Buying Property in Mexico: Separating the myths from the reality

Perhaps you’re wondering just like a lot of foreigners wanting to fulfill their dream of owning a home in Mexico, is it even feasible? The good news is, absolutely. Whether you’re in the market for a home you wish to live in full time, a vacation escape that you plan to visit a few weeks a year, a beachfront lot you hope to resell at a profit or your own piece of land on which you can build your dream home, Mexico is the place for you and in spite of what you may have heard, it’s perfectly legal to buy property in a country that will offer you so much more than you could ever have imagined. Speaking from a quasi local and wannabe Playense who’s had four years living in Playa del Carmen and studied the real estate market, it’s a lot easier to own property in Mexico, a diversely spectacular country than you may have previously thought. 

I’m sure that you most likely have many pending questions and inconclusive discoveries based on insights that you’ve read about or heard through the grapevine. This article will address some of the most common myths around buying real estate in Mexico in an attempt to clarify any doubts you may have and move you into the home of your wildest dreams, sooner than later.

Myth #1: Foreigners Can’t Buy Property in Mexico

It’s a common belief that unless you’re a Mexican National, you can’t own property in Mexico. Let’s get this ultra important fact straight: outside the restricted zones which signifies 50 kilometers (about 31 miles) from shorelines and 100 kilometers (about 62 miles) from international borders, foreigners can hold direct deed to property with the same rights and responsibilities as Mexican nationals. 

Inside the restricted zones however, the ownership land establishes that…”within 100 kilometres along the border or 50 kilometres along the coast, a foreigner cannot acquire the direct ownership of a residential house and/or land.” Of course there are ways around the word restricted that will still allow for foreign ownership. 
 

Myth #2: Holding Title in Your Own Name is the Best Option

Owning property through a trust deed or fideicomiso is the most common way own foreign property inside the restricted zone, as defined above. The fideicomiso is very secure and only banking institutions authorized and regulated under Mexican banking laws can act as fideicomiso trustees. With a fideicomiso, you essentially have all the rights you’d have if you owned the property via direct deed. The buying process itself can be slower as a result of fideicomisos and of course it’s an added cost (Between $1500-3000 USD per property purchase.) However, it’s an incredibly useful tool and many buying outside the restricted zone— such as expats in the colonial cities, for instance—have chosen to own their property through bank trusts. 

There are also other important and notable advantages associated with a fideicomiso. Firstly, you can include more than one person as a beneficiary. For example, a married couple can essentially be “co-owners.” It is recommended as well that the the co-ownership should be structured in such a way that if one partner passes away, the other has immediate, 100% control over the property. In addition, an “heir” may be listed. In essence, if both co-owners pass away, a new beneficiary is already in place and one who doesn’t necessarily need to be related to the original co-owners. A letter of instruction is needed for the back in order to have the official heir in writing. In addition, once the death certificate(s) is presented, the bank immediately and seamlessly passes title to him or her without his having to be in Mexico. For couples, friends who own a property jointly, or for couples in a second marriage with different children, this is a very desirable option.

Simple and easy transfer of control over the property can be conducted and avoids the messiness of sorting out ownership in the Mexican courts. Additionally, it allows you to avoid inheritance taxes. Trusts are issued for renewable 50-year periods. If you are buying property currently held in a trust, you can either establish a new trust for the next 50-year period or take over the existing trust deed. Trusts are renewable at any time by simple application. Maintenance fees for this kind of trust are typically $700 to $800 per real estate, a foreigner will generally form a Mexican corporation, also known as a Sociedad Anonima (SA) that buys the property, as the law permits a foreigner 100% ownership of a corporation.

The property is deeded directly to the corporation and required to be used in a commercial capacity. There are annual corporate fees and tax reports to be filed by an accountant, but this approach avoids the initial costs of setting up and the annual fees, approximately US$300 to $500 per year, that are associated with a fideicomiso.
 

Myth #3: The Government Can RePossess Your Land

This could not be further from the truth. Once the fideicomiso is in place, residential property cannot be repossessed by the Mexican government. Of course there are exceptions to this and one of which occurred in the Baja California: “Yes, there have been cases—such as in Baja California a number of years ago—when the Mexican government has ‘repossessed’ property from foreigners,” notes IL Mexico Editor Glynna Prentice. It was discovered however that the property titles these expats held were fraudulent. Yes, these expats were defrauded, but not by the government; the government was simply correcting the fraud, applying the law, and returning title to the rightful owners.

Cases like these as above, emphasize the importance of seeking an honest, competent lawyer to protect your interests in real estate; one who who can make sure a property title is legal, clear, and unencumbered. Nevertheless if an issue arises, you are fully protected under Mexican law just like any citizen.

Buying a home in Mexico is indeed a lot easier than one might think and in so long as all of the laws are adhered to and you have the write realtor and lawyer who has your better interests in mind, the process should run very smoothly. 

By Leah T. Sakata