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Author: Marcel Vobejda
Senior Advisor 4 June, 2024
In Mexico, there are no restrictions on owning a property in Mexico if the investor is a foreigner. There are six main real estate investment requirements in Mexico, including the Fideicomiso, copy of real estate title, investor’s information, beneficiary information, signed a contract of the deal, and trust deed. The closing process begins when all real estate investment requirements are complete. In addition, Mexico has different real estate investments to choose from, such as apartments, beachfront, condominiums, and houses. The most popular real estate investment in Mexico is condominiums and homes, especially those beachfront properties with access to the beach. Mexicans and foreigners are permitted and free to purchase and sell properties in Mexico. For foreigners, as long as they use the bank trust fund to own property in Mexico, they are able to enjoy rights and obligations similar to those of Mexicans. Owning a property in Mexico takes 2 to 3 months, and the maximum length of finalizing a contract is 90 days. However, the size of acquiring a property in Mexico depends on the factors that affect the process. Furthermore, there are fees to pay aside from the total property price during and after purchasing the property. The costs to expect to pay to include legal and notary fees, bank trust fees, and taxes and duties. After buying the property, there are ongoing expenses, such as Mexico property tax, maintenance fees, land trust fees, and electric and water bill. Apart from that, there is an additional expense if the holder wants to renovate or remodel the property, including workers, engineers, designers, architects, a new set of furniture, and materials. In general, real estate investment in Mexico is affordable compared to the United States.
The real estate industry impacts Mexico as it largely contributes to its economy. The real estate industry in Mexico continuously increased even before and after the Covid-19 pandemic. The effect of housing prices on residential investment influences economic development. Rising home prices stimulate more construction spending to take advantage of higher costs, which leads to more robust economic growth. The real estate industry generates job opportunities that significantly contribute to Mexico’s economy. In 2021, there were 872,000 individuals employed. The investors in real estate properties located only in coastal areas, beachfront, or by the ocean in Mexico are mostly foreigners, but Mexicans invest the most in Mexico. Foreigners are attracted to investing in Mexico because of some factors, such as its economic stability, investment incentives, increasing GDP, and low unemployment rate. Overall, the real estate industry in Mexico is healthy and improving. In addition, the cost of living in Mexico is cheaper than in the United States, Canada, or Europe.
Listed below are the requirements for owning a Property in Mexico.
Fideicomiso is a bank trust which enables the investor to invest in any Mexican property and have it as a beneficiary. Fideicomiso or trust is from the Latin word “fideicommissum,” in which “fides” means faith and “commissus” means commission. Fideicomiso is a 50-year and renewable contract by the holder or heirs. One or more individuals or an entity handle the Fideicomiso. According to the constitutional provision, Mexican law does not permit non-citizens to directly purchase or own land set within 50 kilometers of the coast and 100 kilometers of the border. Fideicomiso enables the non-citizen to acquire and own coastal and borderline property in Mexico indirectly. The non-citizen buyer has the right to utilize, savor, renovate, rent or sell the property. The non-citizen is the trust beneficiary and has all possession rights and responsibilities. There are several advantages of Fideicomiso, including being renewable, for residential purposes, it being safe, appointed beneficiaries, tax strategies to reduce capital gains taxes, and it is not necessary to file any tax returns with the Mexican Government. On the other side, Fideicomiso has disadvantages, including subdivisions being more challenging to be accepted by the Bank Trustees, authorization for construction is often hard to obtain, and the owner must pay the bank trust fee every year to the Bank Trustee. Moreover, there are three parties involved with Fideicomiso, such as the Trustee (The Fiduciario, Bank, or Trustee), the Purchaser (The Fideicomisario or Beneficiary), and the Seller (the Fideicomiente). To establish a Fideicomiso, ask a Mexican Bank, such as Scotia Bank, HSBC, Banamex, and Santander, to create one. They are responsible for providing all the requirements, and the buyer must provide all the information needed. The buyer must pay for a year’s advance, an establishment fee, and a government fee. Then the bank will process the legal title of the property in the Fideicomiso. The cost in USD of establishing a Fideicomiso range from $2,000 to $3,000, and the annual fees range from $550 to $1,000. These are additional to the typical cost of acquiring a property in Mexico.
A real estate title is a document as proof of possession. A real estate title allows the holder to sell the property or transfer all or part of the interest in the property. A real estate title indicates who has the rights to the property, including the right of possession, control, exclusion, enjoyment, and disposition. Non-citizen individuals, companies, or Mexican companies with foreign owners may purchase real estate property for residential purposes in a restricted area but through a trust fund. The bank will keep the property title, and the beneficiary is the foreigner. Mexican companies with foreign investment in their capital stock may obtain plain title for the property in the restricted area if it is not for residential purposes. Before agreeing to or signing the purchase contract, the buyer must request documents from the seller. These documents include the certificate of clean title, existing publicly recorded deed, power of attorney, utility payments, the blueprint of the property, and proof of the amount of tax. Real estate title is essential to ensure the property is free from all liens. In addition, the real estate title is a document that contains all the final agreements of purchase and sale. It is signed before a local notary public that authorizes the sale and purchase agreement between the buyer and the seller. This arrangement usually includes terms and conditions in the letter of intent or promissory agreement, such as all the seller’s representations, warranties, and indemnities. The title will be delivered to the buyer when the contract is approved. The title must be excluding reserves, except for cases where the seller offers for special conditions precedent, subsequent, or withholds domain of the property transferred until the buyer pays the full payment of the purchased price.
An investor is any individual or entity who engages in entrusting capital with the hope of having financial returns. The investor’s information is essential, such as the name, date of birth, social security number, and address. The Notary and Trustee Bank maintains the information. A non-Mexican investor may purchase a property without residency. There are no requirements for non-Mexican to apply for residency status before acquiring real estate. The buyer needs to provide information, including a copy of their identification, a bill of payment indicating the current address, and, if applicable, the visa or any document that validates the legal status to the notary. The documents needed are the following if acquiring property through the buyer’s corporation: the exact corporate name and denomination; and the certified copy of the corporate by-laws and articles of incorporation translated into Spanish.
A beneficiary is a person or entity who receives the benefits of the property owned by someone else. In acquiring a property in Mexico, Fideicomiso is an arrangement where the trustee holds the property and has a beneficiary. Two beneficiaries are involved in Fideicomiso: the Primary and the Substitute. The primary beneficiary is typically the buyer and enjoys all the rights and attributes of the possession, while the substitute beneficiary is the one who receives the requests upon the death of the primary beneficiary. The needed documents are the following if acquiring property as an individual: the full names of the beneficiaries and the substitute beneficiaries, foreign addresses and phone numbers of the beneficiaries, and the photo identification of the beneficiaries.
A Signed Contract or Deal is a lawfully binding agreement. The buyer and the seller sign contracts, showing mutual understanding and agreement to the terms and conditions indicated in the contract. The intent of signing a deal is to prove that the buyer willingly enters into the contract with the seller and is bound by that contract’s obligations. There are three kinds of contracts needed when buying a property in Mexico, offer to purchase, promissory contract, and the purchase-sale contract. The buyer and seller will close the deal once the three arrangements are complete. The Offer to Purchase contract is the primary lever of the purchasing process. It includes a buyer’s offer to the current holder with a definite amount of money. The Promissory Contract is the most significant of the three contracts. In most cases, the Offer To Purchase Contract and the Promissory Contract are both incorporated in one document. The Promissory Contract contains the deal’s terms, dates, and agreed-upon specifics. The Purchase-Sales Contract is the transfer’s last document; the buyer, the seller, and the notary public should sign the document.
A Trust Deed or the deed of trust is a document used in real estate transactions and used when one party has taken out a loan from another party to purchase a property. Usually, banks are the only institutions permitted to offer trustee services in Mexico. A trust deed is an agreement to transfer the property to a third party that will keep title to the property and manages the same in favor of specified beneficiaries. The trust deed has purposes, including removing the property from future creditors and reaching certain or ex-family members; conditions to pass the property to beneficiaries, guarantee a private mortgage, and hold property in the restricted zone for the non-Mexican beneficiary. The trust deed determines the management of the property trust, the distribution of the property privileges, and when and to whom the trust will distribute the property. Those who can act as trustees are only the financial institutions.
After completing the real estate requirements, the last step is finalizing a contract. When the deal is accepted, the closing procedure starts. The individuals involved in the closing of the sale of the property are the buyer and seller, beneficiaries, the notary public, the trustee bank, the buyer’s real estate agents and lawyer. The bank officer or the closing coordinator must receive a permit from the Ministry of Foreign Affairs. To acquire a trust permit from the Foreign Affairs Ministry, the parties must provide personal data, proof of title, and the purpose of the property.
Moreover, the property agent will begin the drafts for the closing deed and review by the notary, lawyer, and bank officer. Then the buyer will sign the acts, settle the payment, and transfer the title to the bank. Paying a deposit is one of the ways How to buy property in Mexico. A 10% deposit of the property’s total price is typically needed as a deposit to verify the purchase. The money is kept either by the attorney, notary, real estate agent or in the escrow account. On the closing date, the notary public will transfer possession of the property to the buyer. The closing date is the day the property will be under the buyer’s name and the title deed is signed. The buyer and the seller agree on the date and decide by the “notario.” The notary will issue a notarized copy of the closing deeds as the first proof of possession. In Mexico, the notary public (notario público) is a public official assigned by the Governor and has the power to certify documents of business or legal transactions that require authenticity. After three months from the closing date, the Public Registry will issue the final deed. The Public Property Registry provides lawful certainty in real estate transactions. They are the institutions that record the registration. The first step in registering the property in Property Public Registry in Mexico is to make a request. Secondly, a purchase sale agreement must change the possession, rights, and titles that will transfer under the new buyer’s name if the property has a previous owner. Another alternative is to show the deeds of the property, which the notary public should sign. Lastly, show the certified copy signed and sealed by the notary public. Moreover, the delivery of the property and acquiring the title take place on different dates.
Real Estate Investments in Mexico include apartments, beachfront, condominiums, and houses. Aside from being a tourist destination, Mexico has become an ideal location to start or invest for foreigners and locals. Mexico has become known for its foreign investors and makes the real estate industry grow. Some of these investors are rich and able to purchase a luxury home for vacation, and others are those who want to enjoy the beauty of Mexico as they retire. Another reason for the buyers of real estate property in Mexico is for investment and wanting to generate income. In addition, the real estate investments with greater demand are condominiums and houses. The reason behind that is the lower prices of condominiums and houses in Mexico compared to the United States. The prices of condominiums in Mexico are relatively low compared to other U.S. coasts, which is the reason for the vast number of buyers in Mexico. As a result, foreigners and locals tend to invest more in condominiums. Furthermore, the three most popular locations for investing in real estate property in Mexico are Conchas Chinas, Amapas, and Old Town. Conchas Chinas is one of the earliest and most recognized neighborhoods in Mexico. Conchas Chinas is known for its resorts and famous residents. It is often called the “Beverly Hills” of Mexico. The lower part of the Conchas Chinas has fast access to the beaches and is close to the Old Town. Conchas Chinas has modern condominiums, traditional-style villas, beachfront homes, mansions, and commercial buildings.
On the other hand, Amapas is one of the famous places in Mexico for real estate investing and is north of the Conchas Chinas. Amapas is known for their peacefulness and calmness in an isolated part of Mexico. Amapas has access to the beach and hillside and have the scenery of the Pacific Ocean. The primary real estates found in Amapas are condominiums and villas. While the Old Town is the central area of Mexico. Old Town is known as the “romantic area” and a busy place compared to the Concha Chinas and Amapas. The real estate investments in Old Town are apartments, single-family houses, and condominiums.
Anyone can buy properties in Mexico, irrespective of their citizenship or nationality, whether locals or foreigners. However, foreign nationals should follow some guidelines.
According to the Mexican Constitution of 1917, only Mexicans could purchase properties in Mexico. In 1973, foreigners were permitted to buy properties outside the restricted area under the Foreign Investment Law and enjoyed the same privileges and duties as Mexican citizens. The restricted area is 31.0686 miles within the coast and 62.1371 miles within the international boundary line. The foreigner must go with a trust fund for 50 years if the property is in a restricted area. A trust fund in Mexico is known as Fideicomiso. In Fideicomiso, the non-citizen is the beneficiary of a Mexican trust, and the bank is the legitimate property owner to gain the beneficiary in the trust.
A real estate investment in Mexico usually takes 2–3 months or less. Still, the length of acquiring a property depends on the number of properties the investor views until deciding which one to purchase. Overall, buying a real estate investment in Mexico is straightforward. In finalizing a contract and taking possession of the property, the length is about 45 to 90 days. However, it depends on factors such as if the property is still pre-owned or in the pre-selling stage. Additionally, it depends on some circumstances, including difficulties in certifying the title and the non-debt certificates; and the volume of work on the bank and notary.
In owning a property in Mexico, aside from the total contract price, expect to pay for the fees, such as legal and notary fees, bank trust fees, tax and duties, and property tax. The legal and notary costs usually vary between 0.5% to 1%, but it depends on the property’s purchasing price. In Mexican Law, the deed to the property must be prepared and processed by a Notary Public. In a bank trust, the initial fee depends on the property and institution, but typically, the average expense ranges from $700 to $1,600, and the yearly fee is about $450 to $600. Tax and Duties include the title deed registry, transfer tax, and the Government closing documents and appraisal. The tax ranges from 2% to 6% of the property’s value. However, Mexico’s property taxes commonly cost about $300 or less and rarely cost about $600 or more. The ongoing property costs in Mexico include property taxes, maintenance fees, land trust fees, and electric and water bills.
There are instances when the investor wants to renovate and remodel the purchased property in Mexico, which is an additional expense. As per the experts, there is a general rule about the cost of renovating and remodeling the property. The expense should be less than 10% of the property’s current market value. The average expense of renovating and refurbishing a property ranges from $15,000 to $200,000. Depending on the changes, the holder wants to make and the price changes. Renovating a property is cheaper than rebuilding it. There are expenses in renovating or remodeling a property in Mexico, such as the payment for the workers, engineers, designers, and architects, a new set of furniture, and materials.
No, real estate investment in Mexico is not expensive. Real estate investment in Mexico is more inexpensive than in the United States. Anyhow, the price of a property in Mexico depends on the location. There are parts of Mexico where real estate investment expenses are higher than others, including the Pacific coast, the Caribbean, and the Riviera Maya. The average property expense in Mexico ranges from $100,000 to $1 million. Even though property in Mexico is more inexpensive than in the US, note that the price increases as the economy of Mexico rises and develops. Moreover, the price of a property in Mexico depends on the property type. Beachfront properties in Mexico are more expensive than those miles away from the beach.
Yes, it is okay to buy and sell a property in Mexico. Mexicans and foreigners are free to buy and sell property. Non-citizens are permitted to buy and sell property in Mexico if they have Fideicomiso if the property is in a restricted area. In Mexico, real estate owners must pay the annual Mexico Property Taxes and Tax Rates, local or foreign.
Senior Advisor
Based in Puerto Vallarta, Jalisco, México.
By recognizing and respecting the importance of the value in the trust clients place in him, Marcel Vobejda is one of the most trusted Top-seller-buyer and developer Real Estate Advisors in Puerto Vallarta, counting among his clients numerous distinguished business and community leaders. Residing in Puerto Vallarta, Jalisco since 2003, works with individuals, investors, and developers interested in our destination’s most coveted Coastal Properties—with a particular focus on the Romantic Zone, Amapas, Conchas Chinas, and specializing in Beachfront properties around the Bay of Banderas.
He’s ranked among the Top in Puerto Vallarta and Riviera Nayarit with hundreds of transactions worth of experience since being a full-time Real Estate agent in the area since 2005. In the last decade, involvement in 80% of all transactions in Lower Conchas Chinas and Amapas solidifies his expertise as the go-to professional in the zone.
Recent successes have included the fastest-selling pre-construction development in Record Time and represent the best properties in the area, such as Sayan Beach, Sayan Tropical, Indah, Boracay, and Serena Condominiums on Los Muertos Beach, to name a few. He is “Real Estate Developers all-inclusive services” beyond the standard Broker sales representation.
A high-touch broker known for his extensive Puerto Vallarta real estate market knowledge and his unmatched devotion to clients, Marcel’s success via positive referrals, long-lasting relationships, decades of networking, and being able to provide his clients with a first position advantage by way of Premier Off-Market property offerings, exclusive only to his portfolio. He is always striving to earn his client’s respect by working tirelessly on their behalf and always offering them candid advice. Marcel also utilizes the latest technologies and is supported by a full-time sales assistant, Axel Pedraza, who shares Marcel’s attention to detail and passion for trying to reach perfection.
Originally from Vancouver, Canada, but is now a proud “Pata Salada” (Nickname for Locals from Puerto Vallarta, Jalisco). Marcel escaped the rainy days of the Pacific North West and is now deeply connected to Mexico, with his better half being born in Puerto Vallarta; this is where he has solidified his home and started his family. When he isn’t working, Marcel enjoys spending time with his family and friends, cooking, traveling, designing properties, boating, fishing, and anything Coastal Living related.
I am currently working on a comprehensive guide on property laws in Mexico, focusing on real estate investment requirements and the importance of fideicomiso.
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