Think you can’t buy real estate in Mexico? Think again!

In places formerly off-limits, foreigners can now acquire irrevocable and absolute ownership rights to property through a 50-year, perpetually renewable, and transferable, real estate bank trust called a “fideicomiso”.

With a Fideicomiso, you have the same property rights in Mexico as we do here in The States with deed.

What is a fideicomiso? It’s a bank trust secured by the Central Bank of Mexico. It is a 100% legally-binding instrument which entitles you to deeded ownership of real property in Mexico. The fideicomiso was created specifically for non-Mexico citizens to enable them to own property in the formerly restricted zones.

You see many years ago, to protect Mexico from having the wealthy countries buy all the desirable land (near the border and coastal areas) the government of Mexico created the Fideicomiso.

In 1997, Mexico joined the International Banking Standards community — and thus a fideicomiso permits non-Mexican residents to own property in Mexico. (You might be interested to know that  Most banks in Mexico are now owned by various international banks, such as Citi Bank and Chase Manhattan — so that’s one of the reasons why Mexico had to adopt the International Banking Standards.)

A “trust” is a “trust” just about every where you go and it works the same way here. For citizens of other countries, title will transfer to a Mexican bank, which acts as trustee of YOUR interests (making you the beneficiary.) There are specific banks that have been authorized by the Mexican government and are allowed to hold a Fideicomiso.

In a nutshell, here’s how a Fideicomiso works:

• The land is put in a trust issued by the federal Mexican government.
• The trust owns the land.
• You own the trust.
• The bank administers the trust. The bank has no ownership rights to the trust.  They cannot “take it back”.
• Trusts are now for the duration of 50 years, with the right to renew for 50 more years at the expiration date.

What are the basic requirements of a Fideicomiso? It’s simple.

1) You must have a valid passport.

2) You must have a valid credit card (the bank trust charges are charged to this credit card).

3) And if you are in Mexico, you must have the tourist visa issued by the Mexican government when you entered the country. You have to possess an FM-3 Resident Immigrant Visa. An FM-3 costs approximately $98.00 US per year, per person, and is renewed annually. It allows you to keep a US plated vehicle in Mexico, to leave and return at will, open and maintain a Mexican bank account, and can exempt you from capital gains tax when selling and allows you to purchase property in Mexico.

When you purchase a home in Mexico, you will pay:

1) The Negotiated Price of the Property — This amount we know, as it is fixed at your agreed on purchase price.

2) The Bank Trust (Fideocomiso) — This charge can vary depending on the bank you choose, but be prepared for approximately $2,250 US. A portion of that fee is for the bank, but the bulk is paid by the bank to the federal Mexican government. This fee covers all the trust documents, permits and the first year’s administration fee.  And don’t forget closing costs which include:

• Title search to ensure the person selling the property is actually the owner or has the legal power to sell the property.
• Lien search to make sure there is not a hidden claim on the property.
• Appraisal to set the tax value.
• A new plot plan showing the lot dimensions.
• A new deed, verifying all taxes, phone bills, water bills, and electric bills, etc.
• Registration of the new deed once everything is complete and all fees have been paid.
• The acquisition tax, paid by the buyer in Mexico. This is fixed at 2.2% of the purchase price.

So, what are the actual costs?  This again is a variable. An approximation is: for a $150K to $200K property, about 4 to 5%, and it drops correspondingly for higher values.But…about all the charges you’ve heard rumored you’re going to be hit with… don’t get scared…they aren’t nearly as bad as you thought they would be.

A sale becomes registered (final) when it is witnessed and recorded by a Notary Public (Notorio Publico in Mexico).

At that point, title passes to the designated Bank to be held in Fideicomiso (Trust). The specific Banks authorized by the Mexican government designated to hold the Fideicomiso must pass diligent Mexican government inspection. The chosen Bank reviews all paperwork of the current owner/developer to ensure the documents are complete and legal. There are a number of Banks in Mexico who have been authorized by the Mexican government to hold the Real Estate Fideicomiso.

Title is delivered to the Bank who has been authorized to act as the Trustee.  The Bank reviews all paperwork of the owner/developer to ensure the documents are complete and legal.  The buyer is designated the Beneficiary of the Trust. The Beneficiary retains the use and control of the property and makes all the investment decisions.

It’s really a pretty simple process as long as you have someone you can rely on, like my friends in Mazatlan, who know how the process works.  I can put you in touch with them easily, they are contractor/realtors and have a very capable staff.

Just Some Good Old Common Sense Hints:

When looking at used homes, bring a small appliance with you – a hairdryer would work. Use it to check the electrical outlets – just to make sure the plugs work and that there’s actually an electric wire attached to the plug. Ask to look at the owner’s most recent water bills.  This is the easiest way to detect leaks in the plumbing.

Okay, having your dream home in  Mexico is totally possible now, legally. Please, please, don’t try getting around the legalities in Mexico. Quite differently from the
United States, they don’t put up with that! And…good for them!

The Fideicomiso also protects your beneficial rights under guidelines provided by the Mexican government and their constitution, basically gives the owner of a property full control of that property. The sole concern of the bank is to manage the property for the benefit of the owner of the trust. Trusts are established for initial 50-year periods and are in perpetuity renewable. You, the beneficiary, may build upon, tear down, add to, improve, mortgage, sell & will, etc. You can transfer or assign you interests to any person and keep the profits from sale of the property, subject to applicable tax laws and expenses.

Property held under a trust may be passed on to future generations, and the person to whom the bequest is made is not burdened with inheritance tax.Investors should contact a contractor/realtor who has a qualified attorney who can walk you through each step. 

The Bank will not issue a developer the right to apply for and form a Fideicomiso on their lots until they are satisfied with all documents and satisfied that the subdivision process has been completed. When title to your property is in a bank trust, there will be annual administrative fees set by that bank.

From the first, when I started researching the possibility of retiring to Mexico as a U.S. citizen, I heard that foreigners can not own property in Mexico. Then after learning that was a misconception, I still heard…Yes, but you can’t own near the coast… Wrong again!

Mexican law now allows foreigners to own real estate where once it was forbidden. Ownership of land within 50 kilometers (approx. 30 miles) of the coast is made possible by setting up a Bank Trust.

There are laws governing foreign ownership of land within 50 kilometers of the coast or 100 kilometers (62 miles) of the border. To ‘buy’ property in these areas, it’s very simple – you need to use a “Bank Trust” a Fideicomiso — that legal, government-sanctioned System. 

Just remember: Buying real estate in Mexico is easy. All you need is a fideicomiso — and you can feel safe and secure because  you have the same rights in Mexico with a Fideicomiso as we do here in the States through a deed. Yes, it’s that simple!