Baja Rentals - Landlord Information
by Mario Restrepo
If you are a landlord of a Baja condominium or house and you plan on renting it either on a month to month basis or as a long term rental, then have a look at this landlord information. There are basic concepts concerning rentals here in Baja, and in Mexico in general, that are different not only in legalities, but also culture.
Baja Rentals - Keep the Utilities in the Name of the Landlord/Owner
As a landlord, it is very important to keep the utilities of your Baja rental in your name, or in the exact name of whomever has the fideicomiso. This helps to establish ownership if title is unclear, and can also help avoid capital gains tax, called "impuesto sobre la renta," should you sell your property. Never let the renter put the electric bill from the CFE, the Commission Federal de Electricidad, in their own name. It will create headaches for you down the road, especially if you have to evict the renter. This is also true with the water bill from the CESPT, and if you are using metered propane gas in which a bill is delivered to your home.
Depending on where your Baja property is located the telephone and internet will be offered by Telnor and will put in the name of the renter. For example, the renter may have an established phone line from the last home and will want to bring it over to their new home. In this case, get a letter signed by the renter, and a copy of their ID, saying that at the end of the lease, that you as the owner have permision to shut off the phone service if the renter doesn't shut it off themself. If you dont get a letter from the the renter you can still turn of their phone service by showing your fideicomiso or escritura to the phone company but this is a bit more difficult.
If Your Rental is in Baja, How Will Your Renter Pay Rent if you are in the USA or Another Country?
There are many ways landlords of Baja rentals are being paid rent by their renters. Every landlord and renter has different needs and wants so there isn't a simple solution on collecting rent across the border. But for now, here is a quick list of some of the ways Baja rental landlords are getting paid their rent by tenants with the best and easiest method on top.
- Direct Deposit
- US bank check mailed to a USA address.
- US Bank check hand delivered to the property manager.
- Google Checkout
- Wire Transfer (cost prohibitive)
- Cash in dollars
- Cash in pesos
Come up with a couple of payment scenarios that work for you and present them to the renter.
It is important to note that how you collect rent can effect the marketabilitiy of your Baja rental property. Let's say, for example, you have a nice ocean front home that you want rented for $3000 a month. Then you decide that you will only take cash payable at the rented property in Baja. Not many renters are going to want to drive around with $3000 cash every month. You can't even pull out $3000 US cash at the ATM. It is better to listen to the needs of the renter, and then come up with a fit for everyone.
Prepare Your Renter To Pay Utilities in a Timely Manner
Give copies of your bills to the renter so they can go pay them whether the bills arrive at the front door or not. Of course, most of the time utility bills do make it to the house in Baja, but now your renter is prepared and will feel in control.
Let your renter know that here in Baja, and all of Mexico, utilities will be shut off in a timely manner if not paid, no matter if the bill was delivered to the front door or not. It is just that the deliver system here in Baja, and all of Mexico, is not perfect. Your renter simply has to anticipate when bills are due, or they can set themself up with one of the bill paying services that are already well established.
Use an English/Spanish Rental Contract
Show your renter that you are a good business person and are looking out for them. Use a bilingual rental agreement with the terms in two columns, English in one column and Spanish in the other, side by side, so the renter has a better understanding as to what they are signing.
Make sure your renter fills out a rental application. Keep the rental application in your records.
Be Prepared to Handle the Security Deposit
Save the security deposit in a safe place. Let the renter know that they will get the security deposit back in a timely manner after they checked out. Come up with a plan on how to handle the security deposit if the utility bills don't show up when the security deposit is due, and the renter still has to pay utilities.
Baja Renter Shock!
All landlords of Baja rentals will eventually find someone who measures up to this unique concept, that has finally been coined here, called "Baja Renter Shock." If you have a renter who is new to Baja, or new to anywhere in Mexico, or has been locked up in the USA for most of their life, then expect Baja Shock in about 1 out of 10 to 20 renters.
Baja Shock is when your renter is exited about moving to a new country, and then all of a sudden, after they have moved into your rental, the differences, whether cultural or private to them, start to shock them.
Signs of Baja Shock are easy to identify. The renter may complain about the house, the neighborhood, and Baja, but won't be able to pinpoint a solid valid complaint but will use what they can to get out of the contract. Do not take this personally because it is probably not your fault. For example, a new leak under the sink will be a big enough reason for them to try to break a lease. I am not saying that you have to give back rent or give back the security deposit, but I am saying be aware that Baja Shock is not uncommon.
You could offer them vacation rental rates to get them out of the contract and in good standing if you wanted.
If I had two renters apply at the same time for the same property under the same terms, I would be more inclined to accept the applicant who is already seasoned in Baja versus the newcomber.
Landlords Should Have Multiple Methods of Contacting their Renter in Baja
As a landlord, you will find that contact info for your Baja tenant will change once they get settled into their Baja rental. When you originally met your tenant, you probably received their cell phone number. Over time you will find that a USA cell phone does not always work in Baja. Some renters will shut off their cell phone once they find out how expensive it is to use in Baja. Also, many times because of misdialing or because of international calling, you still can't get through.
Therefore, get multiple ways set up for you to contact your renter and for them to contact you. Get emails, voip phones numbers, USA mailing address, contact info of their friends and family, and make sure you get their land line number if they set up local telephone service with Telnor. I can gaurantee that as soon as they need to contact you or you need to contact them, there is a chance communication will not be had.
Baja Rentals Property Maintenance
Be up front with your renter as to who is going to take care of the gardening, cleaning, light bulb changing, and all the little things that are common maintenance.
The reason is that when renters shop online they get information from vacation rental properties and some times expect services that are not intended for a long term rental.
On the other hand, you may want to include common maintenance if you think their may be a language barrier, or if you really don't want the tasks left to your renter.
Landlord Managed or use a Property Manager in Baja?
As a landlord, do you want to be the Property Manager? Property Management in Baja is a unique service. You are not only a property manager, but many times a liason between your renter and Baja. I gaurantee that 90% of renters are going to call the property manager the first month to learn about how to pay bills, go to the doctors, dialing to the USA or other countries, or because the internet isn't working as promised, and etc. And all this has nothing to do with your property! But you are the liason between them and their new world!
Of course you can tell them that you are not their Baja tour guide, but that is probably not what you want to say to a tenant who unsuccesssfully just spent time and money driving around trying to find the electric company only to have their electricity shut off two days later for non-payment.
To be your own property manager, you should be present and near your rental in Baja. You also have to have a team of people near your rental who have cell phones and understand that your phone calls are important when you call them. You need to have contact with 2 very competent plumbers and electricians, a handyman, a cleaning lady who knows your property in side and out, and friendly neighbors.
More importantly then anything, if you decide to be your own property manager in Baja, leave your emotions out of it. You should never make a decision based on emotions. Make you decisions based on business mixed in with a lot of common sense. Let the renter talk first so they bleed the information you need to hear.