The Tale of Two Investments…


5 minute read

August 20, 2007

I’m contemplating making another move in the real estate market.

Until last week, when I arrived in Ajijic, Mexico, I was jet-set on purchasing another pre-construction condominium in downtown Toronto.

Now, I’m wondering if a piece of vacant land in a country I just went to for the very first time represents the best real estate investment I could make…


I truly believe that with ANY investment you make, the first step is to identify your time horizon.  There are other things to consider such as your risk tolerance and the amount of capital you are willing to invest, but you really need to ask yourself questions with respect to time.

  • How long am I willing to keep this money invested?
  • When would I like to realize my return on investment?
  • Am I going to re-invest my interest, dividends, or partial returns, if any, over the long haul?

Whether you are buying one hundred shares of Bank of Montreal on the TSX, purchasing a student residence in Waterloo, loaning a music group start up capital, or purchasing rare coins at an auction, you need to consider how long you are willing to keep this money invested.

This brings me to my current dilemma.

As I have mentioned before, I purchased a pre-construction condominium at West Side Lofts about 18 months ago.  My time horizon for this project was three years.  From the moment I signed the first $5,000 deposit cheque, to the moment I sell my condo in 2009 and realize my return on investment, three years will have passed.

I put down $25,000 in cash for this investment.  The condominium cost $250,000, and if I sell it in 2009 for an expected price of about $340,000 (less about $10,000 in commissions to the selling broker), I will have made a $80,000 profit.  If the condominium is completed on time, and I sell it as soon as I take possession, I will have made a 107% return on my investment, PER YEAR!

Wow, this sounds so easy, right?  Why not do it again!

I’m looking at The Distillery District as my newest target.   I personally think this area is going to take off.  I wouldn’t be surprised if it was as popular and trendy as the Yorkville area about 5-7 years from now.  There is simply no other part of Toronto like The Distillery District.  So, I’m looking at another $25,000 investment in a pre-construction condominium.

But when I arrived here in Ajijic, Mexico last week, all that changed.

This area has a certain buzz to it, and I think we’re about ten years from this city just absolutely booming.

This is not Cancun, and it is not Acapulco. This is not Puerto Vallarta either.

Ajijic, as I learned as soon as I arrived, is not on the coast!  It’s not a beach town, and it’s not a place where university kids come for spring break to drink and party.  This is a REAL Mexican city.  It sits on the base of Lake Chapala, but the lake “needs to be cleaned up” as I’m told.  People don’t swim in it, and there are no beaches.  But there IS a serious movement for the lake to be cleaned up, and rumor has the United Nations getting involved.  This is all I’ll say on the matter, as I really haven’t investigated it further.

There are hundreds of full-time residents of Ajijic who are gringos or foreigners, as I’ve met retirees from Texas, Edmonton, Toronto, New York, San Francisco, and the list goes on.  There are also hundreds more Americans and Canadians who own villas and spend 4-6 months a year here.  Then there are the types who own properties, and maybe come twice a year for vacations.

Simply put, the real estate down here is thriving.  I spent last night at my friend’s wedding, which was held at his father’s brand new villa at the top of the mountain overlooking the entire city of Ajijic and Lake Chapala.  The property was simply stunning.  Tennis courts, pools, a hot tub, a gorgeous backyard with impeccable landscaping and a postcard view, and the house itself is a statement of modern Mexican architecture.

The price for this house, in this gated community a ten minute walk from the city centre?  $500,000 U.S.  Place this house in Forest Hill in Toronto, and you are talking about $6,000,000, without the stunning views.

Am I going to buy a $500,000 villa in Ajijic?

No.  And that investment isn’t similar to the $25,000 pre-construction condominium idea at all.

But there are vacant plots of land for sale in Ajijic as low as $30,000 U.S.  Some of these lots sit on the Lake Chapala, which right now is not a huge selling feature.

But the upside?  What if this talk of preserving the lake actually came to fruition?  What if ten years from now, Lake Chapala was home to sandy beaches, sailboats, and waterskiiers?  (I did see a few people waterskiing, but not what you’d expect).  All of a sudden, a lakefront property would be in high demand.

And land is a very unique asset—there is a finite amount of it.  You can produce more condos, but you can’t produce more land.

There are also a couple of lots for sale in the Ajijic Village for $27,000 (double lot for $54,000).  Today, I visited the most magnificent house I’ve ever seen in my life—and I’ve seen everything in Toronto from Vince Carter’s condo to Steve Stavro’s mansion to Mats Sundin’s Forest Hill home.  Words can’t describe this house, but the owners spent $600,000 U.S. to build it on a lot they purchased for $100,000.  The value of the house here: $2,500,000 U.S.  The value of a house like this in Toronto: $12,000,000.  The crazy part is: as we were walking down the street, I would have passed right by this place without ever even knowing it.  Everything in Ajijic is “behind a wall,” as they say.  The entire city is a hidden gem.

So this brings my back to my dilemma.

Should I purchase another pre-construction condominium in Toronto for $25,000 to hold for a three to four year time period?

Or should I purchase a vacant piece of land in Ajijic, Mexico for $35,000 to hold for a ten year time period?

These two investments both involve real estate, but beyond that, they could not possibly be more different.

The plan is for ten years, plain and simple.  If I need that money between now and then, it will mess up the entire plan.  This isn’t a GIC that accrues interest every day you hold it.  This is an assumption that over the next ten years, more and more retirees will seek refuge in Ajijic, Mexico, and this little town that was unheard of fifteen years ago will be one of the most sought-after destinations for anybody over the age of forty years old.

Did I forget to mention that the climate in Ajijic was voted to be the best in the entire world?  I guess I forgot that part.  The temperature does not climb into the 40’s in Ajijic, and is a pleasant 27-degrees almost 365 days of the year.  It’s never too hot, but you’ll never have to shovel snow either.

I played a round of golf yesterday with Willie, who moved here three years ago with his wife from New York, Joe, who has lived here for the last seven years after spending his previous life in Texas, and Allan, who owns a villa and spends only two months a year here.  All three of these men looked at countless locations across the world to call “home” or to vacation to, and all three settled on Ajijic.

Imagine buying a plot of land in Aspen, Colorado thirty years ago, when the main street was lined with t-shirt shops and pizza joints instead of the jewellery shops and time-share sales offices that sit there now.

Is Ajijic, Mexico the next North American hot spot?  Well, it’s not Acapulco, and it’s not Cancun.  But rich retirees don’t seek the night clubs and wet t-shirt contests that the university kids do; they seek culture, authenticity, tranquility, and a place they can call “home.”

And ten years from now, what’s to say that I won’t build a house on this lot myself, and vacation here with my wife and kids?

Perhaps my time horizon for this investment is actually the course of my entire natural life…






Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

Find Out More About David Read More Posts

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1 Comment

  1. B. Donovan

    at 7:04 pm

    Looks & sounds great, for sure a well-kept secret! I’d love to be one of those satisfied property owners in Ajijic.

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