Your success is incumbent upon your efforts.
Like any other Mexican citizen, foreigners can purchase property in Mexico.
It is completely legal and there are many incentives from the government to do so.
The main thing to take into account is the location of the property: properties located within the restricted area require more procedures to be carried out.
The restricted areas represent zones within 100 km. from the land borders and 50 km. in the case of beaches. According to the Mexican Constitution, within the restricted areas, no foreigner can acquire direct title to the land. However, what many people do not know is that as a foreigner it is possible to buy real estate within the restricted area. They can do this by setting up a trust ("Bank Trust") or setting up a Mexican company (Mexican Foreign Investment Law).
The decision you make will largely depend on the tax strategy you want to implement for your project and the number of properties you want to buy in Mexico. When buying more than two properties, it is best to set up a Mexican company.
A trust is a contract between two parties in which one delivers their assets so that another manages them for a certain time and in a previously established manner. The purpose of a trust is to facilitate the purchase and management of a property.
The trust is carried out through a fiduciary bank - a Mexican bank authorized by the federal government to act as a trustee -, in which the bank holds title to the land, but it is the foreigner who holds the rights to the land for a maximum period 50 years old. Authorized by a permit issued by the Ministry of Foreign Affairs, the procedure has an approximate cost of 30 thousand pesos plus an annuity fee of 550 dollars that includes a will that allows the assignment of beneficiaries, in case of death. It lasts 8 days and depends on the delivery time of the property you wish to buy. It is important to note that the trust is linked to the deed and that it can be extended as many times as desired for another 50 years.
Once authorized, it will be registered by a public notary. The notary public serves as the authority to formalize any title transfer process. These documents are recorded in their protocol books, providing evidence of ownership for the buyer.
Another option is to establish a Mexican company. The company must be owned and managed by foreigners. Being a Mexican company, it is subject to the same legal requirements as local companies and, as such, can purchase properties directly in the restricted zone. You should know that establishing and maintaining a Mexican company is more expensive than establishing a trust, plus it must be operated in accordance with the law!
To avoid deception on the part of fraudulent real estate developers, it is important to note that the Trust or constitution of a Mexican company is the only legal way for a foreigner to acquire a property in a restricted area of Mexico.
Compared to the USA, in Mexico, the property tax is much cheaper. It is calculated taking into account the percentage of the value of the property. The seller must contribute with the ISR (Income Tax) and report the sale of the property. And you, as a foreigner, must pay the ISAI (Tax on Real Estate Acquisition), the same tax that any Mexican buyer would have to pay.
Bank and credit financing options are also open to foreigners, so you can access them by buying through a bank. A mortgage loan can give you benefits such as better interest rates and fixed monthly finances.
In your agreement, you will have all the specifications regarding the use that you can give to your property; this includes selling and renting. To sell the unit, you must transfer your trust to someone else; this is known as assignment of rights. If you sell the property to another foreigner, you can transfer your profits to the new buyer. Federal and local taxes must be paid by you, in addition to transfer fees, to make it formally official before a Mexican notary.
This may include HOA restrictions to consider.
Although these steps may seem somewhat confusing, you can always seek advice from our real estate experts, who have experience in procedures of this type and in the acquisition of land in restricted areas. In this way, the path will be facilitated and the purchase process will be speeded up. If you have any other questions, do not hesitate to contact us. Get to know the best projects in the Riviera Maya and obtain quality professional advice.