The thing about buying property in another country is that very few of us have done it before, which can create a lot of apprehension and anxiety. Our job is twofold – to help you find the perfect property, and to educate you about the process and make sure you feel confident in your transaction. Here are a few of the most frequently asked questions, so start here and know that we are available to talk you through the process and any other questions that come up.
Yes, foreigners can own property in Mexico! In most of the country, non-Mexicans can own property directly, however there is a “Restricted Zone” along Mexico’s borders where foreign ownership was historically prohibited completely, but now is allowed via purchase through a Bank Trust known as a “Fideicomiso” (see below). The restricted zone consists of 100 km/62 miles inside the land borders and 50 km/31 miles inside the sea borders.
In order to permit foreign investment in these areas, the Mexican government created the “fideicomiso,” (FEE-DAY-E-CO-ME-SO) which is, roughly translated, a real estate trust. This type of trust is similar to trusts used in the United States, but a Mexican bank must be designated as trustee. The trust “holds” the property for the foreigner, and the bank, as trustee, then has a fiduciary obligation to follow instructions given by the foreigner who is the trust beneficiary. The trust beneficiary retains and enjoys all the rights of ownership just as a Mexican would do. The foreigner is entitled to use, enjoy, and even sell the property that is held in trust at its market value to any eligible buyer. You determine the use of the property and make all the investment decisions. It is NOT a lease, you have irrevocable control over your property, in order to use, rent, sell, make improvements, and appoint substitute beneficiaries (heirs).
Real Estate trusts are valid for a period of 50 years and according to the Foreign Investment Law passed in 1993, trusts can be renewed for an indefinite number of successive 50 year periods. In effect they run in perpetuity.
It’s not complicated – we handle it through the closing process as a matter of course. When you buy a property in the restricted zone you will either create a new Fideicomiso, or transfer an existing Fideicomiso if you are buying from other foreigners. The trustee banks charge about the same amount to do either one, and that will be included in your closing costs, typically around $1500 USD. Additionally, the banks charge an annual fee for their “services” as Trustee – right now they are all charging around $550 USD/year.
The Trust is a legal substitute for simple ownership. As Beneficiary, you have the right to sell, tear down, remodel, rent and do anything you want (within the bounds of the law) with your property. The trustee bank has no authority to restrict your use of the property, nor do they have a right to enter the property. You have the same property rights as a Mexican citizen; you just need to notify the Bank before selling the property since your Trust will be canceled or transferred.
YES! Property ownership through a real estate trust is completely legitimate! Real estate trusts were established by the Mexican government specifically for the purpose of encouraging foreign ownership in the restricted zone. In fact, there are numerous federal statutes and a constitutional amendment which designate this process as the method of foreign ownership and guarantee a foreign investor’s ability to hold title in this way. And, in case you were wondering, the Mexican government also realizes that the Fideicomiso requirement is not ideal — people don’t like it, and prefer outright ownership. Until they are able to change the Constitution of Mexico, however, the requirement will remain.
Absolutely. Trustees (banks) are federally approved to hold real estate trusts. These trusts are NOT considered assets of the bank. Should a bank close, merge, etc., the trust must be transferred to another approved bank. Property owned in a trust is eligible for Title Insurance from several title companies, including Stewart Title and First American Title Company. While we don’t necessarily recommend the purchase of title insurance for your investment (see below), the very fact that these major companies are willing to insure properties held in trusts speaks to their legitimacy and security
No. Although there was a time when it was popular to open a Mexican corporation rather than to utilize the Fideicomiso, the government has made it clear that this is not appropriate and prohibits ownership of purely residential property by a Mexican corporation. Furthermore, it’s very expensive over the long run, as Mexican corporations must file taxes each month, have annual reporting requirements, etc. There are a few limited scenarios where it’s appropriate to have your Mexican corporation buy your property (it’s a bed and breakfast or other non-sole-residential use issue) but it is important to talk with an attorney and/or accountant to determine which method of ownership is best if there is any question.
Your foreign corporation can purchase and hold property in Mexico, but it will have to be in a Fideicomiso. There are special requirements when a foreign corporation or trust purchases, so let us know in advance and we can walk you through how that will work and the added costs.
It is a common misconception that the government in Mexico can randomly seize property. It is false. Under the North American Free Trade Agreement (NAFTA) Mexico may not expropriate land except for a public purpose, such as building a road. In the extremely rare case that the land where your home is needs a road through it, the government pays market value for the property. It is the same process as Eminent Domain in the US, Expropriation in Canada or Compulsory Purchase in the UK.
Insider tip: When you see news reports of the government “taking” property in Mexico, dig deeper — you will find in all cases it was after prolonged litigation, usually over “Ejido” land, which is similar to tribal/Native American land in the US and Canada and cannot be sold outside the “Ejido”. It is not impossible for a foreigner to purchase and title “Ejido” land, but it’s very complicated – you must work with an experienced attorney to get this done correctly and avoid future litigation over title.
A: Nope! You can purchase property any time you are in the country legally - so if you're here on a valid tourist visa, you can purchase property. In fact, purchasing property first and then applying for temporary or permanent resident visa status is probably the way to go. The purchase can be used to bolster your visa application.
Pro Tip: While you don't need a particular visa status to purchase property in Mexico, you will want to get Permanent Resident Visa status before you sell your property. Why? Because if you own your property for at least 3 years and have PR visa status before you sell, you can take advantage of a partial exemption from the ISR (capital gains) tax upon sale.
There's no downside to having Permanent Resident Visa status here - it doesn't affect your citizenship or residency status anywhere else - it's just a status in Mexico. It doesn't require you to be here any length of time during a particular year and it doesn't mean you have to pay taxes here. It is not Mexican citizenship.
It just means you don't have to renew your visa every year (or leave every 180 days if you're on a tourist visa). And nowadays the process is streamlined - apply outside Mexico, get approved, enter Mexico and under a new program at Immigration they can finalize everything here in one day and you'll leave the office with your Permanent Residency card!
Find a wealth of information about buying and living in Mexico, including recordings from our popular Run Away Wednesdays series.
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