREFUL. you could literally loose it all with deals like this. Remember, $275k rents a lot of luxury properties in Rocky Point.