Just How Difficult Is the Property Purchase Process in Mexico?

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Foreign investors looking to purchase property in Mexico for either retirement or for income purposes will need to know how the system works in Mexico. Any property purchases made by foreigners in Mexico now take place through a system known as the fideicomiso system. Below is some key information for anyone looking to learn more about buying real estate property in Mexico.

This system was put in place by an amendment known as the “Foreign Investment Law.” Previously, the Mexican constitution that was written in 1917, announced that all of the lands in Mexico would be communal and/or owned only by nationals of Mexico. The amendment occurred in 1973 and it allowed foreigners to be able to legally purchase property anywhere in Mexico outside of the restricted zone.

The restricted zone includes all areas that are within 64 miles of any international border or within 32 miles from the coastline that occurs at high tide. In the year 1993, Mexico further amended the constitution which allowed foreigners to be able to purchase real estate within the restricted zone through a fideicomiso.

This is a bank trust wherein the bank acts as a trustee and holds the deed for the beneficiary who in this case is the foreigner. This maintains that the trustee is the legal owner of the property but the beneficiary retails all of the rights associated with it including the right to lease, mortgage, sell, and even pass on the property to potential heirs. This is something that is fully authorized by the Mexican Government.

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Within this process, the bank is forced to check up on ownership and insurance to ensure that the property does not have liens. From there, this type of trust is offered for a period of 50 years and the trust is fully renewable at any given time by resubmitting a new application. If the period expires with zero renewal made, the owner is given another 10 years by which they will be able to re-submit an application to further renew the trust.

If the property is purchased that previously had a fideicomiso attached, the trust that existed can be effectively handed off to the new owner and it will expire at the remainder of the existing trust period or the trust can be renewed. If the property is already in a fideicomiso, everything including the transfer tax and the probate is all capable of being avoided.

If a Mexican corporation is 100% foreign-owned, it can purchase property found in this zone without requiring the use of a fideicomiso. However, the property that is owned by a corporation is actually classified as Commercial property. Because of this, they will be forced to pay higher utility rates including electric, water, and telephone rates. That being said, a Mexican corporation is not allowed to purchase or own a single-family residence.

After the purchase, the Tax Authority might choose to do their own commercial appraisal. If the value they get from it is 10 percent more than the declared value, the total difference will be subject to an Appraisal Tax of 20 percent that is payable within 15 days after the initial appraisal is done.

Sales Tax is payable on this type of residential property. Whereas, commercial property transactions are subject to VAT along with Acquisitions Tax.

As soon as the price has been agreed to, there is a Convenio de Compra/Venta that is created which provides deadlines. This is the legal written agreement to both sell and buy. At this point in time, a 5 to 10 percent deposit is expected from the buyer’s end.

You will be required to go to the Foreign Secretary’s Office and acquire a permit and the buyer will need to sign what is known as the “Calvo Clause.” This is a clause that dictates that any foreign jurisdiction will not be sought after to deal with this transaction. At this point, the seller will need to provide a verified copy of the Land and Property Deed. Because of this being a legally binding agreement, it is important to hire a reputable lawyer to review it.

As soon as the deed is transferred over to the buyer, the buyer will then have to provide payment to the seller. Any cash that exceeds $10,000 USD must be declared prior to entering the country. However, there are zero limits to how much you can transfer either to the country or out of the country. The entire process is expected to take anywhere from a total of 48 to 108 days to complete.

To learn more about Yucatan real estate opportunities visit Caban Condos Mexico.

Kirk Mullen

About 

Kirk Mullen's life goal is to travel the world while living off investments. He's currently mastering real estate investing, thanks to his never ending thirst for information online. This site is his culmination of opinions gathered on real estate investing courses, guru's, and other mentors he aspires to be like.

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