How to Buy and Own Property and Real Estate in Mexico?

Non-citizens are qualified to purchase property in restricted zones of Mexico with Mexican corporations. It is advisable to utilize the corporation in buying a property for business or investment objectives. Mexican Corporation is a legal entity that occurs individually of its holders. Individuals own investors, or shareholders, the share of the corporation, corporations, or other Mexican corporations. When the corporation is opened and registered, it separates from its shareholder or managers. Mexican Corporation is ideal for a foreigner who intends to rent the property to generate revenue, plans to purchase more rental property, and doesn’t have the intention to obtain a Mexican residency.

Moreover, a corporation is stricter about the requirements compared to Fideicomiso. The first step is to present the monthly revenue and expenses report, and then the licensed accountant completes it. Submit the documents to the Mexican department of Treasury. The corporation released a Mexican tax ID (RFC) if renting a property by a Mexican Corporation. It is considered commercial and liable to pay additional taxes if the property is under a corporation. The cost of setting up a corporation depends on the lawyer. The minimum price is approximately $2,800, and the maintenance fee ranges from $600 to $800 yearly. Securing property in Mexico by a corporation has both advantages and disadvantages. The benefits of Mexican Corporation are: free from yearly bank fees, the construction permit and subdivision permit are obtainable, and it is best for business purposes. Through Mexican Corporations, non-citizens don’t need to go through the process of Fideicomiso. At the same time, there are five disadvantages of Mexican Corporations. These differences will be made to choosing beneficiaries or heirs of the corporation’s shares, accountant fees cost too much, more work done, yearly or monthly tax returns, and Capital Gains taxes are high and hard to lessen. 

Fideicomiso is a bank trust in Mexico that permits non-citizens to obtain property indirectly in the restricted zone of Mexico. In Fideicomiso, the foreigner is the beneficiary of the trust, while the trustee is accountable for keeping the property title and conducting the needs and wants of the foreigner. Banks are the only institution licensed to be a trustee or an attorney specializing in trusts. A licensed trustee can only open a Mexican bank trust by Banco de Mexico or the Central Bank of Mexico. In addition, non-citizens must consider Fideicomiso if the property is for personal use, intends to have Mexican residency, and rent the property to generate income. Consider the Mexican tax obligations if the purpose is renting the property for income. For those gaining income in Mexico, it is necessary to state all revenue with the tax authorities. In saying the taxes, register with the rules and obtain a Registro Federal de Contibuyentes (RFC). RFC is an ID and registration number in Mexico issued by the tax collection agency. Foreigners with Mexican residency, Mexican citizens, or Mexican corporations are obligated to obtain the RFC.

Furthermore, property owners lacking residency who rent their properties following a bank trust use online rental companies such as Airbnb. Online rental companies without RFC needed to maintain 36% in taxes. Fideicomiso has advantages and disadvantages. There are seven advantages of Fideicomiso. These advantages are for residential purposes, safe, good for 50 years, renewable, appointed beneficiaries, less capital gain taxes, and tax returns, and the only maintenance involved to pay an annual fee.

Define the amount one is willing to pay for a property in Mexico. Property buying is sometimes crucial because it is one of the most important purchases. Before looking for a property in Mexico or a property specialist, it is necessary to determine the budget and stick to the decision on the amount willing to pay. Define the resources and if the investor qualifies for such help. Understand that the expenses in purchasing a property do not end in the closing cost. Real estate investment involves extra expenses, such as property taxes and maintenance fees. For first-time investors or buyers, it is difficult to purchase a property and determine a budget that does not result in hardship in the future. There are cases in that buyers purchase a property on the amount a lender is willing to provide and not minding the other expenses. In such cases, if the buyer is not able to continue the monthly payment, it results in the foreclosure of the transaction. There is a rule in buying a property: “Do not allocate more than 31% of monthly income to property payments.” In addition, properties in Mexico are affordable, but if the investor wants a property near the coast or beachfront, expect a higher price. Furthermore, most of the real estate transactions in Mexico are cash only. Down payments usually range from 10% to 50% of the total contract price of the property. It is ideal to set practical goals. After deciding on the budget, contact a real estate agent or a property that suits the investor’s preference and budget. Finding a qualified and experienced realtor is essential. Agents help investors to look for a property that qualifies for the criteria. Visit the properties, then make a comparison and evaluation. 

Calculate the deposit required for the new and existing properties in Mexico. The deposit amount depends on whether the property is pre-construction or ready for occupancy. The deposit for new or pre-construction property in Mexico ranges from 30% to 95%, while for existing or ready-for-occupancy properties is 5% to 10%. Despite that, the deposit percentage for the Mexican property market has traditionally been 10% of the total contract price. Deposits are reimbursable until all due diligence items are fulfilled, typically 10 to 20 days or more Then, the deposit becomes non-refundable.

Foreigners purchasing a property within the restricted area follow a flow of finalizing the contract to transfer the property in Mexico. The flow of contracts is the Offer to Purchase, Promissory Contract, and Purchase-Sales Contract. The Offer to Purchase and Promissory Contract is unnecessary if the property is outside the restricted zone. The Offer to Purchase is the primary document to start the property transfer from the seller to the buyer. It is a written contract containing terms and conditions and the buyer’s agreement to enter the transaction. The Offer to Purchase is a document where a buyer makes a formal offer to purchase the property. The seller, buyer and the witnesses sign the proposal. The Promissory Contract is the document that contains information such as the legal description of the property, price, penalties, and other items. Both parties are authorized to direct to the Purchase-Sales Contract if the execution of the sale is instant. It is necessary to use a promissory contract if the closing occurs after 14 days. Before signing the Promissory Contact, the buyer needs to pay the deposit first. The signature of the buyer, seller and the witnesses should be in the Promissory Contract. The sale Contract or Purchase Sales Contract is the last document that the notary public uses to legally transfer the property to the buyer and become the new owner. The contract’s frameworks have different models, such as a real estate trust agreement, an assignment of real estate trust, or a reserve title contract; the model relies on the information and process of transferring the property. The buyer, seller, and the notary public need to sign the Purchase Sales Contract. In addition, purchase order and other contact need the signature of the permitted representative of each party, according to the Mexican Law. Original signature is necessary in signing contracts in Mexico, since digital signatures are not legal yet.

After signing the sale contract, the next step is paying the deposit and other succeeding payments. Once the contract is signed, there is a binding agreement. The buyer has 3 to 15 days to settle the stake into the Escrow. An Escrow is a legal agreement where the neutral third party keeps the payment or the property until the buyer and seller have fulfilled the requirements. Escrow accounts are necessary and required on particular loans. They need an escrow to prevent foreclosures and forced-place insurance. The cost of Escrow depends on the escrow company, which usually ranges from $700 to $800. In addition, sending the deposit or other fees by wire transfer is an option. Wire transfer is a standard and convenient mode of payment in sending deposits or payments to buy property in Mexico. In addition, wire transfer is safe, has excellent exchange rates, and has low fees. Wire transfer, as a mode of payment, is recommended if the amount to send is more than $10,000. In addition, the deposit is usually around 5% to 10% of the agreed price. Furthermore, after paying the deposit, it is time to begin the application for the Fideicomiso, and the seller is responsible for informing the bank trust.

Closing costs usually vary between 4% to 6% of the agreed price. The buyer is responsible for the closing cost, other taxes, and fees, while the seller handles the real estate fee and capital gain taxes. Owning a property in Mexico comes with various taxes. Mexico Property Taxes, such as acquisition tax and property tax, take place when acquiring a property in Mexico. The acquisition or transfer tax is a tax payable by the buyer when the ownership of the property transfers to them. It usually ranges from 2% to 4.5% of the agreed price. While the property tax, known as predial, is the annual tax that is always due in January. The amount of tax to pay depends on the property’s size and location. The government gives up to a 25% discount if the owner pays in advance before January. The other taxes and fees included in the closing fees are trust permit, foreign investment registry, trustee bank acceptance fee and first year’s trust fee, appraisal for future tax assessment, non-encumbrance certificate, preventative notice advice, Land Registry Office registration fee, and notary fee.

After the buyer pays the seller and the other taxes and fees, the notary sends a copy of the deed to the Public Registry of Property. Registration takes 30 to 90 days. Registering with the Public Registry of Property is necessary to prevent any future swindling or unlawful ownership of the property. After completing the process, wait for the official registration and Escritura to be handed to the new owner or the bank trust. Escritura is the title after the settlement of the purchase and the cost. Escritura is the Spanish term for title deeds. It is the most important document because it states all the necessary information, such as the details of the former owner, buyer, land registry, mortgage, translators, property address, description, price, taxes, cadastral price, and miscellaneous. 

Regarding real estate, fixed dimensional borderlines designate land without buildings and equipment. Purchasing land in Mexico includes the right to any natural resources inside the borderline of the land. There are three main advantages of purchasing land in Mexico. These advantages are cheaper, low maintenance, and freedom to design the property. Buying land in Mexico is ideal for those who solely invest or want to create and design their dream home. The land has a lower price than the house and condo in Mexico. In addition, the income requirement is less in applying for bank loans for land. Land or lots are authorized to leave untouched while their value continuously appreciates. Maintaining land is effortless, contrary to the house and lots that need to be renovated or remodeled. In short, buying land in Mexico for investment gains more profit than houses and lots because it requires less maintenance. Additionally, the land owner has the freedom to create and design the house layout if the property is for personal use. Property for Sale in Mexico ranges from $30,000 to $16 million.

Real estate is land or fixed construction, such as houses or buildings. Examples of real estate are homes, offices, hospitals, or farms. Buying real estate is one of the great options for those US Citizen in Mexico who wants to generate income or wants to invest. The advantages of purchasing real estate in Mexico are it offers safety and flexibility in the future, the investment return increases, and the money remains active. Foreigners have a broad selection of real estate in Mexico because properties are located near the beach, coastline, or even in the isolated part of Mexico. Investing in real estate in Mexico is profitable if doing it with the right agency, and the risk is low as long as the agreement is transparent about the rights, obligations, terms, and conditions. The average price for affordable real estate in Mexico ranges from $100,000 to $1 million. The cost varies in location, size, and residential or commercial.

A condominium is a property that contains units, and every unit has an individual owner. The short term for the Condominium is a condo. Buying a condo in Mexico is one of the ideal options, whether for investment or personal use. Condominiums in Mexico are perfect investments since Mexico is a famous tourist destination. The demand for condominiums is continuously increasing, together with the number of tourists in Mexico. In that case, condominiums are easy to rent out, and as a result, it generates high income. In addition, condominiums are often semi-furnished or fully furnished. It is not time-consuming if the owner wants to use the condo instantly. Condos are affordable compared to houses and lots. The average price for a Mexico Condo For Sale range from $126,000, and the amount varies in location and size. The most in-demand condominiums in Mexico are those on the beachfront or have access to the beach. Other advantages of Condominiums are that it is a perfect place to spend a vacation and has different amenities exclusive to the unit owners.

A non-resident needs to learn how to open a bank account in Mexico if planning to live in Mexico. Foreigners need a safe way to access their money in person or online. Creating a bank account in Mexico enables the account to pay bills, obtain paychecks, store money, and make purchases. Bank in Mexico offers accounts, bank transfers, and debit and credit cards. Opening a bank account in Mexico is simple and easy. It doesn’t require a strong credit history. There are numerous banks in Mexico, including BanCoppel, Banorte, Citi Banamex, Banco Santander, BBVA Bancomer, HSBC, ING Bank, National Bank of Mexico, Scotia Bank, and Bank of America, Monex. However, there are online banks in Mexico, such as Hey Banco, SuperDigital, and Amazon Recargable. Banks in Mexico are free from fees if the account has a substantial initial deposit or often performs monthly deposits. Most banks offer different services and programs such as ATMs, debit/credit cards, deposit accounts, certificates of deposit, checking accounts, investment accounts, loans, mortgages, payroll accounts, premium accounts, savings accounts, and standing order services. To Open a Bank Account in Mexico, go to the branch or official website of the chosen bank to know the requirements. Generally, the usual conditions for opening a bank account in Mexico are a passport, a visa to prove the immigration status, a letter with proof of address, and a deposit payment ranging from MXN 500 to MXN 750.

Hiring a real estate agent is helpful if someone plans to buy a property in Mexico. Real estate agents are the specialist and the representative of the buyer and seller in real estate deals. Real estate agents help the buyer look for a property and, at the same time, assist the seller in finding a buyer. They are responsible for presenting the properties, and prices, listing the properties and preparing the documents for the clients. In short, real estate agents plays a significant role in real estate transaction. In return, agents receive commissions from the closed sale. There are different real estate agents, such as Seller Representative Specialists (SRS), Accredited Buyer Representatives, Certified Residential Specialists (CRS), and Senior Real Estate Specialists. Mexlife leadership needs the following Real Estate certification for hiring agents: Mexican Association of Real Estate Professionals or Asociacion Mexicana de Profesionales Inmobiliarios (AMPI) Registered and certified Real Estate Broker; National Association of Realtors (NAR) certification USA; Accredited Buyer’s Representative (ABR®) certification by NAR; Global Renewable Energy and Environmental Network (GREEN) certification by NAR; Certified International Property Specialist (CIPS) designation is for REALTORS® by NAR; and Resort and Second-Home Property Specialist (RSPS) is recognized as an official NAR certification. Hiring a Mexico Real Estate Agent has many benefits for the client. Buying a property with a real estate agent provides efficiency, gives a broad selection of properties, lessens legal entanglements, and creates financial and qualitative solutions.

Buying a property in Mexico has two methods to choose from purchasing a property through a corporation or a bank trust. Non-residents are authorized to buy any property in Mexico. Foreigners are allowed to purchase property indirectly within restricted areas. Bank trust in Mexico is called Fideicomiso. Fideicomiso is recommended for foreigners if the property is for personal use, intends to have Mexican residency, and rent the property to generate income. In Fideicomiso, the foreigner is the beneficiary of the trust, while the trustee is accountable for holding the property title and performing the needs and wants of the foreigner. Banks are the only institution authorized to be a trustee or an attorney specializing in trusts. The advantages of Fideicomiso are it is renewable, for residential purposes, it is safe, the beneficiaries are appointed, the tax strategies to reduce capital gains taxes, and it is not necessary to file any tax returns with the Mexican Government. At the same time, Mexican Corporations suggested using the corporation in buying a property for business or investment purposes. Mexican Corporation is a legal entity that appears individually by its holders, investors, or shareholders. The individuals, corporations, or other Mexican corporations own the corporation’s share. When the corporation is created and registered, it isolates from its shareholder or managers. Mexican Corporation is best for a foreigner who plans to rent the property to generate income, has more rental properties, and does not intend to acquire a Mexican residency. The advantages of Mexican Corporation are free from yearly bank fees, the construction and subdivision permits are attainable, and it is best for business purposes. Through Mexican Corporations, foreigners don’t need to go through the process of Fideicomiso.

The Public Notary in Mexico is a licensed lawyer chosen by the Governor of Mexico. A Public Notary in Mexico has the power to sign and authenticate the documents and give legal advice if necessary. In addition, the Notary Public should be the one who prepares and process the property deed, according to Mexican Law. There are five primary documents the Public Notary is authorized to authenticate, including Powers of Attorney, company deeds, birth certificates, marriage certificates, death certificates, bank and insurance documents, and meeting minutes. In property transactions, having a notary public ensures that the process and the papers are legal. Hiring a public notary in Mexico avoids legal problems in the future. They are the most significant legal person when buying a property in Mexico. In addition, “notario” is the Spanish term for the notary. The needed requirements for Mexico Notario are the documents to be notarized, a government identification card, payment, and a witness, if necessary.

Escrow is a legal agreement that permits the neutral third party to keep the money or the property until the buyer and seller satisfies the specific conditions. Escrow is used in property buying in Mexico to protect the buyer and seller throughout the process. The Real Estate ESCROW secures the buyer’s deposit before giving it to the correct party until both seller and buyer fulfill the conditions. In addition, an escrow account keeps the homeowner’s funds for property taxes and insurance. There are five escrow accounts, including independent home sellers and buyers. These five types are real estate sales escrow, mortgage escrow, renter escrow, and construction escrow. Different parties, such as escrow companies, agents, or mortgage services, handle Escrow accounts.

Investing in a property in Mexico should be done without any mistakes to avoid big trouble in the future. Having a clear record in the past and doesn’t have any criminal records are helpful to immediately acquire a property in Mexico. In property buying, a considerable amount of money is involved. Buyers should prove to the agency or agents that they have the capability to invest and continue the monthly or annual expenses. Curriculum Vitae (CV) is one of the documents that show all the achievements, including the backgrounds of the investor. Aside from that, Proof of Funds (POF) is a document that shows the individual is able to fund the transaction. Proof of funds has three forms. These are banks, security, and custody statement. The objective of the evidence of funds is to ensure that the investor’s funds are attainable and authentic. Furthermore, Know Your Client (KYC) is a form that has all the information of the buyer and the seller. The banks, notary, tax department, Real Estate agency, and escrow companies that are part of a Real Estate transaction requires KYC. It is a necessary process of determining and checking the identity of the client while opening an account. KYC is an important part in the fight against financial crime and money laundering. The most significant and vital element, since it is the primary stage to execute the next steps of the process better

Mexico Visa is used to visit Mexico. Mexico Visa is required for those foreigners that want to enter Mexico for a visit, business, and other purposes. Mexico’s visas are needed to buy a property in Mexico. There are three visas used by foreigners visiting Mexico, the Visitor’s Visa (FMM), the Residente Temporal Visa, and the Residente Permanente Visa. The visa needed to purchase a property in Mexico is a tourist visa or the Visitor’s Visa (FMM). FMM is a document issued by Mexico’s Instituto Nacional de Migración (INM) tourist visa. Any foreigners with tourist visas are authorized to purchase a property in Mexico. Once they sign the contracts, the foreigner is no longer a tourist, and advisable to apply for a Temporary Resident Visa. In addition, having a tourist visa allows the foreigner to purchase and sell the property. However, selling a property in Mexico and only having a tourist visa results in high capital gain taxes. It is recommended to acquire the Visitor’s Visa (FMM), the Residente Temporal Visa, and the Residente Permanente Visa if planning to sell a property in Mexico.

Obtaining a property in Mexico comes with various taxes, such as acquisition and property tax. The property tax in Mexico depends on the state, and the agreed calculated annual based on the property value. The property acquisition tax rates in Mexico range from 2% to 4.5% usually of the appraised value. The other taxes and fees included in the closing fees are trust permit, foreign investment registry, trustee bank acceptance fee, first year’s trust fee, appraisal for future tax assessment, non-encumbrance certificate, preventative notice advice, Land Registry Office registration fee, and notary fee. Knowing the property taxes is significant to know other expenses besides the deposit and total contract price. Property taxes are taxes collected and used to maintain the property amenities, including roads, sewage systems, and other services.

On the other hand, Mexico has Property Laws, and they are accountable for regulating the different types of real estate and personal property ownership. A real estate investor who learns Mexico’s Property Laws has leverage over those real estate investors that are not knowledgeable of Property Laws in Mexico. Property Laws are laws that are formulated, enacted, and passed to regulate, govern, and serve as guidelines when dealing with a property. The Property Law in Mexico is significant as it helps protect the property rights of the investor and the seller.