Buying a Vacation Home in Mexico
If you want to buy a vacation home in Mexico, you may be thinking about a quiet home on a secluded stretch of beach. Unfortunately, the Mexican constitution has some restrictions that mean making that vision a reality is slightly more complicated.
In Mexico, foreigners can invest in property as long as it isn’t within 60 miles of the border or 30 miles of the coastline. You can, however, buy property in these restricted areas either by using a special trust known as a fideicomiso, or by forming a Mexican corporation. While the trust option may be more common, the corporate option is still well worth considering.
A Mexican corporation used to require that at least one owner of the corporation be a native of Mexico, but this is no longer the case. All you need are two or more parties to form the corporation and they can both be “foreigners.” A corporation also has the advantage of being able to own property outright, and not in trust. Not only does this reduce the fees associated with the fideicomiso trust, but also gives you the opportunity to rent out your property and potentially earn some income.
A Mexican corporation is set up in much the same way as a corporation in the United States. You will need articles of incorporation, bylaws and stock certificates. Generally, the process can be handled in about two weeks, for a cost of around $2,000 – slightly more or less depending on the number of parties involved and the complexity of the corporation. If you want to pursue this option, you need an attorney in Mexico experienced with corporate formation. He or she can guide you through your options and help you decide if this is a good choice for you.
The other option isn’t quite as straight forward. Under the fideicomiso, you don’t get direct ownership or legal title of the property in question. The bank acts as the trustee and holds the legal title to the property on your behalf. You get the rights and privileges of ownership without actual ownership. The term of the trust is 50 years and can be renewed any time during the duration of the trust, for an infinite number of renewals. Typically, the cost of establishing a trust varies from $1,000 to $1,500, depending on the bank in question. In addition, expect to pay annual maintenance fees that can range from $300 to $500.
To establish a bank trust, you need a permit from the Minister of Foreign Affairs. Deliver that permit to a Mexican Notary or Notario and the process will begin. The Notario isn’t a notary as we think of them in this country, but rather an attorney who has been designated as a Notario by the government – they are government officials and are required for the real estate transaction. While the bank will be listed as the owner of the property technically, they’re required to follow the wishes of the beneficiary regarding the property.
The Notario will make sure that the property is free from any outstanding liens, utility bills or taxes. He or she will also secure the necessary documents from the Minister of Foreign Affairs and prepare all documents for the closing. You generally pay a deposit of 10 percent of the purchase price to begin the process, and you pay the balance at closing. In addition to the balance, you’ll pay a number of miscellaneous expenses, just as you would at a real estate closing in the United States. These may include Notario fees, transfer fees, registration fees, appraisal fees and capital gains taxes – be sure to account for these when you’re planning ahead for your dream vacation home purchase.