Top Questions Expats Ask Before Buying a Property in Mexico

mexzip.com 

Can Americans own Property in Mexico?

Yes, Buying a Property in Mexico is possible for foreigners, but there are certain law restrictions that prevent them from owning property in the border called “Restricted Zone”

Property in Mexicos “Restricted Zone” can be owned by foreigners through a real estate trust, called a “Fideicomiso”



     
If you ask five different people you will get five different answers, there is a lot of misinformation  and a lot of false assumptions that people have. If you are thinking about investing in Mexico one of the things that you need to understand is that Mexico has a restricted zone and i think that restricted zone is what has been misinterpreted into the variations that you hear people discuss on weather or not you can own in Mexico.

The Restricted Zone it is a Ring around Mexico as you can see in the picture, the Red is the coastal Border and the yellow is the International Border and the Restricted zone is a 100km from anywhere in the border, 50km from any ocean border and forms this non even ring around the country.



To understand why the Restricted Zone exist you need to know that when Mexico created the National Constitution for security reasons to protect their borders they set the Restricted Zone.

Through a combination of congressional acts they have this Constitutional clause for Restricted Zone. They have said that any foreigners that purchase in the Restricted Zone will own the Real Estate in a Trust Called a “Fideicomiso”

The Fideicomiso works the same as an asset trust in Canada or the US with a bank serving as the trust holder. In Mexico the people that are able to administrate the trust is a federal authorized Bank
You are the Primary Beneficiary of the Trust. Primary Beneficiaries can appoint Secondary Beneficiaries.The trust has currently has a 50 year term, and is renewable into perpetuity

Foreigners cannot own Ejido Properties

Now, when we talk about a trust, if you are outside of the Restricted Zone that means if you are purchasing in the interior of the country, you dont need to put your property in a Trust.
If you are considering buy a property that is outside of your home country you should really consider put it in a Trust weather is in Mexico in the Restricted Zone or it is not, i would still recommend that you put your property into a Trust.

Why?

Because Foreign countries have no obligation to honor any Foreign wills, so if anything every happens to you, a document that you created back in Canada or the US has no Legal Jurisdiction in a Foreign Country. So what you do not want to happen is to end up your property in probate, should you die.
So a Trust creates a legally recognized entity within that country specifically designates the secondary beneficiaries and for that reason i will highly recommend if you buy a property out of your home country that you look if a Trust is an option.

Is My Investment Secure?

• Number one, we can use Escrow Accounts, those accounts are in the United States through license bondedescrow agents for your purchase, in other words you dont have to put your money at risk by sending funds directly to a seller prior to the transfer, put those funds into an escrow account.

•  First American and Stewart Title both offer insurance policies on fideicomisos. Is not obligatory, but it is available, you can purchase title insurance, which it says that if anyone should ever bring up an issue where your title is in jeopardy because of a survey error or because somebody was not who he said he was or something, Title insurance will pay to a defended and should you lose that court case they will reimburse your policy premium. Is not a necessary product here in Mexico, but if you want an additional layer of security on your investment, it is very reasonable priced.

What Happens if my Bank Goes Under, is my Fideicomiso at Jeopardy?

The answer is no, Fideicomisos are not considered assets of a Bank,  if they make stupid investments they dont put your Fideicomisos are jeopardy. If they close, your Fideicomiso will just get transfered to another Federal authorized Bank.

Security of Investment is also backed protected by the NAFTA agreement

What are My Financing Options?

Once you decided to buy an important consideration to make is Financing because in Mexico there is no Financing, the exceptions to that would be:

• Owner Financing: you want to purchase a private home that is own by an owner and the two parties set upsome type of payment arrangement and at the end of that payment period, once the property have been paid in full the property would be titled in to the name of the purchaser. There are certain laws in Mexico that make it very difficult and not recommendable for owners to do what we know in the US as a Land Contract. The buyers isnt taking ownership of the property until after closing.

Developer Financing: what most people usually do, they would have financing options from their home country. Now, i dont know of any US or Canadian Bank that would aloud you to use your Mexican properties as collateral of the loan, you can use:

• 1. Home Equity Loan
  2. Credit Line
  3. US Citizens: Self directed IRA Funds

What is the Cost of Ownership?

• Your Fideicomiso Brank Trust Fee is about $450 to $650 USD per year, varies by bank that you choose.
• The Predial Property Tax is 0.26% on Developed, Residential Property in Puerto Morelos or cancun, there is a discount if paid early.
• If you property is directly beachfront then you have a beach tax Zofemat and is assessed by the number of meters that you have at the beachfront. Typically houses pay about $1000 dollars some pay up to $1,500 depending on the house
• HOA fees (if Applicable, Property insurance, Utilities) If you have a condo you will have some Maintenance fees.

What is a Notary?

• A Notario, A licensed Mexican Attorney, authorized by the government to oversee transactions including the buy sell properties in Mexico. You have to have a notary involved in the sell of a property in MexicoNeutral 3rd party, makes sure that there are no problems with the property, paperwork is proper, all the due diligence of the title to make sure that is free and clear and ready for transfer.Create buy/sell agreement, Ensures legality of the transaction, performs title search and pay taxes and fees for each party.

How Long Can I Stay in Mexico?


If you come down to Mexico on airplane they give you a piece of paper that you fill out and then they tear apart the top and give you the bottom of the paper part stick it on your passport and you are on your way, that is your Tourist Visa that allow you be legally in Mexico for up to 180 days, if you put that you are staying for 2 weeks and then you decide that you want to stay 180 days, you can do it but you have to go to an immigration Office with your Tourist Visa.

When you Buy a house you can do it on your Tourist Visa, you dont need any special VISA.

There are Long Term Visas that are Available, there are a couple of reasons why you will want to get one:

1. Because it allows you to stay Indefinitely
2. The other thing is that if you plan to have a Vehicle in the Country, because you are going to buy one here or you are importing one down, you will need a long term Visa for that Vehicle.

If you are thinking about having a Vehicle in Mexico is strongly recommended that you purchase one here in Mexico. Bringing a Vehicle into Mexico is a hassle, Save your self the Hassle buy one here.