How do I acquire a property in Mexico?

Due to article 27 of the Mexican constitution, foreign cannot acquire a property 50 km near the coastlines and 100 km near the borderlines unless they constitute a trust with a bank Mexican entity. This is called the restricted economic zone.

What is the process for acquiring a property in Mexico?

First, the parties must sign an offer which states the conditions regarding to which unit will be sold and how the consideration must be paid.

Second, it is recommended to count with a real state attorney, so they can coordinate the draft of the agreement and the specific conditions regarding the transaction.

In third place, its necessary to fille for a permit to the foreign affairs relations office to constitute the trust, and they take about 3-6 weeks.

Once this is completed, the parties shall send all the requested information to the notary so they can finish the draft of the public deed, and it must be approved by the trustee bank.

Once the public deed has been executed (when the parties have signed), the notary must register it into the public registry of property, and they take about 3 months for issuing a document called “Boleta de Registro”. This is necessary due to Quintana Roo ́s constitutive effects, which make mandatory for all public instruments issued by a notary public to be written down into the public registry in order to be valid.

Nevertheless, for any operation, you ́d like to perform in the meantime, such as hiring your electricity or water supplies, you can ask the notary for a certified deed copy, and you will be able to use the property with no problem.

Which Banks are recommended to constitute a trust?

You could work with a large list of banks, nevertheless, the recommended is to work with banks that are specialized in trusts, the most recommended are Bank of BAJIO, Banco Inmobiliario Mexicano and MONEX.

What does the bank do?

For a foreign to acquire a property in Mexico, its necessary to constitute a trust with a bank, in which case, the bank only holds the property ́s title, they cannot act without the main beneficiary ́s instruction.

The client could choose whichever bank to constitute the trust, but it’s better to work with banks that are specialized in trusts, such as BAJIO, BIM, MONEX, the timing, and prices are lower.

The benefits of working with these banks are the prices, which, for the constitution of the trust, the foreign affair relations permit and the first annual fee consists in 2,000.00 dollars and the annual fees could go from 450.00 – 700.00 dollars, depending on the bank.

The term for the foreign affair relation offices to issue the permit, to constitute a trust, is from 3 – 6 weeks.

The costs for constituting the trust must be verified at the moment of acquiring the property since they get adjusted once each year.

How does the figure of the notary public work?

The notary is a lawyer that works as a third impartial party, due to the public faith he is involved with, his job is to ratify public documents and he cannot get involved in negotiations regarding the conditions of the real estate transactions, that is one of the reasons it is recommended for the parties to have their own real state attorney. The fees for the notary are based on governmental tariffs. The parties choose the notary depending; to the seller, the fiscal strategy the notary offers; to the buyer, the the certainty that the operation is being managed correctly.

Can I constitute a trust with a foreign business corporation?

It depends on the bank policies, but it is possible. For example, banks accept figures such as LLC / LTDs, they need a series of documents which shall be notarized and apostilled in the same state they were issued, and translated. These documents are:

  • a) Documents of incorporation
  • b) Bylaws
  • c) Certificate of good standing
  • d) Operating agreement
  • e) Tax ID from the company
  • f) Granted power to a legalrepresentative
  • g) Proof of address from the company
  • h) IDs from the legal representative (Passport, drivers license and proof of address)

There are some other figures that the banks do not accept, such as a foreign trust, it cannot be the beneficiary for a Mexican trust.

Finally, it is not necessary to constitute a Mexican company, the idea for this is when the client has several units and is receiving profits from it, this would be easier to avoid paying several trust fees but it’s not necessary.

What are the operating costs of running a property in Mexico?

The property tax is paid once a year and the services the owner hires, such as water, electricity...

How do the income of vacation rental works?

Normally owners hire an administrator, it is no necessary to open a Mexican account for the income. It depends on the agreement with the administrator, but normally, the administrator pays all the bills for the property charges his fee and transfers the remaining amount to the owner. In this case, since the owner isn ́t receiving income in a Mexican account, the only taxes he ́ll need to pay are in the country/state where he is receiving the incomes, for example, the owner will pay taxes in Texas if the bank account is in Houston.

What is the process of selling a property which its title is being held within a trust?

If a foreign sell to a Mexican, the trust gets extinguish and they celebrate a public deed at the buyer’s name. If a foreign sells to another foreign, they will execute an assignment of trust rights before a public notary and the deed must be approved from the bank.

What happens to my trust if I pass?

In order for the trust to be constituted, it is mandatory to point a substitute beneficiary, who ́s the person who will acquire the trust rights by means of a process that ́s called “substitute beneficiary recognition” and the bank will require the paperwork from the passing apostilled or legalized and translated.

Do I have to be present for the execution of the public deed?

You can designate someone by means of a power.

How much taxes I would pay for the sale of a property?

The regular basis 35% as for the capital gains taxes, never the less, this percentage could be significantly reduced with a fiscal strategy normally elaborated by a public corridor. The strategy could help you to reduce by 70%.

How does it work to acquire a property through an internal assignment of rights? This is possible when the promissory buyer acquirees the right to a property regarding a pre-construction development, and once the property is ready for being the object of a public deed, the promissory buyer notifies the developer their wish to assign the agreements rights to a third party, which is the new buyer in this example.

Depending on the developer and the conditions of the agreement, the developer could charge a percentage of that sale, but it has no actual taxes implications to the promissory buyer, since the property was never object to a previous deed.

Can I invest in Mexico through a foreign investment figure?

It depends on the Mexican bank policies, but there are some figures, such as the 401k, that basically works like a “savings account” and eventually converts into a “retirement fund”, and specifically, the 401k allows you to invest from your retirement fund in Mexico, having the benefit of lower taxes. For having a better advice on your 401k plan, it is recommended to consult a real state attorney to review all the particularities on the subject.

Is it possible to know the exact costs of acquiring a property?

Costs depend on several factors, the notary fees, and taxes, for example, depending on the municipality the property is located on. It is necessary to review each case.

What happens if I´m not able to sign the documents in Mexico?

The documents for closing can be sent through package services, the documents must be notarized and apostilled. The apostille process depends on where the client is located. It is necessary to review each case.


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