How Do Foreigners Acquire Property in Mexico?

Foreigners may obtain direct ownership of property within Mexican territory. However, foreigners cannot hold title to property within 100 km from the border and within 50 km from the coastline. This area is known as the restricted zone.

However, there is a system in Mexico that allows non-Mexicans to purchase property, providing great protection for the property owner, and is very similar to fee simple ownership.

In order to purchase real estate in the restricted zone, foreigners must acquire the property through a bank trust formalized with a Mexican banking institution. As a buyer, you will be designated as the main beneficiary and can designate substitute beneficiaries in the event of death, that way avoiding probate procedures upon death. 

The bank trust is established for 50 years, renewable for the same period of time. Prior to expiration, the trustee bank will let you know that it's time to extend the term for another 50 years.

Can I Acquire in Co-Ownership?

Yes. In the trust both co-owners will be designated as the main beneficiaries. It's common that such co-owners designate themselves as substitute beneficiaries, and they can also designate other 3rd parties, such as their children, as substitute beneficiaries in the event of death.

Can I Acquire Though an LLC?

Yes, the trustee bank would designate the LLC as the main beneficiary of the trust. However, since the LLC is a foreign entity, there are additional requirements for such an LLC to conduct business in Mexico. 

If the Bank Holding My Trust Ceases Doing Business, Is There Any Risk of Losing My Property?

No. With the assistance of the Mexican Banking Commission, the trustee bank would be replaced by another.

What Are My Closing Costs?

Closing costs are typically paid by the buyer and vary on a case to case basis, depending on the purchase price, and are usually between 5% to 9% of the purchase price. Closing costs include notary fees, goverment permits, Secure Title fees, among others.

The seller is responsible for the Capital Gains Tax, any unpaid utilities, and property taxes. Such fees must be paid upon or prior to closing in order for the buyer to recieve a clean title. 

What is the Role of the Notary Public in Mexico?

The notary public is a government appointed official. Part of his responsibility is to calculate, retain and pay taxes on behalf of both the buyer and the seller at closing. The notary public will issue a deed by means of which the real estate transaction will be formalized, and this document is recorded in the Public Registry. 

Property Taxes

As a general rule, property taxes are very low in Mexico. Property taxes vary according to the jurisdiction in Mexico in which your property is located. Taxes are paid annually, with the assesses value being determined at the time of the sale and based on the purchase price. 

Do I Need and Attorney?

Yes, the real estate transaction is subject to the execution of multiple legal documents, therefore it is important to have a real estate attorney to guide and advise you during the process. 

Once I’m and Owner, How Do I Transfer Title?

As the main beneficiary of the trust, you would instruct the trustee bank to: i) extinguish the trust and transfer the title if the buyer is a Mexican National, or ii) assign the rights of the trustee agreement to a foreign buyer.