Understanding Buying Property in Mexico

Year long sunshine, a welcoming atmosphere and white sandy beaches. What’s not to love about Cancun, Mexico? However, while many enjoy it as a place to spend their vacation, what fewer people are aware of is that it’s not that difficult for non-Mexican nationals to own property in Mexico.

In fact, foreign owners can even own property that sits right on one of the golden beaches. 

However, there are some basic terms that those wishing to invest or buy a holiday home need to be aware of. 

Restricted Zones

Beachfront property is one of the most desired plots in Mexico and often is considered within what’s known as the restricted zone. The restricted zones are defined as within land which is located 100km along the borderline, and 50km from the coast. Within these zones, foreigners and foreign companies are impeded from purchasing property.

However, there are two ways in which an overseas investor can acquire property within the Restricted Zone without the requirement of being a Mexican citizen, namely:

  • By establishing a Mexican corporation

Or

  • Through a fideicomiso (Real Estate Bank Trust)

What is the fideicomiso (Real Estate Bank Trust) when purchasing property in Mexico?

The fideicomiso is a Bank Trust which is granted in a 50-year renewable term. The bank acts on behalf of the buyer and will have title, but has a fiduciary obligation to follow the directions and wishes of the purchaser. 

The buyer can enjoy, use, rent out, improve upon the property, expand, build and sell the property and reap 100% of the profits. Additionally, heirs can be assigned the trust. 

The fideicomiso is authorised via a permit issued by the Secretariat of Foreign Affairs (Secretarie  Relaciones Exteriores) and in accordance with Article 27 of the Mexican Constitution. It is essential to mention that the properties held in the trust are not assets of the bank and the size
of the bank does not affect the properties they represent.

Establishing a Mexican Corporation

As of 1995 foreigners can fully own, operate and administer Mexican corporations. There remain some restrictions on the activities that a Mexican corporation can participate in when foreigners are involved such as mining, airports, and telecommunications; however, the general rule is 100% participation. 

There are no investment restrictions on foreign-owned Mexican corporations aimed at buying and developing property.Mexican corporations require a minimum of two associates or shareholders. Both shareholders can be foreigners, and there is no need to have a Mexican partner.

What are the closing costs when buying real estate in Mexico?

Purchase costs when buying in Mexico are usually slightly higher than the closing costs in the United States and Canada, but the annual property taxes in Mexico are surprisingly low.

The buyer will be paying the closing costs and the seller will pay the capital gains tax and sales commissions. The following is a list of closing items:

  • Public Registry Rights
  • Property Acquisition Tax
  • No Liens Certificate
  • Title Search
  • No Property Tax Debt Certificate
  • Bank Trust
  • Notary and Attorney Fees
  • Appraisal by Authorized Valuator
  • Permit from Minister of Foreign Affairs
  • National Registry of Foreign Investment

The closing costs will be about 5% to 8% of the purchase price and it covers the following:

  • Bank Trust Fees
  • Foreign Affair Permit
  • National Foreign Investments Registration Notario Fees
  • Property Acquisition Tax
  • Public Registry Rights
  • No Liens Certificate
  • Title Insurance

So your dream of a beachside property in Mexico may be closer than you think.

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