In the last year alone, rents in San Diego have shot up by almost 25%. According to Trulia, the median rent per month is now a staggering $2,600! With prices continuing to climb, many San Diego residents are heading south for a cheaper alternative. But they’re not going to Chula Vista or Bonita. They’re going even farther south—across the border into Mexico. A new breed of young people, in particular, is settling in Tijuana.
It seems crazy at first, but consider this: Tijuana is only 15 miles south of San Diego, and crossing the border is actually relatively easy if you have a Secured Electronic Network for Travelers Rapid Inspection (SENTRI) card. Think of the SENTRI card as the EZ-Pass for border crossings. This allows people to keep their well-paying jobs in San Diego while paying a fraction of the cost for housing in Tijuana.
Rents in Tijuana are incomprehensibly low for those accustomed to San Diego prices. The average 1-bedroom apartment in the city center costs just $230 per month; a 3-bedroom will run you an estimated $450 per month in the same location.
But it’s Tijuana—a city known for its crime, drugs and other illicit activity. Is it safe for expats to live in Tijuana?
“The first question people ask is always about safety,” says Jill Holslin, who moved to Tijuana after her San Diego condo was foreclosed on during the recession. “The answer is to do your research and find the safe areas. I’m not afraid, but I don’t do crazy things. I like living in a big city. I feel safe here in the same way that I feel safe in New York. TJ stays open and awake until 3 or 4 in the morning. There are always people around. My neighbors know me and look out for me.”
As more people like Holslin, a professor at San Diego State University, move to Tijuana, the city is becoming that much safer. In 2014, homicides were down 6% compared to the year prior. Most of the violent crime is affiliated with drug cartels that use Tijuana as an entry point to the U.S. Steer clear of known hotspots like Zona Centro near Avenida Revolución and you should be alright.
Once people get settled in Tijuana, they find the city has so much to offer besides cheap rent. For starters, there’s the weather. Tijuana offers the same warm weather climate as San Diego to the north, and beaches are equally as spectacular. There are a growing number of trendy bars and restaurants compliment mom-and-pop establishments, and the city has a lively arts, culture and music scene.
“People here may be poor, but their spirits are good,” says Vivian Dunbar, an expat who’s lived in Tijuana for years now.
Now, it’s not just SoCal residents who are making the journey south. Real estate developers have taken note of Tijuana’s revival and are starting to follow suit.
“Before there was zero interest from Americans in building here,” said Cesar Leal, director of business development at SEICA, a consulting company in Mexico. “Right now, in the last four months, there’s been a lot more interest showing up,” Leal noted last fall.
Greg Shannon is one of many small-scale San Diego developers poking around Tijuana. Shannon had become frustrated with the lengthy permitting process developers faced in San Diego. After spending five years trying to build two houses in La Jolla, both of which were by-right developments but faced opposition from neighbors, Shannon set his sights on the other side of the border – where regulatory standards are lower and community groups are less likely to protest.
“You have these forward-looking developers, like Greg Shannon, seeing this,” says Daniel Reeves, senior vice president of economic development and public policy at the Downtown San Diego Partnership. “I think it is scary for a lot of developers to consider Tijuana, because it’s a different process. But once it pays off for one, we’ll see a flood of people.”
Like moving to Tijuana, developing there carries risk. Laws regarding foreign land ownership are complex, financing can be a challenge, squatters’ rights laws are stronger in Mexico than in the U.S., and the real estate market is less stable. Yet with high risk comes the potential for high reward.
Property management companies have an opportunity to benefit from all of this, as well. Agencies can provide a host of services to American renters and developers alike.
Services for renters might include:
- Resources for those trying to decide upon neighborhoods
- Furnishing apartments locally (most apartments do not come equipped with appliances)
- Collection of utility payments (gas, water, cable and electricity bills cannot be paid online)
- Help navigating government policies and procedures (e.g. obtaining a work visa or SENTRI card)
Services for developers might include:
- Assistance with the acquisition of existing residential properties
- Consulting regarding site selection for the construction of new residential properties and the negotiation of land purchase agreements
- Outsourcing of architectural and construction services
- Project management of construction
- Traditional management of residential properties, including marketing and rent collection
- Assistance with the sale of residential properties
- Services such as housekeeping, security and routine maintenance—all of which can be provided using locally-based employees (an added bonus because local government looks highly upon foreign companies that they consider “job creators”)
Starting a multinational company might seem intimidating, but Mexico is a relatively business-friendly country. American-based companies can structure their Mexican operation as a foreign subsidiary, which creates a legal entity that is separate from the American parent. Corporations are easy to organize under Mexican law, and establishing as a multinational company in this way will help the agency avoid double taxation (in the U.S. and Mexico).
By all indications, the revitalization of Tijuana is going to continue for the foreseeable future. As more residents and developers look to get in on the action, they’ll be looking for guidance from someone who is well versed in the local market and the ways to overcome real-estate related barriers. Getting a head start now will help property management companies gain an important first-mover advantage!Read more on Real Estate Markets