Are you dreaming of owning a property in Mexico? Whether you want to retire in paradise, invest in a vacation home, or start a new life in a different country, buying in Mexico can be a rewarding and exciting experience.
But before you pack your bags and head south, there are some things you need to know about the process of buying in Mexico. In this article, we’ll cover the most important aspects of buying in Mexico, such as:
The benefits of buying in Mexico
The legal requirements and restrictions for foreigners
The steps and costs involved in the purchase process
The best place to buy in Mexico
By the end of this article, you’ll have a clear idea of what to expect and how to prepare for buying in Mexico. Ready to learn more? Let’s get started!
The Benefits of Buying in Mexico
Buying in Mexico has many advantages, both personal and financial. Here are some of the main benefits of buying in Mexico:
Affordability: Mexico offers a lower cost of living and a favorable exchange rate for many foreign currencies. This means you can get more value for your money and enjoy a higher quality of life. You can find properties in Mexico for a fraction of the price you would pay in other countries, especially in the US and Canada.
Lifestyle: Mexico is a diverse and beautiful country, with a rich culture, history, and cuisine. You can enjoy the warm weather, the stunning beaches, the vibrant cities, and the charming towns. You can also explore the natural wonders, the ancient ruins, and the colonial architecture. Mexico has something for everyone, whether you’re looking for adventure, relaxation, or entertainment.
Accessibility: Mexico is easily accessible from many parts of the world, especially from the US and Canada. You can find direct flights to many destinations in Mexico, and the travel time is relatively short. You can also drive across the border, or take a bus, train, or ferry. Mexico is a convenient and attractive option for frequent travelers and snowbirds.
Opportunity: Mexico is a growing and dynamic market, with a lot of potential for investors and entrepreneurs. You can find opportunities to generate income from your property, such as renting it out, flipping it, or running a business. You can also benefit from the appreciation of your property value over time, as the demand for real estate in Mexico increases.
The Legal Requirements and Restrictions for Foreigners
Buying in Mexico is not as complicated as you might think, but there are some legal requirements and restrictions that you need to be aware of. Here are the main ones:
The Restricted Zone: The restricted zone is an area of land within 100 kilometers of the border or 50 kilometers of the coast, where foreigners are not allowed to own property directly. This zone covers most of the popular tourist destinations and beachfront properties in Mexico. However, there is a way around this restriction, which is to use a trust or a corporation.
The Trust: A trust (or fideicomiso) is a legal arrangement where a Mexican bank holds the title of the property on behalf of the foreign buyer. The foreign buyer has all the rights and benefits of ownership, such as using, selling, renting, or inheriting the property. The trust is valid for 50 years and can be renewed indefinitely. The trust fee is usually around $500-$1000 per year, depending on the bank and the value of the property.
The Corporation: A corporation (or sociedad) is a legal entity that can own property in Mexico, including in the restricted zone. The foreign buyer can own shares of the corporation, and appoint a director and a board of directors. The corporation can also conduct business activities in Mexico, such as renting or managing the property. The corporation has to pay taxes and comply with the Mexican laws and regulations. The corporation fee is usually around $1000-$2000 per year, depending on the accountant and the complexity of the business.
The Steps and Costs Involved in the Purchase Process
Buying in Mexico involves several steps and costs, which vary depending on the type and location of the property, the method of payment, and the professionals involved. Here is a general overview of the purchase process:
Find a Property: The first step is to find a property that suits your needs, preferences, and budget. You can search online, visit open houses, or work with a real estate agent. A real estate agent can help you find the best deals, negotiate the price, and guide you through the process. The agent’s commission is usually paid by the seller, and it ranges from 3% to 10% of the sale price.
Make an Offer: Once you find a property that you like, you can make an offer to the seller. The offer should include the price, the terms, and the conditions of the sale. You can also include a deposit, which is usually 10% of the offer price, to show your commitment and secure the property. The deposit is refundable if the offer is not accepted, or if the sale falls through due to a valid reason.
Sign a Contract: If the offer is accepted, you and the seller will sign a preliminary contract (or promesa de compraventa), which is a legally binding agreement that outlines the details of the sale. The contract should include the names of the parties, the description of the property, the purchase price, the payment method, the closing date, and any contingencies or clauses. The contract should also specify the penalties for breach of contract, such as forfeiting the deposit or paying damages.
Hire a Lawyer: It is highly recommended that you hire a lawyer to review the contract, conduct a title search, and ensure that the property is free of any liens, encumbrances, or legal issues. The lawyer can also help you set up a trust or a corporation, if needed. The lawyer’s fee is usually around 1% to 2% of the sale price, depending on the complexity of the case.
Hire a Notary: A notary (or notario) is a public official who certifies the validity and legality of the transaction. The notary will verify the identity and capacity of the parties, check the documents and permits, calculate and collect the taxes and fees, and register the title deed. The notary’s fee is usually around 1% to 3% of the sale price, depending on the value of the property and the services provided.
Pay the Taxes and Fees: Buying in Mexico involves paying various taxes and fees, which are usually split between the buyer and the seller, according to the contract. The main taxes and fees are:
Acquisition Tax: This is a tax that the buyer pays to the state government, based on the value of the property. The acquisition tax rate varies from state to state, but it is usually around 2% to 4% of the sale price.
Value Added Tax: This is a tax that the buyer pays to the federal government, if the property is new or has been substantially renovated. The value added tax rate is 16% of the sale price.
Capital Gains Tax: This is a tax that the seller pays to the federal government, based on the difference between the purchase price and the sale price of the property. The capital gains tax rate varies depending on the seller’s status, income, and deductions, but it can range from 0% to 35% of the profit.
Registration Fee: This is a fee that the buyer pays to the public registry, to record the change of ownership of the property. The registration fee varies from state to state, but it is usually around 0.5% to 1.5% of the sale price.
Appraisal Fee: This is a fee that the buyer pays to an appraiser, to determine the value of the property for tax purposes. The appraisal fee depends on the size and location of the property, but it is usually around $200-$500.
Close the Deal: The final step is to close the deal, which is when the title deed is signed, the payment is made, and the keys are handed over. The closing usually takes place at the notary’s office, in the presence of the buyer, the seller, the agents, the lawyer, and the bank representative, if applicable. The closing can take anywhere from a few weeks to a few months, depending on the type of property, the method of payment, and the paperwork involved.
The Best Place to Buy in Mexico : Riviera Maya
Riviera Maya is a stunning stretch of coastline, located on the Caribbean side of the Yucatan Peninsula. Riviera Maya offers white-sand beaches, crystal-clear waters, and a rich biodiversity.
Riviera Maya is also home to some of the most famous attractions in Mexico, such as the Mayan ruins of Tulum and Chichen Itza, the eco-parks of Xcaret and Xel-Ha, and the island of Cozumel. Riviera Maya has a diverse and booming real estate market, with properties ranging from cozy cabins and bungalows, to modern condos and resorts. Riviera Maya is ideal for buyers who want to experience the natural beauty and cultural heritage of Mexico, or generate income from tourism and hospitality.
As you can see, buying in Mexico has many benefits and opportunities, but also some challenges and risks. That’s why it’s important to do your research, consult with professionals, and follow the legal procedures. If you do that, you can find your dream property in Mexico, and enjoy the lifestyle you’ve always wanted.
We hope this article has been helpful and informative, and we invite you to contact us if you have any questions or need any assistance. We are Susi MacDonal Real Estate, and we are here to help you buy in Mexico. Thank you for reading!