Most of the transactions for buying and selling are done in cash, but financing is available from U.S. institutions and real estate developers as well as Mexican banks — though usually at higher interest rates than their foreign counterparts.
Besides direct purchasing, Mexico has expanded real estate investing by offering its first-ever real estate investment trust in March 2011. Listed on the Mexican stock exchange, the Fibra Uno REIT sold some $300 million worth of shares, with a third bought by foreign investors, in its first go-round. More REITs are expected to follow.
Of course, buying and selling property in Mexico means paying taxes in two countries.
"There's capital gains tax for the U.S. if the property is sold," said Brent Lipschultz, a partner in the accounting firm EisnerAmper. "There's tax implications with rental real estate as well, and with investing in a REIT. It's important that people report any income to the IRS from foreign property and work with someone who knows international tax issues." (Want to know more about U.S. taxes?)
"There's a sales transaction fee that can be 3 to 6 percent of the deal, and you will pay annual property taxes in Mexico up to 1 percent of the land's value," said Hadid. "Owners will also pay capital gains in Mexico when they sell."
Along with taxes, investors face a Mexican housing market that's still in the midst of recovering.
"There are certain weaknesses in Latin America for nearly 20 years," says Hadid. "Right now Mexicans are looking at existing homes closer to their work to save money, as opposed to buying new homes. That means new home sales are down."
Besides taxes and the economy, investors have to deal with a much more serious issue when it comes to Mexican property — the continued deadly drug violence. (More:Mexico's Image Problem With Tourists)
"Mexico to me is just like any other place, in that you don't want to be in the wrong place at the wrong time," said Hatfield. "You just need to be wise about what you do. Mexico's a tourist destination, and the government doesn't want to lose that, so it's doing what it can to stem the violence."
The newly elected government is actually a return of the Institutional Revolutionary Party or PRI, that didn't impose a war on drug lords when it was in power six years ago. Some say that's a better way to handle the problem. But the killings have taken a toll.
"Most of it is centered in particular areas like along the border with the U.S., but it's headline news and still a concern," says Jim Worms, Chairman and CEO Paladin Realty Partners, a U.S. based investment firm that has been active in Latin America for nearly two decades. "There are fewer institutional investors now than a few years ago because of it."
"I have a 3-year-old and 7-month-old, and I would pull up stakes if I felt there was any danger," said O'Neal, who says most of his current international buyers are Canadians, Americans and Italians. "The PRI won't allow the drug cartels to stop people from coming here."
In spite of the violence, many analysts say Mexican real estate can still be a good investment, especially in commercial and retail sectors. For the Bradys, investing in Mexican real estate is a gamble worth taking.
"We always worry about the money we used, but time will tell if it pays off," Brady said. "We're praying and hoping every day that it will."