Using Your IRA to Buy Real Estate in Los Cabos

A Little-Known Strategy for Diversifying Retirement Assets

Most Americans think of their IRA as a collection of stocks, bonds, ETFs, and mutual funds sitting inside a brokerage account.

What many don't realize is that a self-directed IRA can be used to purchase real estate—including real estate outside of the United States.

That means it's possible to use retirement funds to purchase investment property in Los Cabos, collect rental income, participate in appreciation, and potentially create a retirement home for the future—all while maintaining the tax advantages associated with an IRA.

For investors looking to diversify beyond Wall Street, it's a strategy worth understanding.

How It Works

The first step is establishing a self-directed IRA through a custodian that allows alternative investments. Unlike a traditional brokerage account, a self-directed IRA can hold assets such as real estate, private lending, private equity, precious metals, and other non-traditional investments.

Once the account is funded—typically through a rollover from an existing IRA or former employer 401(k)—the IRA can purchase investment property.

The key distinction is that the IRA becomes the owner of the asset, not you personally.

All purchase expenses, property taxes, insurance costs, HOA fees, maintenance expenses, and other property-related costs must be paid by the IRA. Likewise, all rental income and proceeds from a future sale must flow back into the IRA.

As long as those rules are followed, the investment maintains the tax advantages of the retirement account.

Can an IRA Buy Property in Mexico?

Yes.

The IRS does not require IRA-owned real estate to be located within the United States. An IRA can legally own investment property in Mexico, Costa Rica, Panama, Colombia, and many other countries.

The property must remain an investment while it is owned by the IRA, but there is no prohibition against foreign ownership through a retirement account.

For Los Cabos investors, this creates a unique opportunity to participate in one of Mexico's strongest real estate markets using retirement capital.

Why Los Cabos?

Los Cabos has become one of the most active real estate markets in North America.

Several factors continue to drive demand:

• More than 450 weekly flights from major U.S. and Canadian cities during peak season

• A growing remote-work population

• Strong tourism fundamentals

• U.S. dollar-based pricing for most higher-end properties

• Strong long-term and short-term rental demand

• Lower property taxes than most U.S. markets

Many investors are surprised to learn that once you move beyond entry-level housing, most transactions in Los Cabos are priced in U.S. dollars. Rental income is often generated in U.S. dollars as well, making the market particularly attractive to American investors.

The Retirement Home Strategy

One of the most interesting IRA strategies involves buying tomorrow's retirement home today.

Consider an investor in their 40s or 50s who knows they eventually want to retire in Los Cabos.

Instead of waiting until retirement, they use a self-directed IRA to purchase a condo or home now. The property is rented as an investment for the next 10 to 20 years, generating income and participating in market appreciation.

When retirement arrives, the owner can distribute the property from the IRA into their personal ownership.

In a traditional IRA, taxes would generally apply to the value distributed. In a Roth IRA, a qualified distribution may be completely tax-free.

The result is a retirement property that potentially appreciated for years while generating rental income along the way.

Common Ownership Structures

Most foreign investors buying property near Mexico's coastline use a structure called a fideicomiso, which is a bank trust specifically designed for foreign ownership.

Another option is using a Mexican corporation or LLC equivalent (an SRL), which can make sense for investors purchasing multiple properties.

Many self-directed IRA investors also establish an IRA-owned LLC, commonly referred to as "checkbook control." This structure often simplifies the acquisition process because Mexican institutions are generally more familiar with corporations than with U.S. retirement accounts.

Proper legal and tax advice should always be obtained before choosing an ownership structure.

Financing Options

Unlike the United States, financing in Mexico tends to be more conservative.

Typical options include:

Developer Financing

• Usually 50% down

• Terms ranging from 5–10 years

• Interest rates often between 5%–7%

Cross-Border Mortgage Lenders

• Typically 40%–50% down

• Rates commonly around 8%

• Terms up to 25 years

Many investors choose to purchase with cash, particularly when using retirement funds.

It's important to note that any financing used within an IRA generally must be non-recourse financing.

What You Cannot Do

The biggest mistake investors make is assuming they can use the property while it remains inside the IRA.

You cannot:

• Vacation in the property

• Let your spouse use it

• Let your children stay there

• Personally benefit from the property while it is owned by the IRA

The property must remain a pure investment until it is distributed out of the retirement account.

This is one of the most important rules to understand before moving forward.

The Bottom Line

Using IRA funds to purchase real estate in Los Cabos isn't for everyone.

However, for investors seeking diversification, long-term appreciation, rental income, and a potential retirement residence in one of Mexico's most dynamic markets, it can be a compelling strategy.

As always, investors should work closely with qualified attorneys, tax professionals, and self-directed IRA custodians before proceeding.

But for those willing to think beyond traditional retirement investing, Los Cabos may offer an opportunity to put retirement capital to work in a tangible asset that can generate both financial returns and future lifestyle benefits.

Fletcher Wheaton - fletcher@remexico.com