Buying Property in Mexico

If you plan to buy property in Mexico it is very important you receive as much information as possible to be well informed in making your decision. Below are some introductory guidelines that can be useful:

Property in Mexico

Financing your Mexican Property

Mexican Law: Property ownership

Ejido (Agricultural) Lands

The Role of the Notary Public in Mexico

Costs and Taxes

Important! The information in this section is provided for outline guidance only. Information, figures and rates change without notice. For updated information please contact us through our Contact Page.
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Property in Mexico
This introductory guide assumes that you are considering the purchase of land or property in Mexico.

Buying property in Mexico, whether it is land, a serviced apartment or a house, can offer good value for money in comparison to prices in the US and Europe. Although, prices in some areas have increased dramatically in recent years, care should be taken in assessing a property’s true value; Mexico’s land costs can be lower, building and maintenance is cheaper and cost of ownership (taxes, utilities) is very low.

The reasons to buy property in Mexico come down to a personal choice, and depend on your individual circumstances. Perhaps you will be living in Mexico for some years and you see long term rental as ‘wasted’ money, or perhaps you’re looking for an overseas property investment that will surrender a rental income, while providing you with a place to stay on a holiday visit…

Property value in México increases year-to-year, as they do in most places. And as with all property, the relative value and appeal of land or property in Mexico comes down to the “Location, Location, Location” factor.

Another important factor to consider when buying property in Mexico is the developed state of local and surrounding infrastructure in the location you are looking at. Not all areas are well developed, and property prices will be cheaper in those that are not. However if, for example, a high speed road is built connecting a previously ‘remote’ location to other, better developed places, you may see a property investment in that area increase substantially. México is a vast country – at nearly 2 million square kilometers – and not all of it is easily accessible. Road infrastructure is improving every year, with most major places now adequately connected, and work continues to connect the more remote areas, but this will take time.

If you’re considering the purchase of property in Baja California Sur you have come to the right professionals. Thousands and thousands of foreigners have successfully purchased land and property in Mexico, there is no reason why you should not become one of them if you want to.

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Financing Your Mexican Property Investment
Historically and in many cases today, most property/real-estate deals in México are cash only. Mexican Banks are now beginning to offer mortgage products for the purchase of real-estate in Mexico, although 30-40% deposits are required and interest rates are not as attractive as those in the US, Canada and Europe.

There are some banks in the US who are now offering mortgages on Mexican Property, but they are usually offered on the back of equity built up in a property in the USA and the rates are higher on the additional loan amount, to reflect the additional risk. Many Americans HAVE mortgaged a house in México using this financial vehicle so it is possible.

Financing inside México is still difficult and relatively expensive, so if you plan to buy real-estate in México you will be well advised to have your own foreign funding available; either through an equity-release scheme or other fund. Some people who are planning to retire to México will sell their house in their home country and use the proceeds to finance property in México; those who want to keep a ‘base back home’ may release equity from their existing home, rent it out, and use the dual proceeds to fund their retirement home in México.

If you are looking for financing for U.S. or Canadian citizens feel free to take a look at this financing link below:

Finance North America

Real Estate Lending for U.S. and Canadian Citizens

http://www.FinanceNorthAmerica.com

Telephone from US/Canada 1-866-Yes-4Mex (1-866-937-4639)

This applies to finished homes

See also: Payment for your property investment, later on this page

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Mexican Law: Property Ownership

Mexican Law provides for private ownership of land by foreigners, its laws are very specific about the way in which land rights should be transferred from seller to buyer, and also what type of lands are and are not eligible for public ownership. A Notary Public (see below) will guide you through these details, but generally:

Property may be purchased and owned outright for residential use by foreign nationals outside of the 100km restricted land border zone, or outside of the 50km coastal zone.

Inside of the restricted border/coastal zones, foreign nationals may own land through a fidecomiso (a trust) which is set up through a bank and provides for ownership of the land and property in all but name.
The Mexican Constitution previously banned foreign nationals from owning property that was within the restricted border zones. This old law was intended to protect Mexican soil from foreign invasion.

Because the Constitution cannot be altered in this respect, the Government introduced a system of land trusts, so that foreign nationals could invest in property inside of the ‘restricted’ zones. So now, if you as a foreigner, want to buy a dream home with a Pacific beach view, you can, except that it will be by means of a trust, set up through one of the main banks in México.

The trust holds the deeds to the property, and you and/or other named persons which you specify are sole beneficiaries to the trust (and therefore the property). You have full rights to do whatever you like with your property: it can be developed (in accordance with local planning regulations), rented, leased, sold, or given away. In other words, you own the property in all but name.

The trust enables you to name a beneficiary upon your death, and you do not need to have a Mexican Will in order for your wishes regarding the trust to be executed.

You do not have to be a resident of México to own property there, so there is no need to qualify for resident status under immigration laws in order to have a property investment in México.

Mexican Law on property ownership is comprehensive and provides protection for the seller and the buyer in all property transactions, provided that the law is followed, and you ensure that all necessary documentation is present and that the procedures are adhered to. Your Notary Public (see below) is an important person in this process, and he/she will guide you.

Title Insurance in México:

When you buy real estate in México, you would do well to consider taking out Title Insurance on the property. Title Insurance covers you, should the property you buy subsequently turn out to have liens associated with it. This is especially relevant if the property you are buying has been privatized, having previously been classified as being “Ejido” lands (see below), but even if this is not the case, Title Insurance will protect you if any other previously unforeseen lien or charge is brought against the property before you took possession of the Title Deed. Rates for Title Insurance are around US$5-US$5.50 per US$1,000 of the property’s value; pay-able once only at the point of purchase. If you need more information we will advise you further about Title Insurance.

For more security in your real estate transactions in Mexico please contact Stewart Title Baja and Stewart Title Los Cabos

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Ejido (Agricultural) Lands
Ejido lands have a long history in how they came into being. Essentially, they are similar to “commons land”; after the revolution, communities and peasants were handed strips of land, in the main, to grow crops on, and they are called “Ejidos”. You CAN buy Ejido land, but the sale requires the agreement of the whole community that ‘own’ it, the process is arduous and risky. Some big property developers may negotiate to buy a big plot of Ejido land, with a view to “fractionalizing” it (usually introducing mains water, sewerage and electric to the land as well), to develop property and/or to sell off the individual plots to small property investors. Under these schemes, the land is often re-classified and made available for private ownership. The process is usually undertaken by professionals who understand Mexican property law intimately and can from a year to several years. The current advice is: double check to make sure that the land you are buying is not Ejido land and if it is, avoid it.

Note: It is advisable to purchase Title Insurance if the property you are purchasing is ex-ejido land (although regardless of the type of property, Title Insurance is a shrewd investment). Read more about Title Insurance under the heading of Title Insurance, above.

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The Role of the Notary Public in México

The Notary Public is the most important person you will deal with when you make a property investment in México. Do not confuse the role of the Notary Public in the US or UK with its counterpart in México: In México, The Notary Public has the power to witness and certify important business documents which require absolute authenticity. The appointment also holds responsibility for the management and secure storage of original records. Notary Publics must be Mexicans of at least 35 year in age, they must have a degree in Law, have 3 years work experience at a Notary Public office and they must pass a stringent exam. Those who pass, in time, are appointed as Notary Public by the State Governor.

Under Mexican Law, the deed to the property must be prepared by a Notary Public. As a buyer, it is your right to choose the Notary Public, and it should be your first port of call – or second after your lawyer.

The Notary Public will ensure that all documentation and permits are in order so that the transaction can proceed.

Everything official to do with your transaction should be done via the Notary Public: We will be happy to contact you with a Notary Public of your choice.
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Costs and Taxes

When you buy property in your home country, you are usually faced with the associated costs like agent fees and taxes. México is no different, although the net value of these costs as a percentage of the property values may be lower overall, but this is not guaranteed as professional fees have risen recently also.

Costs and Taxes: Buying

Acquisition Tax: This Tax is paid on the sale value of the property and is equivalent to about 2%. This tax is paid whether the property is sold, transferred, donated, placed into trust, split off or merged.

VAT (Sales Tax): No Value Added Tax (Sales Tax) is payable on residential property. Commercial Property transactions are liable to VAT at the current rate in addition to the Acquisitions Tax.

Appraisal Tax: The Tax Authority may choose to perform a commercial appraisal of the property after you purchase it. If the appraisal value is more greater than 10% of the price you paid for it, you will be asked to pay 20% tax on the difference between the two amounts. This sum is due within 15 days of the date of the appraisal report.

Registry Fee: In order to have the Public Records updated, a 1.3% fee (based on the value of the transaction) is paid by the buyer.

Public Notary Fees: You will be required to pay fees for services provided by the Notary Public. These are about 1.5% of the transaction value, plus the cost of the official appraisal (as described in Valuation section, for tax purposes)

Bank Trust: If you purchase property within the 50/100km restricted zones, you will need a bank to set up and manage a trust for you. Shop around, as prices vary from Bank to Bank. Set-up fees can cost up to US$750, with annual service charges between US$300-US$500. The annual service fee will cover legal obligations (e.g. the filing of necessary documents annually) by the bank on your behalf.

Lawyer / Attorney Fees: If you hire a lawyer / attorney, you will also need to pay him/her with fees for services they undertake on your behalf. These should be negotiated in advance.

Land / Building Surveys: If you need to undertake any land or building surveys, these will have to be paid for separately. Cost will depend on type, extent and complexity of surveys undertaken.

Foreign Office Permit: Your permit from the Mexican foreign office will cost around US$150.

Service Fees: If you are buying a house in a gated community, or an apartment, be sure to check on the annual service fees, and have these put in writing. Service fees can range from US$100 a year to US$1000 a year, depending on location, number of houses or apartments in the enclosure and amenities offered.

Title Insurance: When you buy property in México, you would do well to consider purchasing Title Insurance. Rates are based on the sale value of the property and are charged at around US$5-US$5.50 per US$1,000 of the value. More Information about Title Insurance.