Myths vs Realities Real Estate in Mexico
Buying Real Estate in Mexico can be one of the best investments of a lifetime.
Our clients’ needs vary and include those who are looking to extend their property investment portfolio, folks who wish to relocate with the family, people looking to find that perfect condo with all the trimmings for retirement, or a combination of a tropical home and rental income generator when you are not in Mexico.
MYTH: Foreigners cannot buy property in Mexico.
FACT: Foreigners CAN buy property inside the restricted zones with a trust, and outside of the restricted zones with no trust needed.
MYTH: Foreigners cannot buy property inside of the “Restricted Zones” (within 100 kilometers from any national border and 50 kilometers from any ocean.)
FACT: The Fideicomiso system was specifically designed to allow foreigners to purchase property inside of the Restricted Zones.
MYTH: Real Estate in Mexico is really just a “Lease”.
FACT: The trust has a 50-year lifespan. Unlike a lease, at the end of the 50-year period, it will become renewable for a filing fee of approximately $1,000US. Thereafter it is renewable in the same manner, for subsequent 50 year periods in perpetuity. The bank acts as a trustee – most banks in Mexico have trust departments to manage trusts (fideicomiso). They charge an annual trustee fee of about $550US and each bank charge varies slightly. The trusts in the banks are
‘off balance-sheet assets’ in that in the event of a bank closure or dissolution (there has never been a bank failure in Mexico – ever), the trusts are not considered assets of the bank and would be assigned to another bank under the auspices of the Bank of Mexico.
One of the interesting differences we noticed was the use of “Notarios” or Notaries. These individuals are NOT like the simple Notary Public in Canada or the USA. They must pass the Mexican equivalent of the bar exam, they are then required to take two years of extensive study while practicing in a notary’s office following which they are subjected to a 3-day examination program and finally must be appointed by the state to a specific office in a city of which there are
only a predetermined number of “notario” offices appointed. Notaries in Mexico are the only entities that are recognized by the Commercial and Land Registry and the Taxation Authority and they are empowered to collect taxes for all 3 levels of government.
Once you complete the purchase process you are then the proud owner of the beneficial rights of a trust, the body of which is the property. Think of a glass of water – the glass represents trust and the water is the property. You have complete control of the glass. Same thing with trust – you control it completely. You can sell the property, rent it, gift it or lend it – just so long as whatever it is you are doing with it is legal. You will also be obliged to maintain it and pay property taxes. Property taxes are .08% of the assessed value – which was established when you purchased the property by way of the tax assessment appraisal that was registered with the assessment office (the ‘Catastro’).
Important Considerations:
Professional Assistance: Seek out qualified real estate agents and a reputable notario to help you with the process.
Restricted Zone: Understand the regulations and the role of the fideicomiso if you are buying property within the restricted zone.
Due Diligence: Thoroughly research the property, location, and potential future developments before making a purchase decision.
