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The Journey Begins! Buying the Property

The Journey Begins! Buying the Property (2001 – 2002)

When guests arrive at Villa Santa Cruz, often before they even make it upstairs to their guest suite, they want to know the story of the Villa. They pepper us with questions like: Who owns it? How did you find the property? Did you renovate or build from scratch? Who was your architect? Where did you find the furniture? How do you run everything “off the grid?” The history of the Villa, the incredible risk and hardship involved in its evolution, the depth of relationships forged along the way, and the rewards, mistakes and learning experiences that have come from the last decade are enough to fill thousands of pages. Over the next few months, we’ll attempt to illustrate, through a series of blog posts, the journey we have taken to create what is now today’s Villa Santa Cruz.
The journey begins back in the late 90’s when the Villa’s owners, business partners Matt and John, were in the midst of their first business undertaking together – flipping homes in San Diego. Focusing on neighborhoods like North Park, Golden Hill and Sherman Heights, they’d buy a home, remodel it and either sell it or keep it to refinance and rent out, using the equity earned in the home as the down payment for their next “flip.” With their meager funds tied up in the remodels, they had little left over for any type of normal personal life. As only single men can, they lived like homeless vagabonds, sleeping on the floors of their remodels, crashing on friends’ couches, and living in ugly motorhomes they would park on a different street block each week. It was a crazy time – something pulled off by young guys willing to dream big, play the risky real estate market, sacrifice conveniences, and work hard.

By living on the cheap, they found themselves with enough time and money between remodels to escape construction life and travel the world. They visited Ibiza on one trip, Thailand on another, and then decided to head south of the border in November 2001 to explore Baja. Just two months post-9/11, with the threat of terrorism palpable, it took a bit of chutzpah to travel to Mexico, but, like their current lifestyle, risk was never a deterrent.
Winding their way down the Baja Peninsula in Matt’s 1973 ocean blue Westfalia camper van with Australian Shepard mix, Tucker, they rolled into a small, relatively undeveloped bohemian fishing village on the Pacific ocean called Todos Santos, located 50 miles north of Cabo San Lucas. On the days preceding their arrival in Todos, they’d heard rumors that it was known as the “jewel of Baja.” Once there, they understood it was aptly named. With beautiful golden light cast on lush palm trees serenaded by a soundtrack of crashing waves, tweeting birds and a soft breeze rustling pink bougainvillea petals, the town certainly stood out against the monotonous brown desert that covered the rest of the peninsula.

The Ocean Blue Westfalia Camper Van

Although Todos was a “beach town,” they were surprised that the town itself was set back a mile from the beach. Determined to camp on the sand, they headed north out of Todos to find beach access. Bumping along the dirt road, they were pulled farther and farther north by the beauty of the expansive landscape. With the Pacific to the west, a purple hued mountain range to their right, and oases of dense palm groves dotting the coast line, they’d found their Mexican heaven. Eventually, about five miles north of town, they turned left off the main road and headed to the beach. They came upon a young Mexican man, and in their broken Spanglish, asked the price for camping on the beach. The man requested only one beer. Feeling that they must have misunderstood (who would want just one beer?), Matt and John offered him a six pack. The man replied, no, that he’d prefer only one beer – he did not want to get in trouble with his wife. Having paid their toll, they set up camp on the beach. Intending to spend just a night or two in Todos, they just could not pull themselves away from their spot of paradise and stayed for over a week.
Each morning they would run along the shore, between the surf and the dunes, remarking that the landscape looked eerily similar to the green bluffs of Pebble Beach, scalloped by the waves. Spending the days napping, reading and watching Tucker dog paddle waves and dig for sand crabs, they were always well rested for sunset happy hour and a few games of coconut bowling.

Matt is Coconut Bowling
Matt is Coconut Bowling

After a few days on the beach, and having run out of the essential supplies (beer and ice), they headed back into town to restock. Considering that their “campsite” was just a patch of sand and didn’t come with showers, soap or razors, they were quite a haggard duo walking around Todos, looking, true to form, like homeless guys. Passing by the Amerimex real estate office window on their way to the grocery store, Matt recognized a fence line in one of the listings as the one that they would run past each morning on the beach. On a lark, they went into the office to find out more details on the property.
Behind the desk was realtor Richard Rutowski, a tall man with a big smile, casual demeanor and cowboy boots. A Hollywood transplant to Todos Santos, he is most well-known for writing the screenplay Natural Born Killers. Almost instantly, Matt and John coined the moniker “Natural Born Realtor.” To a different kind of guy, Matt & John’s filthy appearance may have suggested that said property was out of their financial reach. But, to the Natural Born Realtor in a town like Todos Santos, opportunity came in all forms. Without pause, Richard took them out to see the land and discuss details.
The three of them intended to walk the perimeter of the 24.7 acre (10 hectares) property to get a feel for the land, but after arriving at the property’s front entrance, they knew this would be a challenge. With dense cactus and overgrown desert brush, there was no defined pathway to travel the quarter mile from the road to the beach. Gingerly stepping through growth and brush, scraping legs and stubbing toes, Richard explained that the main value in this land, besides the obvious stretch of beach frontage, was water. Historically, the property, commonly known as Rancho Santa Cruz, was a rich farmland. Neighbors remember days of working the land, cultivating sweet potato and papaya plants. Old brick canals that begin at the well tower and wind their way through the property evidence antiquated irrigation methods in which farmers flooded their vegetable fields to water on a large scale (this was before the invention of modern methods like header pipes and drip tape). Matt and John now understood why this property felt so special on their morning runs – it was green. Juxtaposed against the dry brown desert lots with scraggly brittle brush that surrounded Rancho Santa Cruz, the green dunes, thick saguaro cactus and palm groves on the property were simply magnetic.

Just Raw Land
Just Raw Land (the Van is exactly where the Pool will one day be)

Raw Beach Front Coastline at Rancho Santa Cruz
Raw Beach Front Coastline at Rancho Santa Cruz (the Palapa will later be built here)

The three of them finally broke free of the overgrowth and made their way up the dunes as the ocean came into full view. The clear sunny November day was captivating – whales splashed out in the Pacific, ocean waves gently rolled up the white pristine shore, and sand felt warm and soft between their toes. Looking from the ocean back over the property and out to the mountain range in the east, they were overcome by the serenity of the landscape. What a discovery! They had to have it. But, there were two main problems: one, they didn’t need a 25 acre parcel of raw land in southern Baja and two, they couldn’t afford it. Not ones to let need or lack of resources stop them, they put their heads together to learn more about the deal.
Talking with Richard, they quickly learned that buying property in Mexico was radically different than doing so in the United States in one very important regard – money. As real estate flippers, they were well-versed in the business of bank mortgages, accumulated interest and down payments and were thus shocked to hear that none of this applied in Mexico – they were expected to pay all cash, all at once. Frenzied by their love for the property, but uneasy about coming up with such a large sum of money, they devised a plan.
After scribbling numbers and punching calculator keys, Matt and John asked Richard to communicate their offer to the seller – they would buy 1/5 of the beachfront with an option to buy the second fifth within 2 years, with a first right of refusal on the third, fourth and fifth portions, and so on until they had purchased the entire parcel over 10 years. While impressed with their creativity, Richard knew the seller would reject it outright. The seller, an elderly American man, was wrapping up affairs in anticipation of the end of his life and originally intended to donate Rancho Santa Cruz to an orphanage in Cuernavaca (mainland Mexico) where he was living. The orphanage was flattered that the seller would want to gift it such a valuable property, but had to turn it down because it lacked the resources to deal with a property in Southern Baja – to them Rancho Santa Cruz might as well have been on the other side of the world; money was the only thing it needed. Motivated by the needs of the orphanage, the seller responded to Matt and John’s offer with a surprising counter – if they could come up with the full asking price, in cash, on the 24.7 acre parcel within one year, he would throw in an additional 21 acres (8.5 hectares) located on the east side of the road for the same price. Upon hearing this news, Matt and John’s jaws dropped wide open – double the amount of land for the same price? Was this for real? They would not let their lack of funds impede their great luck.
Bubbling with excitement, their minds were instantly racing, hatching plans to come up with the funds. They knew that their only option was to liquidate all their assets in the San Diego remodels. They put a few of the homes up for sale and refinanced another, putting the equity towards the purchase price of Rancho Santa Cruz. The year they had to come up with the money was soon running out and they were still short by almost 50% of the purchase price. One of their properties had been on the market for many months and would not sell, so they decided to take on a partner in that home and put his contribution toward the purchase price. Yet, they were still short by 25% of the purchase price. Defeated and disappointed, they remained steadfast in the desire to own Rancho Santa Cruz. Playing their last card, they were forced to borrow against a property in the United States that John owned with other partners – committing Matt & John to covering a monthly payment until the amount of that loan was repaid. Without a reliable income to ensure that they could afford the monthly loan payment, it was a gamble, but they ignored that worry and instead focused on the prize – they had bought Rancho Santa Cruz, their piece of paradise.

John with Tucker at the Front Entrance of Rancho Santa Cruz (starting to clear the land in the background – read about that step of the journey in the next installment)

Finally taking possession of the property in September 2002, Matt & John pulled an Airstream trailer onto their parcel of raw land to bask in the glory of the Mexican sun and surf – it was their hobo heaven. They spent that first evening playing bocce ball on the sand, watching Tucker chase pelicans at sunset, and sitting around a fire, congratulating themselves on becoming “Mexican land barons.” It was a night of celebrating good fortune, good friends and good luck. Ignorance was bliss. Had they known of the tsunami of problems, struggles, hardships and desperation that were about to hit them, they would have packed up that first night, relisted the property, and never have looked back.
Focused solely on the thrill of the deal for the past year, they had not given much, if any, thought to what they’d actually do with the property once they had it. Waking up the next morning, they had a few sobering realizations. While the property did come with abundant water rights and a well, there was no functioning infrastructure to pump the water out of the well, let alone any existing hose bibs or faucets they could turn on to fill a bucket with water. There was no electricity (the property was located way outside the town power grid), no septic system, no liquid propane gas tanks – none of the infrastructure needed to make raw land inhabitable at even the most basic level. Alarming them further, they had sunk every last penny they had into the purchase price of the raw land, and still owed a large sum to a US bank. Out of money, the land they had labored so hard to buy began to feel like a weighty liability. Where would the money come from to make basic improvements? What jobs could they get to keep them afloat? What was their next step? How in the world would they dig themselves out of this one?To see what happens next in the story, check the blog in a few weeks to read the next installment in the crazy adventure of Villa Santa Cruz.