Foreigners Purchasing Property in Mexico

Source: Q-Roo Paul

Dear Q-Roo Paul: “I heard that foreigners aren’t permitted by law to own property in Mexico. How were you able to buy a condo there?” — Reader from Philadelphia, PA

It sounds like you’re referring to foreigners purchasing property in the restricted zone, which is within 50 kilometers of any coast or 100 kilometers of any border. There are fewer restrictions on foreign ownership outside of that area.

My condo is only a few minutes from the beach, so it clearly falls within the restricted zone. Nevertheless, I was able to acquire ownership of the property by establishing a bank trust, called a fideicomiso in Spanish.

Basically, it works like this: The bank holds a naked title for the property and serves as the trustee for the property. The buyer of the property is named as the beneficiary of the trust and enjoys full ownership rights. That means that they can occupy it, rent it out, borrow money against it, make improvements to it, leave it to someone in their will or do anything else that can typically be done with real estate.

Just to be clear, the bank does not own the property. The naked title means that it is a title without benefits. The bank cannot sell, depreciate, lease or exercise any control over the property. In fact, the bank is not even permitted to list the property as an asset for accounting purposes.

The trust is valid for a maximum of 50 years (Artículo 13, Ley de Inversión Extranjera), but it can be renewed indefinitely. The cost to maintain the trust averages around $500 USD a year. This fee is charged by the bank for providing the service.

Let’s Wrap This Up

I’ve known several potential foreign investors who have gotten cold feet once they found out about the fideicomiso.

I have to admit, the concept concerned me a bit at first too, but once I thoroughly researched it, I felt completely comfortable with it.When it comes down to it, I have the same property rights that I would have if I bought in the U.S.

The only thing I don’t care for is the reoccurring yearly fee to maintain the trust. However, as Linda often reminds me, that’s a very small price to pay to live in paradise — and as usual, she’s absolutely correct!

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About the Author

Q-Roo Paul
Paul Kurtzweil (Q-Roo Paul) is a former lieutenant from the Polk County Sheriff's Office in Florida. During his 25-year career, he received numerous commendations to include two of the agency's top honors: a Meritorious Service Medal and a Medal of Valor. In 2015, Paul retired and moved to Mexico with his wife. He now spends his days enjoying the Riviera Maya and blogging from the beach.

28 Comments on "Foreigners Purchasing Property in Mexico"

  1. Thank you!

  2. Glenn Sekse | July 3, 2017 at 4:40 pm | Reply

    I wonder who gets the $500 each year? Is this a form of ex-pat tax for the Mexican government?

  3. Is it possible to purchase a 2 bedroom condo there in the $150,000-200,000 range

  4. Rosarito Gal | July 3, 2017 at 6:05 pm | Reply

    If you obtain Residente Permanente, after 5 years you may apply for duel citizenship and then have the fideocomiso rescinded, no longer having to pay the annual fee to the bank.

    • That’s always an option; however, some people may have trouble with the exam on Mexican history and culture since it’s only offered in Spanish. The exam is a requirement in the naturalization process.

      Here’s a sample question from a study guide provided by the Mexican government:

      5. Manuscrito en papel amate o sobre cuero con representaciones pictóricas que relataba asuntos históricos y religiosos del México antiguo:

      a) Jeroglífico
      b) Pictograma
      c) Libro
      d) Códice

  5. Another concise summary of owning real estate in the restricted zone. And I refer to the annual bank trust fee as an excessive fee (for the bank’s efforts to maintain the file) that offsets the very favorably inexpensive property tax rate !

  6. Marjorie Ratcliffe | July 3, 2017 at 6:27 pm | Reply

    There is another way to buy beach property: setting up a Mexican corporation. There are no yearly fees but it is a bit more expensive up front. The owners are directors of the corporation. The advantage is that you can make changes to the property without bank approval. You pay annual income taxes, assuming there is income after you recover purchasing or building costs. This is the route we chose to follow for our Casa Verde in Celestun. Check it out, we’d love to pay income taxes some day.

  7. It is refreshing to see a concise conceptual summary. Other quick points are that outside the restricted zone, you can own in fee simple estate, identical to in the US title conveyed directly by deed. With a Trust, title is still conveyed by an instrument comparable to a deed, and successors can be identified (an action which a will would fill). Trusts are also negotiable and numerous conditions, terms and other variables can be incorporated therein, to minimize future participation by the bank with items that are not clearly articulated in the Trust. Title review is still very important and the selection of your notario is of similar importance.

  8. Paul you may want to add a comment on the perspective on the bank fee compared to what real estate taxes would be for similar value property in US. Mexico has a different tax structure when it comes to real estate, and for a property in the $150,000 to $200,000 value the local Mexican real estate taxes would likely be less than $500, at least in our experience in the Yucatan area, In the Philadelphia area, it would be WAY more than that,

    • That’s a good point. My condo is in that range and my property taxes were only $179 USD. That makes the $500 fideicomiso payment a pit more bearable.

  9. steven neal | July 3, 2017 at 7:59 pm | Reply

    Is it possible to purchase a 2 bedroom condo there in the $75,000-125,000 range

  10. Joan Allison | July 3, 2017 at 8:14 pm | Reply

    There is really no service performed except some paperwork. One must go directly to the bank for this and often wait in a line. If anything happens to one of the owners (such as death or divorce), there is a lengthy, costly method of getting the title in the other person’s name (with the rights to sell or lease). ANd, in fact, it may be impossible. That is my experience. Also, their rules change at will and you, the actual owner, are not informed.

  11. Are you sure you can lease trust property? I was told “no” but that was some years ago.

    • According to all of the real estate attorneys I’ve spoke to, it’s permitted. For example, the majority of my neighbors are non-Mexican, have their properties under fideicomisos, and rent them out via sites like Airbnb. A few even have long term renters. It depends on how the fideicomiso is worded.

    • Stephen Slater | July 6, 2017 at 11:48 am | Reply

      When you lease/rent your property in Mexico, taxes are due on the income… so be careful when renting out your property. The tax payment(s) can be enforced. It is also appropriate to give something back to the country you own property within.

  12. Great article. Simple & clear.
    The parts that integrate the trust, are described bellow with their legal names.

    BANK TRUST – Contrato de Fideicomiso
    FIDUCIARY – Fiduciario (the Bank)
    TRUSTOR – Fideicomitente (the mexican Seller)
    TRUSTEE – Fideicomisario (the foreign citizen Buyer). Also called Bemeficiary of the Trust.

    R.Garcia. Cedral Caribe REALTORS

  13. Ethel aka Fran | July 4, 2017 at 10:11 am | Reply

    I’m curious about homeowner insurance especially in the event of a hurricane; what can you tell us about insurance coverage?

  14. James Downes | July 4, 2017 at 9:16 pm | Reply

    We chose to purchase a condo on the beach in Progreso. We found condos there in the range from about $70,000 to $500,000 for a penthouse condo. The area is a good rental market with Canadians in the winter and locals from Merida renting in the summer.
    On a separate note, I really enjoy your information. I will be a bit of a fish out of water when we,move,there,permanently but I am learning from you.
    Thanks

  15. After we got out citizenship we closed the Fedicomiso and put the property into our own name. it cost about $10.000.USD to completed the process which included paying the transfer tax as if a new buyer was taking over the title. It took about 3 months and was no problem at all.the lawyer did all the paper work.
    .

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