The creation of the restricted zone in Mexico was part of the recent changes in laws and regulations in relation to buying property in Mexico. These changes have made investing in property a lot easier, a lot less complicated and a lot more attractive to foreign investors.
To this end we have written a guide to buying property in the restricted zone in Mexico. Is it really a compilation of commonly asked questions from our clients. We hope that it will ease you worries and remove any obstacles there may be ahead of you. Our team at Punta Sayulita has the experience to help you every step of the way.
The most important thing that you should know is that buying property in the restricted zone in Mexico is completely legal and 100% secure.
In the Mexican constitution the restricted zone is defined as all land located within 100 kilometres of any national border and within 50 kilometres of any ocean. It also states that no foreigner is allowed to purchase direct title to land within the restricted zone. However, Mexico’s Foreign Investment Law allows foreigners to acquire indirect title to land in the restricted zone by one of two methods; through a Mexican corporation or through a bank trust (fideicomiso).
A little Spanish will go a long way here in Mexico and although many people and places will speak English having some words and phrases will open doors and encourage positive relationships.
In regards to buying property here, an important word that you will need to know is Fideicomiso. Pronounced “Fee-day-coh-MEE-soh”. Mexico created the Fideicomiso to encourage foreign investment in the highly desirable areas, particularly along the coastline.
Here´s a simple breakdown of what you need to know:
– A Fideicomiso is a real estate trust that is held at a Mexican bank of your choice, for example HSBC or Santander.
– The Fideicomiso was set up to allow foreigners to buy prime Mexican real estate in the restricted zone in Mexico
– The bank acts as a Trustee
– You maintain complete control over the trust (operates like a Living Trust in the United States)
– A Fideicomiso gives you complete control over the property which allows you to lease, rent, mortgage, sell, improve and will your property
– The Fideicomiso only acts as stewards of the trust. The trust is the beneficiary’s property and cannot be used by the bank in any way.
– The trust is for 50 years and can be renewed for additional 50 year increments at any time. The cost is approximately $500 USD
– Each trust is guaranteed indirectly by the government
We recommend that non Mexican property buyers have title insurance for property transactions as it is seen as an insurance policy for property ownership. Title insurance companies can also be used as escrow agents which is the safest way to close the property transaction and ensures that all money is returned should the property deal fall apart.
Having a reliable real estate company in Mexico to help you organise all the official paperwork and closing costs. Typical buyer’s fees include a 2% acquisition fee, a 1% recording fee, a 1% notary fee and a $3,000 USD attorney fee
Buying property through the Fideicomiso can cost approximately $1,500 USD set up fee, $500 registration fee and a $500 annual fee there after.
Setting Up a Mexican Corporation
Most investors buy property in Mexico using the Fideicomiso but you can also set up a corporation if that is better suited to your needs. It is common to buy property through a corporation when your intention is to use the property for commercial reasons. You might plan to use the property in summer but rent or lease the property for the rest of the year. Also, buyers interested in multiple properties often choose this option.
Here´s some introductory information about setting up a corporation in Mexico.
– There are 2 main types of corporations in Mexico.
The LLC is a limited Liability Corporation and the LLP which is a limited Liability Partnership
– Foreigners can own, operate and manage Mexican corporations but none of the corporations investors can be Mexican
– a corporation in Mexico it has the legal capacity to buy property anywhere in Mexico, including the restricted zone
– There are no restrictions on foreign owned Mexican corporations who are dealing and developing in property so the advantages there are huge.
– The attorney’s fee is $1,500 USD to set up a corporation and there is an accounting fee of $100 per month thereafter
Approximate costs when buying property through a corporation are a $1,500 set up fee and a $100 a month accounting fee.
Punta Sayulita prides itself on it´s customer service. We feel that it´s the most important part of our business. Our experience has shown us that buying property, no matter where in the world, can sometimes be complicated, stressful and that often the legal expenses and responsibilities can set up roadblocks to buying that perfect property you have already fallen in love with.
Our team at Punta Sayulita will advise you every step of the way.