Can foreigners buy land in Mexico?:

Mexico’s real estate ownership laws have never been more welcoming to foreigners who have been attracted by this country's exquisite geography, warm climate, reasonable cost of living, relaxed lifestyle, and overall quality of life. Yet still, there are significant differences between buying real estate in Mexico and buying real estate in the United States or Canada. For the traveler interested in buying property in Mexico, it's important to know how foreign ownership works, what the buying process involves, what's available, and what the prices are like.

Since 1973 foreigners (non-Mexicans) have been able to purchase coastal and border properties if done through a Mexican bank trust, known as a Fideicomiso. Essentially, it is like a Trust in the United States -the bank holds the legal title to the property with all rights and privileges of ownership, including exclusive use and enjoyment held by the Trust beneficiary-the foreigner.

The foreign beneficiary enjoys the right to occupy or rent the property, and may cause the transfer of title or beneficiary transfer to the property to any legally qualified person he may designate. Beneficiaries are also allowed to modify their property in accordance with local zoning regulations.

These Trusts have an initial term of 50 years. They are generally renewable at any time or at the end of the 50-year period for a relatively small fee for additional 50-year periods. The property may also be sold to a person legally authorized to own land or to another foreigner via a Trust, at any time, with the foreign buyer capturing the amount of the appreciation of the property value. This process is designed to protect the rights of foreigners and ensure the transactions are legal.

What is this Trust, and how does it work?

Essentially, it is like a Trust in the United States—the bank holds the legal title to the property, with allowed rights and privileges of ownership, including exclusive use and enjoyment, held by the Trust beneficiary—the foreigner. The foreign beneficiary enjoys the right to occupy or rent the property, and may cause the transfer of title or beneficiary transfer to the property to any legally qualified person he may designate. Beneficiaries are also allowed to modify their property in accordance with local zoning regulations.

These Trusts have an initial term of 50 years. They are renewable at any time or at the end of the 50-year period for a relatively small fee (less than $1,000 US) for additional 50-year periods. The property may also be sold to a person legally authorized to own land or to another foreigner via a Trust, at any time, with the foreign buyer capturing the amount of the appreciation of the property value. This process is designed to protect the rights of foreigners, and ensure the transactions are legal.

How are these Trusts created?

To establish a real estate Trust, (fideicomiso), banks will charge a predetermined fee, plus a percentage of the property's value, to cover the costs of preliminary studies and the drafting of the Trust agreement. The bank also charges an annual fee for maintaining the Trust, roughly averaging $500 per year, providing there is no financing involved.

The Trusts are carried as off balance sheet assets by the banks who act as trustees. The Mexican Government specifically set the trust system up to allow non-nationals the security of ownership without having to change their 1917 constitution.

Are there differences in other aspects of property ownership in Mexico?

Financing is relatively new in Mexico, but is available for La Serenata through our preferred source. If financing is something one wants or needs, get pre-approved ahead of time, just as you would in the U.S. or Canada. Closing costs to the buyer tend to be roughly 2 to 4 times higher in Mexico than they are in the U.S. or Canada, averaging 4 to 6 percent of the purchase price. Closing will take from 30 to 60 days depending on contingencies and financing requirements. Escrows are available via major U.S. Title companies, The buyer and seller need not be present at closing, but may be represented by their sales agent via a power of attorney. Notaries are the agents of record for all transactions registered in the Land Registry Office.

What about the availability of insurance on the transaction (title insurance), as well as the property itself?

To date, there are no home inspection agencies nor home warranty policies available in Mexico, however in recent years, title insurance has been available on property that is fee simple land held in a trust, as is the case with La Serenata de Punta Mita. Beginning in 1996, Stewart Title Guaranty Company began underwriting title insurance for Mexican properties at an approximate cost of 1% of the insured amount. This premium has been declining in recent years. Other types of insurance, including property, liability, damage, and earthquake, are all readily available in Mexico, at low cost, and policies can be written to pay claims in U.S. dollars.

What about taxes? What can I expect to pay in Mexico?

For the buyer, the subject of real estate taxes generally comes as good news, especially in the Puerto Vallarta area, where real estate taxes tend to be low. Known as ‘Predial’, the tax is calculated as a percentage of the assessed value, paid every bimester, determined at the time of sale. Property taxes have historically been low in Mexico because they have never been considered a source of governmental revenue.

What other expenses should I consider on the purchase of property in Mexico?

If you are not planning on living full time in Mexico, property maintenance will need to be considered for the time you are away. For condominium owners, maintenance and security is handled by the Condominium Owners Association, paid for through monthly fees. Homeowners may want to consider a property management company, which is available in Punta Mita as part of the Residential Concierge Services.

How do I get started?

Contact Us.