1. Can Foreigners own property in Mexico?
Any Foreigner or any Mexican national can establish a Fideicomiso (the equivalent to an American beneficial trust) through a Mexican bank in order to purchase real estate anywhere in Mexico, including the Restricted Zone.* The Buyer requests a Mexican bank of his/her choice to act as a trustee on his/her behalf. The Bank obtains a permit from the Ministry of Foreign Affairs to acquire the chosen property in trust. The Fideicomiso may be established for a maximum of 50 years and can be automatically renewed for another 50 years.
The Bank becomes the legal owner of the property for the exclusive use of the buyer/beneficiary who has all of the benefits of a direct owner, including the ability to lease or transfer his/her rights to the property to a third party or a pre-appointed heir. During this period, the foreigner is considered as a Mexican National.
The Bank Trustee is responsible to the Beneficiary to ensure the fulfillment of the Trust, assuming full technical, legal and administrative supervision in order to protect the interests of the Beneficiary.
* Laws passed in 1973 and 1993 have made it possible for Foreigners to purchase property within 64 miles of the Mexico’s borders and 32 miles from it’s coastline.
2. If the property is own through a trust, what are my limits as to what I can do with this property?
Beneficiaries are allowed to modify their property. Construction, in accordance to local zoning regulations, is permitted at the owner's expense. The Beneficiary has all of the benefits of a direct owner, including the ability to lease or transfer his/her rights to the property to a third party or a pre-appointed heir.
3. Can you get Title Insurance on the property? If so, what are the costs?
Title Insurance is available through the Mexican escrow companies. Based on a Title search, you can either obtain an “owners” or a “lenders” policy of title insurance securing your investment in Mexico. Insurance premiums are approximately $7.00 per $1000.00.
Owner's Title Insurance not only will protect you against hidden risks that would not be disclosed by even the most meticulous search of public records, but also will pay the defense of your title as insured.
4. What percentage is paid for closing costs?
Closing costs are paid by the Buyer and depend on the value of the property purchased. They include a transfer tax (ISAI) of 2% which goes to the Mexican government, an average of 2% for legal Notary fees, a registration fee of .05% of the assessed value of the property, fees for the tax certificate, title search fees and property appraisal, as well as miscellaneous office expenses.
5. What is the cost of a trust?
The normal annual trust fees are approximately $500.00 plus IVA. Costs to set up the trust varies by bank.
6. What are the procedures for buying a piece of property?
Once your Offer to Purchase has been accepted, a deposit (usually 10% of the purchase price) is required. The money is placed in an escrow account. These funds are held during the time needed to close the sale. The balance is payable upon the signing of the Trust Deed at the Notary’s office.
In order to obtain a trust deed, our escrow office will:
7. How much are Capital Gains taxes, and who pays them?
The Seller pays all capital gains taxes and real estate fees. Capital gains taxes are 35% of the difference between assessed values at the time of purchase and sale, with adjustments made for inflation and capital improvements.
As noted above, the seller pays all capital gains taxes. As a buyer you are eligible for a one-time exemption from capital gains tax if you establish residency for 2 years after your purchase prior to selling.
To establish residency, you must have an FM3 (Resident Tourist Visa), and all the utility and phone bills in your name for 2 years. FM3 Visas are issued from Mexican Immigration. You can request the forms from the local Immigration office. They usually take 30 to 45 days to obtain, once submitted.
8. What is the percentage amount of Property taxes?
Property taxes are very low here. The property tax, known as "predial" is a rate of .06% of the assessed value for private residences. Commercial properties will be assessed at a slightly higher rate. The assessed value is determined at the time of the sale. Historically, property taxes have always been low because they have never been perceived as a source of revenue for the government.
9. Can my Property be used as a rental?
Property that you purchase here in Mexico can be used as rental property, providing that you register with Hacienda (Mexico's federal tax agency), establish residency and obtain an FM3, and that you acquire permission from the Minister of Foreign Affairs to do so. The language in your trust must include this permission. A Mexican C.P.A. can advise you on these procedures. Please note that your property tax percentage may increase once it becomes “commercial”.
10. Can I build on my property?
Yes, most property if it is located within a development will be subject to the CC&R's, a local building permit must be obtained and plans must be drawn and engineered by a licensed Mexican architect/ engineer.