Real Estate Investor Q&A Roundtable. EP4 (Part 1)

In this dynamic roundtable edition of Echando Raíces (part 1), we tackle the most urgent questions from investors buying in Mexico’s coastal hotspots. From understanding the fideicomiso trust system to unpacking delay penalties, closing costs, pre-sale flip strategies, and even why your unit doesn’t come with a parking spot—this episode is a masterclass in practical real estate investing. Whether you’re navigating your first purchase or scaling your portfolio, you’ll walk away with a sharp investor lens and the clarity needed to make smart, informed decisions.

The questions we'll be tackling today:

• What rights do I have if I buy through a trust (fideicomiso)?
• What happens if the construction delivery is delayed?
• What appreciation can my unit have at the time of delivery?
• What closing costs should I budget for?
• Can I resell my unit before receiving it?
• Why don't some developments have assigned parking spaces?
• Can I modify my apartment if I buy it in pre-sale?

Ideal for: First-time investors, curious buyers, and real estate agents looking for clear answers and advice from experienced professionals.

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Chapters

• 1:28 What rights do I have if I buy through a trust (fideicomiso)?
• 6:10 What happens if the construction delivery is delayed?
• 11:14 What appreciation can my unit have at the time of delivery?
• 14:24 What closing costs should I budget for?
• 19:47 Can I resell my unit before receiving it?
• 23:34 Why don't some developments have assigned parking spaces?
• 27:29 Can I modify my apartment if I buy it in pre-sale?

Transcript

0:00

Okay, let's unpack this. We are diving into a treasure chest of real estate knowledge today. And this isn't just theory. No, not at all. Our sources come directly from a high level investor q and a round table, And this wasn't some casual presentation. This was. Seven industry heavyweights, tackling the most immediate, critical questions that investors both foreign and domestic need answered right now. Yeah. Specifically about buying property in, you know, those high demand tourist zones. That's absolutely right. And our mission for you, the learner, is really to bypass weeks of reading, cut straight to the actionable insights, yet the cheat sheet, basically, pretty much we're extracting the essential knowledge nuggets that clarify. Legal certainty define contractual protections and expose those subtle but crucial hidden costs that often surprise new buyers. Oh yeah, those always get you. They do. So we've structured this deep dive around the seven most pressing questions posed to these experts during that round table, and we're gonna cover everything from that. Let's be honest, sometimes confusing legal figure of the fi miso. Definitely a point of confusion. All the way to the maybe surprising financial calculation behind why your investment condo likely doesn't have its own assigned parking spot, right? Seems counterintuitive, but they're logic. We need to jump right in because these details, they really define the high risk, high reward nature of this sector, don't they? They absolutely do. Yeah. Understanding these points is key. Okay, let's start with the cornerstone question. Especially for any international buyer looking at coastal property. If I buy through Fideicomiso, a trust is the apartment mine. Hmm. Yeah. That's the big one. This fear of not truly owning the property. I think it's probably the single greatest psychological hurdle for non-nationals entering this market. It's a fundamental question and it pops up because the legal structure, well, it's complex. It's rooted in history. What's fascinating here is that the fi miso exists precisely because of geographical restrictions. One's established decades ago. Ah, the restricted zone. Exactly. We're talking about restricted zones, areas generally defined as being within, uh, about a hundred kilometers, the national border, or 50 kilometers of the coastline. Yes, give or take. And historically, those zones were restricted for like national security and sovereignty reasons, wasn't it? To prevent foreign control of. Key areas precisely. They were considered sensitive areas and direct title ownership by non-nationals was prohibited back then. So the Fiko Mezo emerged as the legal workaround, or the legal figure, as they often call it, that allows foreign investment to flow into these really prime locations while still technically complying with those historical land laws. Okay, so let's break down the trust structure simply. Who are the players involved? Like who's who in this setup? Sure. You basically have three key roles. Mm-hmm. First, there's the fi ante. That's usually the developer or the seller, the one who transfers the property into the trust. Second, you have the fiduciary. This is the institutional trustee. It's always a certified Mexican bank. They legally hold the title. The paper title, the bank holds the title. Got it. And the third. The third is you the investor. You are the fide cesario. That's the beneficiary of the trust and this beneficiary status. That's the key to the ownership question. Right? So while the bank technically holds the what? The naked legal title, that's the term. Yeah. Naked title. What rights does the investor, the beneficiary actually possess? What can you do? Okay, so the investor retains all the essential rights of ownership. It's often called these the Beneficial rights, beneficial rights, which means you have the right to use and enjoy the unit. You can live in it yourself. You can lease it out for profit, long-term, short-term vacation rentals, whatever. Okay, and crucially. You have the right to sell your beneficial interest whenever you want. You can transfer it. You can inherit it. So for all intents and purposes, you control the asset, you reap the financial rewards, and you also bear the risks associated with ownership. It functions like direct ownership in practice. It sounds like the legal structure is a difference, but maybe not a practical distinction for the investor's day-to-day control, as long as they play by the rules. That's a good way to put it. And speaking of rules, the experts at the round table were very, very clear about one non-negotiable legal limitation is tied to property use. Well, yes, that's the critical compliance point, the designated use of the property. What does that mean exactly? It means if the property was acquired with permits for residential use, and that usually covers both personal residency and vacation rentals. You cannot legally just decide to alter that to commercial use. So no opening a shop, no opening a storefront or an office space or say a medical clinic, not if it was permitted as a residential and vice versa. Of course. Let me push on that. Say I'm an investor, I bought a really large ground floor unit. Why can't I just decide, you know, I'm gonna turn this into a private high-end dentist's office. Isn't that my prerogative if I have those beneficial rights? That's a great question and it's where municipal rules and the project's own planning rules intersect with your beneficial rights. Ah, okay. The bank holding the fi miso, they have obligations. And the homeowners association structure, the condo regime, they're also obligated to enforce the original permitting, right? Changing the use, say from residential to commercial. It changes everything. The density calculations, the infrastructure demands, water, electricity, usage patterns, even the tax structure for the property, and sometimes the whole building. It's not just your unit in isolation. Exactly. If the development was permitted for, say, 144 residential units, one owner can't just unilaterally compromise that legal designation for the entire building. Yeah. Sense. Nor can they disrupt the environment for the other owners who specifically bought into a residential concept. You can't have drills buzzing next door if you bought a vacation condo. Okay. So the key takeaway here is. You get certainty of rights, very similar to direct ownership, but you absolutely must adhere strictly to the unit's designated purpose. That's it. Get that clear before you write any checks. Essential clarity, right? Moving from those legal foundations to managing risk. The next investor question, this one strengths, right at the heart of presale anxiety. What happens if I buy, but the construction gets delayed? Mm-hmm. A million dollar question sometimes, literally, right? Every investor buying off plan is betting on the future delivery date. A delay means lost rental income capital tied up. It's stressful. It absolutely is. Yeah. And this is where doing your homework, your due diligence on the developer's track record becomes your very first line of defense as so well, the Roundtable discussion featured developers who were able to cite specific examples. They weren't just saying, trust us. They pointed to delivering the Serena project during the immense difficulty of the pandemic shutdown. Wow. Okay. That's a stress test. Huge stress test, or successfully completing other projects like Costa Celeste in a Studio 34, maybe on time, maybe even a bit early. This history, it suggests a level of commitment and capability that goes beyond just favorable market conditions. Reputation is good. Absolutely. The cold hard reality check comes down to what's actually written in the purchase promise agreement. The contract 100%. Where does that contract provide the actual protection when unavoidable delays happen? You know, things like major hurricanes, supply chain disruptions, labor shortages. Mm-hmm. Stuff happens. The contract is your ultimate safeguard, or it should be. Yeah. And what's interesting here is this sort of. Two tiered system they generally employ to handle delays, two tiers. Okay. First, the contract has to stipulate a clear promise delivery date that sets the initial expectation standard enough, but critically, it almost always includes a defined grace period. This period is pretty standard across the industry, typically ranging from, say, three months, up to maybe six months. Okay? So that grace period acts as a buffer. Like a built-in allowance for unforeseen issues. Precisely. If the developer delays for say, five months, and the grace period in the contract to six months. Well, technically they haven't breached the delivery agreement yet. Got it. It accounts for those extraordinary events, true force majeure things genuinely beyond the reasonable control of the development team. But, and this is the crucial part. What happens if they blow past that grace period? Exactly. What happens if the delay extends past that safety net? This is where the financial compensation is supposed to kick in the penalty clause. Okay. Tell us what that compensation looks like. We need actionable numbers here, not just vague promises of you'll be compensated. Sure. The experts confirmed that if the delay does extend beyond that grace period, the client is compensated usually with interest payments. Now the exact figure is contractual. It varies naturally, but the typical range cited in the market discussion was often between say 0.75% and maybe 1.5% monthly. Monthly. Okay. Monthly. And it's usually calculated based on the total purchase value of the unit sometimes. Though less common. It might be based on the accumulated amount the client has already paid towards the unit, right? But that percentage, whatever it is, is paid for each accumulated month of delay after the grace period expires. Okay, let's make that concrete. If I bought a$200,000 apartment and the developer is now saved four months past the six month grace period, so 10 months total delay from the original date, right, and the contract says 1% per month penalty on the total purchase value, that means they owe me$2,000 per month,$2,000 per month. For each of those four months past the grace period. So$8,000 total in this example. Correct. That provides a clear financial incentive, a penalty for the developer to avoid those extended delays. But there's always a, but is it truly perfect for the buyer? Does that$8,000 really make me whole? Well, that raise is a really important consideration for you. The learner, while it is defined compensation, and it definitely constitutes a penalty on the developer, the investor has to calculate whether that penalty. Truly covers their own financial impact. Meaning if you are banking on immediate high yield vacation rental income starting the month after the grace period ended, does that 1% penalty that$2,000 a month actually cover your lost cashflow potential? Yeah. Maybe your projected net rental income was$3,000 a month. Ah, so the penalty might cover the inconvenience and the cost of having my capital tied up, but it might not fully replace the lost opportunity. Income exactly. The investor relying on a hard delivery date for immediate rental revenue. While you need to understand that you are taking a calculated risk, even with this penalty clause in place, it mitigates but may not eliminate the financial downside of a delay. So the contract lays out the rules of the game, the penalty structure, but the takeaway is you should always, always consult your own legal advice. Absolutely. Yeah. Review the terms carefully. Is the grace period reasonable? Is the penalty percentage fair? How does a calculated total value or paid amount? That's what the experts really emphasized. If something about the guarantee or the penalty structure just doesn't sound right or feel robust enough, red flag. Big red flag. Yeah. Exercise extreme caution. Read the fine print. Okay. Let's shift gears a bit to the upside the profit potential. Question number three gets right to it. What price do you project for my apartment at the time of delivery? Mm-hmm. The big payoff question, this is really what separates presale investment from just buying a property that's already finished and ready to go, isn't it? It is. This is pure market strategy and risk assessment. The projected appreciation, the potential gain in value, it's directly linked to the risk you, the investor, assume during that construction phase. So the timing of when you jump in is everything. It's critical. It determines the size of the discount you receive compared to the final market price. If you buy very early, maybe friends and family or the initial launch phase, you're basically providing the developer with seed money. Or early construction financing. Your capital is available when their risk is absolutely the highest. Exactly right. You're taking on the most uncertainty and the market in theory, compensates you for taking that higher risk. So how much compensation are we talking? What's the typical discount or appreciation potential The roundtable discussion provided a very concrete metric that these developers often use as a target. They typically launch new projects at prices projected to be somewhere between 20% to 30% lower than the prices of comparable properties that are already finished titled and ready for immediate delivery in that same competitive area. Wow. Okay. 20 to 30% just baked in by buying, say, two years before delivery. That's a huge incentive. It's a massive incentive. It's the primary driver for presale investment. How do they maintain that spread? Is it guaranteed? Well, guaranteed is a strong word in real estate, but it's managed. It's a delicate balancing act based on really rigorous market studies of the area. The appreciation isn't random. Developers strategically increase their list prices as construction milestones are hit. Ah, so the price goes up incrementally. Yes. Maybe a price bump when the foundations are poured another, when the structure's topped off another, when finishing details begin, they manage the price list upwards during the construction period. I see that initial 20% to 30% gap is carefully calculated. It needs to be attractive enough to bring in that essential early stage capital from investors like you. It also has to ensure that when the units are finally delivered, their final list price is competitive with the existing immediately cash flowing inventory next door. So they don't price themselves out of the market at the end. Exactly. If the initial discount gap were too small, why would early investors take the risk? If it were way too large, the final price might be unsustainable or signal desperation. It's strategic pricing. Okay, so let's run another quick number. If I buy a unit at launch for say,$150,000, and based on the market and the developer's plan, that same property is priced at$195,000. I've potentially gained$45,000 in equity. Just on paper before I even pay closing costs or collect a dime of rental revenue, that is the core driver for the aggressive presale investor profile. That's the goal. Your initial profit is essentially realize the moment that construction risk evaporates, which happens when the project reaches completion and is ready for delivery precisely. The high reward component of the strategy is capturing that construction phase appreciation, Alright. Now for the, uh, maybe less exciting, but absolutely necessary reality check the financial buzzkill, perhaps. Ah, yeah. Gotta face the music sometime. Question number four, what closing costs should I budget for besides the actual purchase price? Nobody wants to get to the finish line, ready to get the keys, and then get hit with a surprise bill for thousands of dollars they didn't plan for. No, that's a terrible surprise. And this is just foundational stuff for accurate budgeting. You have to know this number in Karoo where many of these tourist developments are, right? Like Cancun, Tulum, Pade, Carmen. Exactly. The consensus among the experts at the round table and. Generally in the market is that the estimated budget for all your closing and titling costs is approximately 7% of the transaction value. 7%. Okay. And the really key thing to understand here is that this money is paid externally. It's not going to the developer, right? It's not part of their profit margin. No. It's going to the go. Federal state, municipal, and to the notary public for their services. Okay. Let's use a simple simulation again to make that 7% feel real. If I secured that, say,$200,000 unit we talked about earlier, Hmm. 7% of$200,000 is$14,000. Correct. So I need to have$14,000 in cash ready to go completely separate from my down payments and the final installment payment on the unit itself. And this is due right at closing? Pretty much, yes. Right. When you're finalizing the purchase and getting the title. It is a significant lump sum that needs to be factored into your total investment calculation from day one. It absolutely is. So you the learner, you need to know exactly where that$14,000 in this example is actually going. Can you break down the components of that 7%? Sure. It covers a number of mandatory distinct things. First, you have the notary fees or notary public rights. You're paying for their professional services. They conduct the legal due diligence, verify documents, calculate taxes, and officiate the signing of the deed, ensuring the whole transaction has legal validity. Okay, the notary's cut. Makes sense. Second. There are public registration fees. This is the cost to officially record your new title in the Public Registry of Property, makes it official effective. Try it. Government record keeping. Third, you have various local taxes. This bundle includes state and municipal fees, and the most significant chunk of this is usually the acquisition tax. Locally, it's known as the ISA. The ISA. Okay. Let's define that because it sounds important. How is that acquisition tax calculated and why is it such a big piece of the 7% I a I stands for in Sore acquisi, the in web tax on the acquisition of real estate, it's primarily estate tax, though municipalities might have related fees. Mm-hmm. Its calculation basis can vary slightly by state, but it usually hinges on whichever value is highest out of three. One, the official government assessed value the castral value. Two, a formal commercial appraisal value if one is done, or three, the actual transaction price stated in the contract. Whichever's highest. Usually yes. They take the highest value to maximize the tax revenue. And this ISAI, it's typically the largest single component within that overall 7% budget. You're essentially paying the state a percentage for the right, the privilege of acquiring that real estate asset. Okay, that makes sense. Taxes and fees paid right at the very end, once the property is ready for delivery and the title is being transferred. Correct upon titling. But you mentioned earlier there might be a strategic financing tip, something that could ease the burden of that$14,000 lump sum. Yes. And this is a really critical maneuver for investors who want to. Maximize their liquidity. Keep more cash on hand if you're financing a portion of your property purchase with a mortgage loan, which many investors do, especially foreign buyers, right? Many banks, not all, but many, will allow the buyer to roll these closing costs that entire 7% package into the long term mortgage financing. Ah. So instead of needing that$14,000 in cash, immediately at closing, you add it to your loan principle. And you pay it off gradually over the 10, 15, or 20 year term of your mortgage. Along with your main loan payments, that dramatically lowers the immediate cash requirement right at the moment you take possession. That could be a lifesaver for some investors. Cash flow planning, it really can be. It makes the entry point much smoother financially. Definitely something to ask your mortgage broker about. Good tip. We also need to clarify the distinction between buyer and seller responsibilities regarding all these costs and paperwork. It can get confusing. Yes. It often confuses first time buyers, so let's be clear. You the buyer paid that 7% titling package to put the property into your name, right, the cost of becoming the new owner, the developer, acting as the seller has responsibilities too. They must provide numerous certificates and documents proving the property is clean and ready for transfer. Like what kind of certificates? Things like certificates. Confirming the property is free of any liens or encumbrances. Certificates showing that all existing property taxes are paid up to date clearances for water and other utility connections proving there are no outstanding debts. Okay. The seller generally bears the initial administrative costs to obtain these clearance documents to prove the property is sellable. You the buyer, then pay the 7% package required to actually execute the transfer and officially switch the name on the title deed Seller. Cleans the slate. Buyer pays to write their name on it. That's a pretty good analogy. Alright, let's move into some more strategic plays. This next question is a pure measure of investor flexibility and frankly, playing the market. Can I resell my unit before the official delivery? And if so, what is the cost? Ah, the flip before you finish strategy. Exactly. This allows those early investors to capitalize on that 20% to 30% appreciation. We talked about potentially without ever incurring those 7% closing costs because they never actually take title. This is definitely the hallmark of the high velocity, often more experienced real estate investor profile. Their goal isn't necessarily to hold and rent. It's to capture that construction equity quickly and then cycle that capital into the next hot pre-sale launch. Makes sense. So what's the general answer? Can you do it? The general consensus from the experts was, yes, reselling or more accurately transferring your contract rights is generally accepted by most developers, but there's a key timing element. You typically must initiate and complete this transfer process before the official titling and unit delivery process has formally begun for your specific unit. Once that final stage starts, it usually becomes much more complicated, Okay, so timing is critical. Administratively. How does the developer actually handle this trans full of interest? Is it like they just cross out my name on the contract and write in the new buyer's name? Huh? No, it's usually a bit more formal than that to maintain legal purity and avoid issues down the line. Figured the procedure described by the developers is typically a formal termination of the original purchase promise agreement with you, the first buyer. Okay. Tear up the old one, essentially, and then the generation of a completely new. Fresh purchase promise agreement directly with the new buyer. I see a clean break. Exactly. This clean break ensures there's no lingering liability for the developer related to the first contract, and it establishes a clear contractual timeline and set of obligations for the second buyer starting from scratch. Okay, that makes sense legally. Now let's analyze the cost. This was fascinating. Instead of charging, say a percentage of the appreciative value, which could be a substantial amount, if the price went up 30% right, a percentage of the reseal price, the developer example, cited in the source groupo to sewer apparently charges just a flat administrative fee only MXN$25,000. That's roughly what, 1500 US dollars around that? Yeah, depending on the exchange rate, why would the Phoebe so low and why flat instead of a percentage? That seems almost generous. This is probably the most fascinating nugget of commercial strategy we pulled from that discussion. Think about it, a high percentage fee, say 5% or more of the resale price, what would that do? It would eat significantly into the first investor's profit. Right. It would penalize the investor for flipping. Yeah. And discourage these kinds of early exits. Mm-hmm. It would slow down capital movement by charging a deliberately low flat administrative fee, just enough to cover their paperwork and maybe a tiny bit more. The developer is sending a clear signal. They're implicitly saying they support and even encourage this type of investor churn. fosters goodwill with the market. It attracts the experienced high volume investors who value liquidity and low friction, low overhead administrative processes. Mm-hmm. For this type of developer, it's actually a key part of their business model. If they get their initial sale profit locked in early, they keep inventory moving and they build relationships with repeat investors. Exactly. It's a calculated decision. They attract serious investors who provide that crucial early capital, and these investors don't tie up inventory for the long haul. If the developer benefits from the initial sale may be subsequent sales, if the unit had slipped again, well, the initial investor achieves their financial goal, realize the equity gain without the headache, and more importantly, the significant expense of the 7% closing costs. Yeah, it's a win-win structured that we deliberately Okay. This next one is the perfect practical aha moment. It really highlights the difference between investing in tourist focused condos versus buying a traditional residential home. Question six. Why doesn't the real estate development have assigned parking spaces? Mm-hmm. This throws people off, especially if they're used to North American or European residential markets where deeded parking is almost always standard. So why is it different here? The decision is driven almost purely by maximizing the return on investment for you, the owner, and maintaining competitiveness in the vacation rental market. It boils down to an economic equation. these developments focus almost entirely on vacation rentals, short-term stays, right? They're not primarily for full-time residents. Exactly. Which means the end user, the Airbnb guest, the hotel guest, staying for a week has fundamentally different transportation habits and needs than someone living there permanently. Okay. Explain that difference. Right. So reason number one is simply lower demand from the user. Tourists staying in prime, walkable tourist areas often rely on well walking or maybe scooters, taxis, uber prearranged, airport shuttles. They don't always rent a car for their whole stay, correct. They simply don't rent cars often enough or rely on them heavily enough to justify the developer building and the investor paying for hundreds of dedicated individually deeded parking spots. That's reason one. Usage patterns. Okay. And reason two, you said it was economic. Reason two is the decisive financial impact on the investor. If parking were assigned and deeded, this is where the savings really accumulate for you by not having one. Okay. Break down the true cost of adding an assigned deeded parking spot to my condo unit, because it sounds like more than just the concrete. Oh, much more. First, remember, a standard parking spot is maybe 12 to 15 square meters of actual land or constructed space. Right. That one simple addition, deeding that space to your unit impacts your costs in at least three significant ways. One higher purchase price for the unit. Initially, the developer has to charge you for the cost of that land and the construction costs associated with building that parking space. Whether it's surface level or structured underground, it adds directly to your acquisition cost. Makes sense. Pay for the space. Two. Higher closing costs. Remember that 7% we just talked about? Yeah. Calculated on the transaction value. Exactly. If your unit now includes an extra square meters of deeded parking space, the official value of your property is higher, so your 7% closing cost budget just increased, because you're titling more square meters. Ouch. Okay. Higher closing costs. What's the third hit? Third, and this is often the biggest long-term drag, increased maintenance fees your monthly HOA or condo fees. How does parking affect HOA fees? That extra square footage, even if it's just a painted spot in an underground garage, it requires upkeep. Lighting cleaning security patrols, or cameras monitoring it, repainting lines, concrete maintenance or repairs over time. Insurance for that common area. Ah, okay. All those shared costs get allocated. Right. Every skill month for a parking spot my rental guests might use for three days outta the year it's a massive ongoing drain on your net operating income. For what? For a feature that doesn't really drive higher rental rates. That is the conclusion the developers have reached an assigned beaded spot does not materially increase your nightly rental rate on platforms like Airbnb or VRBO. Especially if the building does offer some communal unassigned parking as a general service or amenity. So they usually have some parking just not tied to specific units. Often, yes, maybe an underground garage with first come first serve spots or valet parking. That's usually sufficient for the transient tourist market. By excluding assigned deeded parking from the individual units, developers essentially eliminate a huge, unnecessary recurring operating expense for the investor. It makes your unit inherently more profitable over the long term. It's a smart financial move. Disguises a lack of a feature. Okay. Our final key question from the round table. This one addresses design, control and personalization. Can I modify my apartment when investing in a pre-sale? Mm-hmm. A very common question, especially from investors who are really thinking about. Maximizing rental income through specific layouts, right? They have an idea to make it function better for renters. What kind of modifications are typically requested? Yes. The requests are often frequent and quite specific. They usually revolve around maximizing the flexibility and functionality of these investment focus configurations. Probably the most common technical request involves the lock off unit. Okay. Let's define that term lock off for the listener because it's absolutely central to investment property design. In these tourist areas? Sure. A lock off unit is basically an architectural design feature. It allows a single property title, let's say, a two bedroom, two bathroom apartment to be physically split into two completely separate independently rentable sections. How does that work? Like two front doors, often? Yes. Or one main entrance leading to a small foyer with two internal doors that can be locked securely from both sides. One section might function as a self-contained studio apartment, maybe with its own entrance, a small kitchenette and a bathroom. The other section would be the main unit, perhaps one bedroom suite with the full kitchen living area and another bathroom. I see. So you own one apartment, but you can rent it as two separate units. Exactly. This allows the owner to maximize occupancy and income potential. You could rent out both sections separately to different parties, or you could use one section yourself for your vacation and rent out the other section simultaneously. It offers huge flexibility. Got it. So the modification requests usually involve messing with that lock off setup? Precisely. Common requests are things like, can you remove the lock off dividing door and wall entirely? Just make it one large standard two bedroom apartment. Mm-hmm. Maybe they don't want the rental complexity or the opposite. I'm buying two adjacent studio. Can you add a connecting lockable internal door between them? So I can rent them together as a two bedroom? Sometimes or separately. Other times room or sometimes more fundamental changes. Like this unit has a dual logoff, meaning two kitchenettes. I only plan to use it as a single residence when I visit. Can you remove the second kitchenette entirely before you build it? Right. So are these kinds of changes generally possible? Generally, yes. They can be possible. But, and this is a huge, but only under two extremely strict conditions that are pretty much universally dictated by the developers. Okay, lay them out for us. Condition number one, timing. Absolute critical timing. Yes. Modifications are only feasible if you request them very, very early in the construction process. We're talking when the project is still basically lines on a blueprint or maybe just starting the structural gray work before the walls really go up exactly before structural walls. Electrical conduits, plumbing lines, and HVAC systems have been installed according to the standard plan. Once those key systems are in place, making changes becomes incredibly cost prohibitive, risk, structural complications, and causes major delays, not just for your unit, but potentially for the whole floor. So if you buy later in the construction cycle, maybe six months before delivery, the answer to modifications is almost certainly gonna be a firm polite, no, this is just too late. You bought the standard plan at that point. Okay, timing is crucial. What's condition number two? You said it ensures commitment. Correct. Condition number two is the developer's way of protecting themselves and ensuring the client is absolutely serious about this non-standard exceptional request. How do they do that? Think about it from their side. Modifications mean changing architectural blueprints, dealing with specialized engineering approvals or calculations. Managing non-standard labor, on site ordering custom materials, perhaps all of this increases the developer's complexity, risk, and potential for error, right? It throws a wrench in their standardized process. It does. So they need absolute assurance that the client requesting this exceptional change is fully committed. And won't back out later. Leaving them stuck with a weird customized unit that might be harder to sell to the next standard buyer if the deal falls through. So how do they get that assurance? A bigger deposit, exactly. Therefore, to even consider executing any significant non-standard modification, the developer will often require a substantially higher initial down payment for the buyer. The figure mentioned in the roundtable was typically a minimum of 50% down payment paid immediately upon signing the modified agreement, 50%. Wow. Okay. That's serious skin in the game. Yeah, it absolutely is. Yeah. It effectively locks the buyer in and covers the developer's risk exposure for undertaking the custom work. No, 50% down, no custom changes. Simple as that for most major modifications. So serious modification requires serious financial commitment upfront. Even if you meet both conditions, early request and 50% down, are there still limits? Can I redesign the whole thing? Oh, absolutely. There are still firm limits. The 50% down doesn't buy u carte blanche. The limits are generally non-negotiable, particularly concerning anything structural or anything that affects the common areas or the building's exterior appearance. What kinds of things are definitely off limits? Well, while internal, purely cosmetic changes after you take delivery are usually allowed, like painting walls, changing light fixtures, provided they don't mess with structural elements or plumbing changes requested during construction that break. The visual aesthetic of the building affects structural integrity or impact. Common elements are strictly disallowed. Always the example from the round table about ground floor terraces that seemed to highlight this perfectly. Yes, that was a great illustration. Developers talked about instances where owners of large ground floor units, which often come with spacious private patios or terraces. All right. A nice feature. Those owners wanted to enclose their private terrace space with permanent walls, windows, maybe even a solid roof, essentially trying to create an extra interior room out of their outdoor space. I can see why someone might want that extra square footage. Sure. But that type of modification is instantly rejected by developers. Why? It's their private terra space, isn't it? Yes. But it fundamentally impacts the visual harmony and architectural integrity of the entire complex. Imagine one ground floor unit sticking out with enclosed walls while all the others are open terraces. It looks terrible. Plus it often blocks or significantly alters the view. The light and the airflow for the units directly above it. Ah, okay. Affects the neighbors, critically affects the neighbors and the overall plan design. The developer has an obligation to all owners and to the building's overall aesthetic and value to maintain consistency and enforce the original architectural plan, especially on exteriors and common facing elements, which brings us neatly to what you call the build your own house threshold. Exactly. You have to remember, you are buying one unit within a mass scale development. These projects might have a hundred, 144, maybe even 300 plus units being built simultaneously. It's a standardized production process to some extent. It has to be for efficiency and cost control. So if you as a buyer come in wanting to relocate all the major plumbing stacks or move load-bearing walls, or demand entirely non-standard exterior finishes or window types, or insist on a completely different interior color scheme for cabinetry and tile that the developer doesn't offer, you've basically missed the point of buying into a presale development. You've missed the point. That's the reality. Mass development prioritizes efficiency. Speed, consistency and conformity to achieve economies of scale. If a client requires that level of total concept change in customization, they really need to recognize they're asking for custom homebuilding, which is a totally different ball game, totally different price point, timeline, and process. It simply cannot be accommodated within the context and constraints of these large scale fast-paced investment property. Projects, the limits on modification are necessary for the development and ultimately all the investors within it to succeed on time and on budget. So let's try and wrap this up. What does this all mean? We have, I think, successfully navigated and really unpacked seven absolutely foundational questions. We've aimed to provide the kind of clarity that's necessary to define the sort of rules of engagement in this high velocity real estate investment sector. I think so. We've established that the Fitia comiso, while sounding complex, essentially grants you full beneficial control and writes over the asset. The key caveat being that the units established use residential or commercial must be strictly respected. Can't change that. And we saw that contractual protection against those dreaded construction delays, it's quantified. It usually involves that grace period buffer, followed by a specific monthly financial compensation, a penalty, often based on the unit's total value. If delays extend beyond that buffer and financially, we clarified that buying early, taking that construction risk, well, it aims to secure roughly a 20% to 30% potential profit margin or appreciation by the time of delivery. That's the reward. And crucially, the cost side, we absolutely must budget approximately 7% of the transaction value for those necessary external closing and titling costs. But the good news is we learned that this lump sum can often be strategically rolled into a mortgage loan to. Ease the immediate cash crunch at closing. Mm-hmm. We also dissected some of the commercial rationale behind developer policies. Understanding that a low flat fee for administrative reselling isn't just nice. It actively fosters investor liquidity in turn, which can be part of their model. Yeah, that was insightful. Those design choices, like avoiding assigned deeded parking, they aren't arbitrary. They're usually very calculated financial moves. Designed specifically to minimize your recurring monthly maintenance costs, thereby boosting your long-term net rental income potential without really sacrificing rental value in the tourist market. Having this level of detail, these insights in your arsenal as an investor, I mean, it feels like the difference between operating on gut feeling or intuition and operating like a seasoned, calculated professional who understands the game. It really is. You now know the rules, you understand the key risks better. And you can spot the strategic opportunities and the potential pitfalls much more clearly, you know the landscape. And perhaps to leave you our listener with a final, provocative thought to explore on your own as you do your due diligence. Okay, let's hear it. While the contract, the written word is legally binding regarding things like delay, penalties and grace periods. Perhaps the ultimate form of due diligence. The one that transcends even that written contract is digging into the developer's actual reputation, and more importantly, their documented past actions. How they behaved previously exactly. Go beyond simply confirming that a penalty clause exists in the contract. Ask around investigate, did they actually support those administrative resales smoothly and with that low fee during their last project? Or did they drag their feet and complicate the process despite what the contract allowed? Hmm, when the pandemic hit and caused massive disruption, how did they actually treat their clients regarding delays in compensation? Were they fair? Were they proactive? Or did they hide behind the bare minimum letter of the contract? So look at the track record of behavior, not just the promises on paper. Precisely exploring their documented past behavior, talking to previous buyers if possible. That provides perhaps the most comprehensive layer of security and confidence when you're dealing with these highly variable factors like potential construction timelines, and the administrative ease of transferring your rights. It's about assessing their character and integrity, which often tells you more than the legalese alone.