How to Buy Beachfront Property in Mexico as a Non-Local
OWN AT
CHILENO BAY

3 STEPS FOR BUYING MEXICAN REAL ESTATE
FOR NON-LOCALS

 

You may not understand every detail that is involved in buying beachfront property in Mexico, but don’t let that be a deterrent to purchasing your dream home. The purchasing process is not as complicated as you may think. Here are three steps to complete as a non-local to ensure a smooth purchasing process.

1. UNDERSTANDING FIDEICOMISO

When Mexico was experiencing economic hardship in 1917, the government enacted a law to make it more difficult for other countries to purchase property by setting up a “Restricted Zone.” Once enacted, this regulation made it illegal for a foreigner to directly own property in this zone, which applied to real estate within 100km of any Mexican border, or 50km from any Mexican coastline.

However, through a bank trust called a Fideicomiso, it is still possible for non-Mexican nationals to own real estate along one of Mexico’s beautiful beaches! A Mexican bank is designated as the trustee, holds the title of the property, and is the owner of the record. A non-Mexican buyer then becomes the beneficiary of the real estate trust and enjoys unrestricted use of the land (along with the options of renting or selling it). Once the trust expires after 50 years, the beneficiary has a contractual right to renew, rent, sell, or bequeath the property to whomever they choose.

The Mexican government may not directly or indirectly confiscate your property for any reason except for a public purpose, such as building roads. This act is similar to the U.S. Eminent Domain process and must be done through a legal condemnation proceeding.

2. WORK WITH THE RIGHT PROFESSIONALS

There are a few key players in the purchase of Mexican beachfront properties. Here is who you need and what they will do for you:

  • Real Estate Company: While many of the aspects of Mexican real estate transactions are similar to the procedures carried out in the United States or Canada, there are some that differ and shouldn’t be overlooked. Hiring an experienced realtor will help you navigate the system. Chileno Bay Resort & Residences at Los Cabos has a highly experienced real estate team that is expressly dedicated to making the selection and purchase process as smooth and easy as possible.
  • Bank: A Mexican bank is authorized to act as the Trustee and ensures that the closing is legal and appropriate. The bank issues a trust to the foreign buyer and is prohibited from transferring ownership of the property, changing the beneficiary rights, or doing anything to the property without your written instructions. Mexican banks are protected against bankruptcy by the government.
  • Buyer’s Attorney: Only a licensed Mexican attorney can represent you and protect all your legal transactions. Your attorney will draw up contracts, review the terms and conditions of the sale, and provide advice on the laws. Your attorney can also save you money in the long run by helping to keep your costs and fees in check.
  • Notary: A notary is a licensed attorney certified by the Mexican government, and they will provide strict security of original records and documents. The notary will authenticate documents, calculate and retain the seller’s capital gains tax, collect the purchaser’s acquisition tax, coordinate appraisals, and provide certificates of no liens and no debt. The notary is equally responsible to the buyer and the seller and can be held liable.

3. PAY TAXES AND CLOSING COSTS

Taxes and fees vary across the states in Mexico, but here are the costs most commonly associated with a Mexican real estate purchase.

Taxes:

  • Real property transfer tax payable by the purchaser ranging from 2-5% depending on the location of the property.
  • Real property tax at varying rates depending on the location of the property.
  • Value added tax payable by the purchaser to the seller.
  • Income tax at a rate of up to 35% for the sale of a primary residence home.

Fees:

  • Trustee fees associated with a Mexican bank must be paid throughout the life of the trust beginning with an upfront payment for the first year.
  • Notary public fees are determined on the basis of a progressive schedule but may be negotiated.
  • Recording fees are calculated on the basis of the value of the transaction.
  • Appraisal fees commonly range between 0.1% to 0.3% of the value of the property.
  • Surveyor fees may or may not be required.
  • Environmental assessment fees are typically only standard for commercial transactions.

Total closing costs including taxes, notary fees, setting up the escrow, appraisal fees, origination fee, application, establishing the trust, and obtaining the SRE Permit will total approximately 5%-7% of the property’s sale price if the property is paid for in cash. If financing is obtained, the total closing costs will be approximately 7%-10% of the property’s sale price. Title insurance is optional but guarantees the property owner that their property is free and clear of any claims, judgments, liens, or other legal issues.

Purchase the Dream

When it comes down to it, the process of purchasing a dream piece of real estate in Mexico is not that different than purchasing a property in many other countries. If you enlist a team that has specific experience and expertise, such as the team at Chileno Bay Resort & Residences, your home buying experience will be hassle-free, safe, and expeditious from start to finish.

To request information about our beautiful Mexican beachfront villas, and to begin the process of buying real estate at Chileno Bay, contact Chileno Bay Residences today.