The Mexican constitution states that foreigners may not own property within 50km of any coast and 100km from any border. To enable foreigners to purchase real estate in these restricted areas, a trust deed (Fideicomiso) system was created through Mexican Banks.

Foreigners purchasing property outside the restricted areas may directly own rural and urban land with some limitations on certain agricultural tracts. Mexican Corporations (even ones owned by foreigners) may own property in the restricted area, as long as it is commercial property.

 
THE BANK TRUST DEED

 
As stated above, any real estate purchased in the restricted areas require a BANK TRUST DEED or Fideicomiso established with a Mexican Bank.
 
This trust deed assures the foreign buyer of all rights and privileges of ownership. The Foreign Investment Law, a constitutional amendment created in 1973 and amended again in 1994, allows the trust to be established for a term of 50 years and is renewable any time during it existence.
 
The Bank (trustee) holds the trust deed for the person who purchases the property (Beneficiary). The property is not part of the bank’s assets and cannot be licensed or attached for bank obligations.
 
The Beneficiary has all ownership rights to the property and may lease, mortgage, pass to their heirs or sell the property. The Mexican government established the trust system as a protection for foreigners interested in owning property in Mexico.
 
By making ownership pass through the trust process, there would be an automatic review of the transaction, ensuring: Valid ownership. No outstanding debtedness of the property.
 
The Bank is required to check ownership, insurance and liens against the property. Bank trusts may be granted and extended in 50 year periods. If you purchase property, the existing trust deed may be assigned or a new 50 year trust created. Trusts are renewable at any time by a simple application. Trust fees are nominal. An annual management fee is charged by the Trustee (bank).
 
Bank trusts are established by a Mexican notario (notary) following the receipt of a permit by the Minister of Foreign Affairs. This procedure is routine due to the large number of foreign property owners. The forms are standardized and the entire process is usually completed by the notario as part of the closing procedure.
 

Offer of Purchase and Sale:
Once your offer of purchase and sale has been accepted, the closing process begins. (Note: Only contracts written in Spanish are legal in Mexico).

The Offer of Purchase and Sale is validated with a 10% deposit, held in U.S. dollars by your notario or agent. The funds are held during the time needed to close. The balance is payable upon the signing of the trust deed at the office of the Notario.

In order to obtain the trust deed, your notario will need to complete the following steps:
 

 
When the above has been completed, the notario will present your representative with a statement of remaining funds due and once paid, will present the legal transfer papers for signing. The entire closing process takes between 30 and 60 days. Ask us for a recommended notario.
 

Closing costs are paid by the buyer and depend on the value of your property. They include a transfer tax (ISAI) which goes to the Mexican Government, an average of 2% for legal notario fees, a registration fee of .05% of the assessed value of your property, fees for the tax certificate, title search fees and property appraisal, as well as miscellaneous office expenses.
The seller pays all capital gains taxes and real estate fees. Capital gains taxes are 40% of the difference between assessed values at the time of purchase and sale, with adjustments made for inflation and capital improvements.
 

As noted above, the Seller pays capital gains taxes. As a buyer you are eligible for an exemption from capital gains tax if you establish residency for at least two years previous to the sale. To establish residency you must have an FM3 (Resident Tourist Visa), and all utility and phone bills in your name for two years. FM3 visas are issued from Mexican Immigration. You can request a form from their office which tells you everything you need to apply for the visa. They usually take 30 to 45 days to obtain, once submitted.
 

In Mexico, certain attorneys are designed by the government as Notaries, and their services are required for the transfer of real estate. They are unbiased, official representatives of the government and have a fiduciary responsibility to both parties and sanction the contract from a tax and legal point of view.
 

If you are purchasing a condo, maintenance and security are handled by the Condo Owners Association, paid via monthly fees.
If you’re purchasing a single family home, you might want to consider a property management company. Property management services usually include:
 

Property taxes are very low here. The property tax, known as "predial" is a mil rate of .08% of the assessed value, paid every bimester. The assessed value is determined at the time of the sale. Historically, property taxes have always been low because they have never been perceived as a source of revenue for the government.
 

 
Bayside Properties
Puerto Vallarta
Telephone: (011-52-322) 222-8148
Fax: (011-52-322) 223-0898
email us
 
Francisca Rodriguez #160, Puerto Vallarta, Jalisco, Mexico 48330