La Paz, Baja California, Mexico
A coastal Mexican town with a small, but growing, American community.

La Paz is more a Mexican city than an expatriate's haven, but for those who love magnificent seaside sunsets, sugary beaches, sailing, diving - and the ability to stretch a retirement dollar -- La Paz is a superb choice.

The capital of the southern half of the Baja peninsula, La Paz is located on the Sea of Cortez, just 90 miles from Cabo San Lucas. Like Cabo, La Paz has great deep-sea fishing and a desert climate; unlike Cabo, La Paz is light on tourist resorts. "Ten years ago, you couldn't even find La Paz in a travel agency," says Sidne Byars Herrero, a realtor who caters to Americans. "It's a real Mexican town." Mexican culture predominates, down to the architecture, which goes back to the town's founding in the 16th century.

The expat community in La Paz is small but growing, and new developments, including gated communities, promise to bring in more. Retirees spend time at the marina, enjoy the restaurants and take courses at the city's universities. Bridge groups meet weekly, as do tennis groups and a writer's circle. The town square has live music almost every night.

The Malecón, a palm-lined sea wall, is the place to take in the breeze after sunset. There are miles of beaches north of the city and three undeveloped islands open to kayakers, divers and sailors. The whales swim by in February, the dolphins in summer. However, summer is hot, and many expats return to the States from May to October.

There are some legal challenges to retiring in Mexico. Although you can collect Social Security there, you can't use Medicare outside the U.S.; if you choose to return to the U.S., you'll need to re-establish residency before you can reinstate coverage (unless you continue to spend part of the year in the States). You can, however, use private American health insurance.

Rentals in areas favored by Americans can be hard to find; owning property is more common -- but also more complicated. Mexican law forbids foreigners from owning land within 50 kilometers (about 31 miles) of the coast. You can buy land through a Mexican bank by using a mechanism called a trust deed, or fideocomiso. The deed is owned by the bank, but it gives the beneficiary rights to the land for 50 years and can be renewed. The house belongs to the beneficiary free and clear.

How secure are trust deeds? "There have been problems, some very notable cases -- not with the deeds in question but with title to the land itself," says Liza Davis, public affairs officer at the U.S. Consulate in Tijuana, who notes that the title insurance American homeowners count on is less common in Mexico.

There is one U.S. company that issues title insurance on Mexican real estate, Stewart Title Guaranty. Its Web site is loaded with information on how to buy real estate in Mexico. Davis suggests that any buyer use an expert Mexican real estate attorney. The consulate will provide a list of qualified attorneys on request.

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