A Quick Guide For Foreigners Wanting to Invest In Mexican Real Estate

A Quick Guide For Foreigners Wanting to Invest In Mexican Real Estate

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beach house in mexico

More and more foreigners, coming mainly from the US and Canada but others coming from Europe and other areas, have been buying up Mexican property despite economic turmoil and uncertainties in most parts of the world. Sales of both restricted as well as non-restricted property have been continuous in Mexico and more and more people are seeking expert advice on foreign investments and foreign home ownership in this tropical country in general.

While this guide, which is geared towards foreigners wishing to invest in Mexican real estate, is not all encompassing, it does cover many important aspects of foreign home ownership in Mexico and it will definitely be a good starting point in your search for reliable information on the topic.

Understanding Mexican Laws Concerning Foreign Home Ownership

One of the first things a foreigner wishing to invest in Mexican property needs to know is what the “Restricted Zone” is and how this legal concept could affect their real estate investment as well as the purchasing process.

A Basic Definition of Mexico’s Restricted Zone

In essence, foreigners can only legally purchase property in certain areas of Mexico. The Mexican Constitution forbids a foreigner from buying property in either of these two circumstances:

  1. Foreigners cannot legally buy nor own property which is located within 100 kilometers of Mexico’s border with any country; including the United States, Belize or Guatemala. That’s 62 miles and 241.3 yards from the border.
  2. Foreigners cannot buy property if it is located within 50 kilometers of any of Mexico’s coastlines, including any of its islands. (A 31 mile and 120.6 yard restriction)

How Foreigners Get Away With Buying Property Within the Restricted Zone

Not too long after the gentlemen that wrote the Mexican Constitution placed these harsh restrictions on foreigners wanting to buy land here, some revisions were made that came up with a way to bypass the legal restrictions that had been implemented.

Forbidding foreigners from buying land or property within the restricted zone became detrimental to the progress and economy of both the people and towns found within these regions. A way had to be devised in order to bring in foreign capital.

Additionally, it is important to note that there was also great pressure from foreign investors pushing to have these restrictions lifted.  From a foreigner’s perspective, some of the most attractive real estate investment opportunities are found within Mexico’s restricted zone. In fact, today many foreigners buy property within these restricted areas every year. How do they do this? Through something called Fideicomisos.

Understanding the Fideicomiso Loophole

Fideicomisos are basically a sort of trust fund which allows you to purchase a property within the restricted zone and have it registered under someone else’s name. Basically a financial institution buys the property on your behalf and gives you full control over it, which is very similar to having full ownership rights.

The bank itself holds the title but you reap all profits or losses associated with homeownership, including being able to rent it out or sell it at any moment.

How do Fideicomisos Work?

The Fideicomiso process involves 3 basic parties which are in essense the seller, the “real” buyer, and the third party trustee who will figure as the owner in record. These 3 parties are legally known as:

  1. The Fideicominte (the seller)
  2. The Fiduciario (the trustee)
  3. The Fideicomisario (the “real” buyer)

In other words, you, the buyer or fideicomisario will invest your money through a fiduciario. The fiduciario is required to follow each and every one of your orders and will upon your request purchase the property from the fideicominte or seller and hold it in a trust on your behalf.

Buying Property in Mexico’s Non-Restricted Zone

Foreigners can and do legally buy and own property which is more than 100 kilometers from the Mexican borders or more than 50 kilometers from any coastline.

According to the Mexican Ministry of Foreign Affairs which is the government entity in charge of overseeing real estate investments made by foreigners, in order to buy property in Mexico you must follow a set of guidelines they have laid forth in their official government website which can be found here:

(http://www.sre.gob.mx/tramites/sociedades/tema2e.htm)

The guidelines are written in Spanish so you’ll have to get them translated if you don’t speak Spanish in order to understand what you are doing. They basically require you to fill out several forms and pay some minor fees before you become eligible to buy property within Mexico. Once these requirements are met you are basically on the same playing field as any Mexican citizen wanting to buy property within the country.

The Actual Buying Process

Buying property in Mexico is a bit different than buying property in countries such as the US or Canada, however many things still hold true.

One of the major differences is that the Mexican government does not currently require people to have special licenses in order to help others buy or sell real estate. That means that pretty much anyone can set up a corporation and act as a real estate agent or broker on your behalf. Therefore, verifying a company’s reputation and acting only when you get a very good recommendation from others is very important if you want to avoid being cheated.

Like in any other country, doing your homework before making a purchase of this sort is very important as well.

Exercising Due Diligence Before Buying

First and foremost you must always verify if the property has any pending issues, legal or otherwise before signing any contracts or handing out any money. Here are a few questions that you need to ask and confirm before you buy:

  • Was the property legally built? Does it have building permits and the whole nine yards?

Keep in mind that a lot of property in Mexico was built unlawfully or cannot be legally sold so verifying the legitimacy of the construction is important.

· Is the seller the real owner of the property and is he/she legally entitled to sell it?

Here you need to verify that the seller has the “Escritura” or property title. You also need to have a professional company run a title search and also look through documents such as the “Certificado de Libertad de Gravamen”, the “Certificado de No Adeudo” and other documents that will tell you if there are any important issues pending such as mortgages, liens, back taxes, etc., on the property.

Conclusion

Only after having verified that a property is free from problems and you have filled out all the necessary paperwork required by the Mexican government should you sign an actual sales agreement. Remember, a little due diligence up front will help you avoid inconveniences later on.

About the VivaReal Network

VivaReal is a Latin America property listings network with a major focus on the Mexican real estate market. Their current mission is helping expats, investors and retirees connect with local sellers, brokers and agents in Mexico as well as other Latin American countries.