Buy And Invest In Mexico 101: A Guide For Expats

Important Points To Consider

It is simple and straightforward to buy property in Mexico for foreigners. However, you need to do your due diligence and hiring a real estate professional is a must.

You do need to have an idea about your property objectives before you dive in. Are you looking for property to live in… or are you looking for investment? The end-use for your property may dictate how you go about purchasing it.

What is “Ejido”?

In 1917, the government declared that all land in Mexico would be “ejido“. This means, communal land used for agriculture and farmed by locals. This implied no one could own private property. Nowadays not all Mexican land is ejido. It’s important to make sure that any property considered for sale is not classified as such.

Mexico passed the Foreign Investment Law in 1973. This allowed foreigners to purchase real estate anywhere in the country. The only restrictions being border and coastal land. That is to say, both 100 km of international borders or within 50 km of the coast. In 1993, the law amended to allow for sale within restricted areas through a fideicomiso. To clarify, fideicomiso is a trust agreement established with a Mexican bank.

What is Fideicomiso?

A fideicomiso allows a foreign buyer to hold property with all the rights of a citizen. With a single fideicomiso, you can hold many Mexican properties. Above all, owning the properties with continuance, and will the property to your heirs. Plus, you can transfer the trust to another foreign buyer, if you want to sell.

A fideicomiso is good for 50 years and is renewable thereafter (by you or your heirs). It can be held by one or more individuals or by an entity (LLC, for example). The setup ranges from US$500 to US$1,000, and maintenance fees for US$500 to US$700 per year.

Buying Property In Mexico Through A Corporation?

Foreigners can also own land in restricted areas through a Mexican corporation. These can be 100% foreign-owned. Only consider a corporation when buying real estate strictly for investment or business. If you plan to subdivide and develop land, a Mexican corporation makes sense.

Corporations come with more restrictions and reporting requirements than fideicomisos. You need to submit monthly reports on income and expenses. After that, a certified accountant needs to complete it. Then, send it to the Mexican Department of Treasury. Property held in a corporation are considered commercial, so it’s subject to extra taxes.

The initial costs to set up a corporation will vary depending on the attorney. The least required is $50,000 Mexican pesos (about US$2,800 at today’s exchange). Moreover, you’ll also incur costs for the certified accountant to maintain it (US$600 to US$800 per year).

Always involve your attorney in reviewing the legal status of the land. Most importantly, include title search, preparation of contracts, and setting up your corporation.

Steps To Buy Property In Mexico

1. Offer And Acceptance For Buying A Property In Mexico

Make an official offer. Mexican law recognizes verbal agreements. However, you should write both the offer and acceptance. This ensures no confusion on terms and conditions. Send your offer in the form of an “Offer to Purchase” contract. Detail the main terms of the sale. Include price, payment plans, details on an earnest money deposit. Deadline for the seller to accept the offer is usually included. These are all standard practices when buying property in Mexico.

closeup of someone signing a contract — Make sure all offers are recorded in writing to eliminate any misunderstandings or confusion

As soon as the seller has accepted your offer, make an earnest money deposit. Either by the real estate agent or the buyer’s attorney must hold this payment. You should include a clause in the offer that guarantees the deposit if either a promissory agreement or a final sales agreement isn’t executed in a certain amount of time; also note who received the deposit. If the seller requires it to be non-refundable, make sure it’s not more than you’re willing to lose.

2. Promissory Agreement

Once you make the deposit, the promissory agreement (contrato de promesa) will be drawn up. This binds both buyer and seller into a timeframe to execute the buying contract. Having this in place locks in the basic terms. Meanwhile, you and the seller should track down all the paperwork needed. To complete the purchase it usually takes some time. It also allows time for both parties to work out the details for the final purchase contract.

Under Mexican law, both parties are bound by the terms of the promissory agreement. If all the terms and conditions are met to execute the purchase contract, neither party can back out of the sale.

Once signed the promissory agreement, the seller contacts your bank (from your fideicomiso). This starts the trust application. Your attorney then orders a trust permit from the Ministry of Foreign Affairs.

Your journey in buying a property in Mexico is half-way there.

During this time, your lawyer should also be verifying the legal status of the property. Above all, review the title, right of transfer, and terms of the purchase contract. He’ll also need to request documentation from the seller. Moreover, certificate of no encumbrances, a certificate of no tax liability, and a property appraisal.

The documentation required by the buyer is minimal. All you need is a copy of your passport and driver’s license. Plus, a recent utility bill showing your name and home address. Corporation documentation if applicable, too. Present these to a notary and file them at the public registry.

If everything is in order, the notary and your attorney will work with the bank. They will have the trust documents drafted and finalized.

3. Purchase/Sales Agreement

By now, both should be able to execute the purchase/sales agreement (compraventa). Then start the closing process, and transfer title of the property to the fideicomiso.

By this time, the bank office should´ve received the permit from the Ministry of Foreign Affairs. Your attorney will be able to start the drafts for the closing deed. Your lawyer, a notary, and a bank trust officer will then review the final draft of the deed.

4. Closing And Title Transfer

Firstly, verify everything is correct. Secondly, when all the closing paperwork is ready, you will get a notice of a due date and the final closing costs due. Finally, you will sign the deeds, payments settled, and the title transferred to the bank.

Item	Amount	Who Pays
Certificates of no encumbrances and no tax lien	US$200 – US$300	Buyer or Seller (Negotiable)
Notary fees	US$650 – US$1,200	Buyer
Public registry filing fee	US$100 – US$300	Buyer
Appraisal fee	US$300 – US$500	Buyer or Seller (Negotiable)
Acquisition tax	2% of purchase price	Buyer
Trust permit fee (50 years)	US$1,000	Buyer
Foreign investment registration fee	US$300 – US$800	Buyer
Attorney’s fees	Varies	Buyer*
Administrative and closing costs involved in a typical transaction *The seller may use his own real estate attorney for the transaction. In which case, he would be responsible for covering this separate legal fee.

The notary then issues a notarized copy of the closing deed. This is your first proof of ownership and you can use it to put utilities in your own name.

Within 3 months of your closing date, the Public Registry issues the final deed. This will contain an electronic folio. In addition, a copy of all certificates, and payment of rights.

While buying property in Mexico, the delivery of your land and taking of title are different steps. They can take place on two different dates. This means you don’t immediately take possession of the property at closing.

Condo building with pool surrounded by palm trees and tropical landscaping. Guide for buying property in Mexico — Always insist on a personal walk-through before accepting final posession of the property to ensure good condition and that all agreements have been met.

5. Delivery Of Unit

Finally, do a walk-through to ensure that your property is being handed over in good condition before you take it. Once you’re satisfied, you’ll sign a delivery statement. This details the official delivery date of your property.

Keep in mind that your attorney can handle the entire purchase process. As a result, you don’t need to be in the country for every step. Lastly, by granting your lawyer a power of attorney, they can assist you through each stage of the sale. That is to say, every stage all the way up to the signing of the closing deed on your behalf. You just bought a property in Mexico, congratulations!

Omar Best