The hottest section is near Tulum, just down the beach from a massive Mayan fortress overlooking the Caribbean. While the area retains a funky 60's vibe (there's a nude beach--unusual for conservative Mexico), in the past several years some swanky hotels and real estate developments have been launched.

Indeed, with more than 70 million American baby boomers expected to retire in the next two decades, many without adequate pensions or health plans, some experts predict a vast migration to warmer--and cheaper--climates. Often, such buyers purchase a property 10 to 15 years before retirement, use it as a vacation home, and then eventually move there for most of the year. Developers are increasingly taking advantage of the trend, building gated communities, condominiums and golf courses and are selling directly to the retirees and to those wishing to hold the property as part of their real estate investment portfolio.

On the negative side, there are a couple of factors to keep in mind:

First, if you are planning on using investment property in Mexico as a repositioning strategy, remember you cannot use the popular 1031 exchange approach because the rules limit replacement properties to domestic replacements (i.e. land in the United States).

Also, many land-seekers are encountering a variety of obstacles with the investment itself, including skyrocketing real estate prices and confusing laws. Under the Mexican constitution, foreigners are allowed to own land outright anywhere except within 50 kilometers (31 miles) of the coastline or 100 kilometers from a national border. Within the restricted zone, they can hold the property in a trust, or fideicomiso. While they don't officially own it, they retain the right to use it and sell it for a renewable 50-year period. For example, in Tulum, several miles of virgin beachfront are claimed by an ejido--a form of communal ownership that's fairly common in Mexico. Under current law, ejidos can be "privatized," subdivided and sold, subject to unanimous approval by ejido members and time-consuming government approvals. Until that happens, foreigners are blocked from buying pieces of it.