Buying property in Mexico, whether land, a serviced apartment or a house, can offer good value for money in comparison to prices in the US and Europe. Mexico's land costs can be lower, building and maintenance is more economical and cost of ownership (taxes, utilities) unprecedented.
Though there are 'horror stories' associated with buying property here (as in every country in the world), the overwhelming majority of all real estate deals go through legally and smoothly.
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 holiday when you visit.
Thousands and thousands of foreigners have successfully purchased land and property in Mexico. With the right approach , there is no reason why you should not become one of them.
FINANCING YOUR MEXICAN PROPERTY INVESTMENT
Historically, most property/real-estate deals in Mexico 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. Rates are higher on the additional loan amount, to reflect the additional risk. Many Americans HAVE mortgaged a house in Mexico using this financial vehicle so it is possible.
Financing inside Mexico is still difficult and relatively expensive, so if you plan to buy real-estate in Mexico 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 Mexico will sell their house in their home country and use the proceeds to finance property in Mexico; 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 Mexico.
It's important to think carefully beforehand about how you are going to finance your property in Mexico. An Estate Agent in Mexico may be able to advise you, and some even have connections with financial institutions in the USA who can proffer solutions depending on your personal circumstances.
MEXICAN LAW: PROPERTY OWNERSHIP
Mexican Law provides for private ownership of land by foreigners, and its law is very specific about the way in which land rights should be transferred from seller to buyer, and also what type of lands are not eligible for public ownership. A Notary Public (or Notario in Spanish) will guide you through the details of these, 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. In this current manner, foreigners wanting to buy a dream home with a stunning beach view now can, except that it will be by means of a trust, set up through one of the main banks in Mexico.
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 in regard to the trust to be executed (an efficient step in the process).
You do not have to be resident in Mexico 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 Mexico.
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.
Title Insurance in Mexico: When you buy real estate in Mexico, 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.
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; payable once only at the point of purchase. A good Estate Agent in Mexico will be able to advise you further about Title Insurance.
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.
CHECKS TO LOOK INTO
The Notary Public and/or your lawyer will do a series of checks on the property and ensure that the property has a 'clean' history, and that there are no liens on the land (e.g. an old unpaid mortgage).
Other items to be checked include: Checking all buildings are on tax registers and have the required building permits, utilities were legally installed and payments are up-to-date, the property is not jointly owned, or if it is, that both (or all) owners agree to the sale, and that the seller/s has/have the right to sell.
The Notary Public is legally responsible to ensure that all documents are in order and that all legal procedures have been adhered to. He will do a thorough check and will not destroy his reputation by hiding any problems, or potential problems from you.
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$500 - 700 usd. 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$1,500.
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 Mexico, 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.
COSTS AND TAXES: Selling When you sell a property in Mexico, you will be subject to the fees of any professional services you contract, plus the following taxes and fees:
Income Tax on Property Gains: If the home has not been your main residence for at least the last two years, will be required to pay income tax on the property. You may either pay 20% on the gross amount of the transaction, or elect to pay 40% tax on the net profit obtained from the property. This law prevents short-term speculation on the property market. Commercial property is taxed at above rates, regardless.
Agent Fees: If you employ an agent, expect charges of around 3-6% of the value of the sale as a fee, but you may want to negotiate on this beforehand. You will also need to pay VAT (Sales Tax) on agent fees.
TIMEFRAME
Timeframes can vary dramatically from a few weeks, to several months! If agreeing to 'deadlines' in your initial sales agreement, leave yourself plenty of time to meet deadlines that you agree to.
On average, you can expect the process to take up to 3 months from the time the initial sale agreement is drawn up and the deposit is paid.
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Cantex Enterprises SA de CV
Condominio Paseo del Sol Mza
12 L4y5 Fase II, Playacar
Playa del Carmen, Mexico 77710
011 52 984 803 2324
Fax: 011 52 984 803 2324
lifestyles@cantexrealty.com
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