Many Americans dream of buying land in foreign countries like Mexico. But first, you may be wondering if it's even possible. Let us explain.
Yes, you can buy land in Mexico as a foreigner, but expect more fees and restrictions. Foreigners cannot purchase land within 32 miles of any Mexican coast and 64 miles of any Mexican border. Buyers must also set up a Fideicomiso to make the purchase.
In this article, we will dive into the details of how you can successfully purchase land in Mexico as a non-Mexican citizen. We'll cover the essential steps to follow, ways to mitigate potential risks, and provide resources to help you make an informed decision that sets you up for future success.
- Yes, you can buy land in Mexico using a Fideicomiso. This is a trust that grants the buyer indirect ownership of the land.
- The Fideicomiso fees range between $2,000 and $5,000, plus annual fees.
- Mexico's beautiful landscapes, rich culture, and attractive real estate market make it an excellent choice for potential property owners.
Table of Contents
Can I Buy Land In Mexico?
Yes, foreigners can buy land in Mexico. However, there are specific rules and processes to follow. Properties within 64 miles of international borders or 32 miles of the coast cannot be owned by US citizens or foreigners.
Unfortunately, this means no beachfront property purchases. Ejido land is also off limits for foreigners based on the Mexican constitution. But we can still own property in Mexico with the help of an old Mexican law.
To acquire property, we need to set up a Fideicomiso. This is an international trust arrangement, to buy land. This arrangement allows foreigners to own residential property legally but does add some time and cost to the buying process.
It's essential to navigate this process carefully, be aware of possible risks such as discrepancies in property titles, and consider all the costs involved in purchasing land in Mexico. The process can be complex too.
Here's a summary of the process:
- Find a realtor or search for your dream property independently.
- Finding financing, if needed
- Set up a Fideicomiso
- Make an offer on a piece of land
- Pay the deposit and close the deal
Working with a reliable realtor and legal experts is essential to navigating the process and understanding local regulations. There might be risks associated with foreign ownership of land, such as property disputes and fluctuating property values.
Buying private property in Mexico includes the purchase price, taxes, legal fees, and other expenses. Research your desired location to get an idea of land prices in Mexico.
Additionally, consider maintenance and property management costs if you plan to develop the land. This is a much more expensive venture.
Legal Restrictions To Know When Buying Land In Mexico
Buying property in Mexico as a foreigner involves understanding the specific legal framework catered to foreigners investing in Mexican property.
Foreigners can purchase land in Mexico, but there are certain restrictions within what is known as the Restricted Zone. This zone covers an area within 32 miles of the coastline and 64 miles along the borders of Mexico.
To buy property within this area, foreigners need to obtain a fideicomiso. A fideicomiso is a 50 year transferable bank trust that allows us to buy property in Mexico.
The bank holds the legal title to the property as the buyer’s trustee. The buyer owns the piece of land as the bank’s beneficiary. To buy land in a restricted zone without a fideicomiso , you'll need to obtain Mexican citizenship.
Banks act as trustees, maintaining legal title to the property on behalf of the foreign buyer, but the buyer has the right to use, sell, or rent the property.
Foreign Investment Law
Outside the Restricted Zone, foreigners can own properties through direct deed, per the Mexican Foreign Investment Law. This law grants equal treatment to foreign investors as it does to Mexican nationals.
A real estate transaction must be executed in both the restricted and unrestricted areas before a Mexican notary public to validate and register the sale.
Closing costs typically amount to around 5% of the purchase price, including a 1.5% notary fee, a 2% transfer tax, and other miscellaneous fees, such as the Fideicomiso setup fees.
Understanding these legalities and working with a reputable Mexican lawyer can mitigate the risks associated with purchasing land in Mexico.
Mexican Real Estate Purchasing Process Explained
The purchasing process can be confusing. We will explain the methods available to a US citizen looking to purchase land in Mexico.
Set Up a Mexican Bank Trust (Fideicomiso)
The most common way foreigners buy land in Mexico is with a Fideicomiso. This is the purchasing method if you purchase for the following reasons.
- Plan to use the property for personal use
- Would like to obtain Mexican residency
- Already have Mexican residency but plan to earn rental income
The Mexican laws are tricky. This is indirect ownership, but as the owner of this Fideicomiso, you still have complete control over the land and whatever happens with it. But anybody who plans to rent should consider the following option for tax purposes.
Purchase Land Through a Mexican Corporation
Outside the restricted zone, foreigners can purchase property, but they have indirect ownership when it’s done using a Fideicomiso. The bank holds the deed for the property in their name.
For properties used for commercial purposes, creating a Mexican Corporation may be a practical option. A corporation can own multiple properties, making transferring ownership easier.
There are three reasons why someone would use a corporation.
- They intend to rent the property to earn income
- They plan to buy multiple rental properties
- They never plan to obtain Mexican residency
Other than these reasons, purchasing land through a Mexican Corporation is unnecessary and only increases the fees you'll have to pay.
Other Precautions and Due Diligence
When purchasing property in Mexico, it's crucial to find a reliable notary representing your interests as a buyer. The notary ensures that the sales contract is properly drawn up and helps you navigate the legal requirements associated with owning property in Mexico.
Some steps for due diligence include:
- Verifying property title and seller's rights to sell
- Checking for any debts, liens, or legal encumbrances on the property
- Obtaining all necessary permits and approvals
Additionally, consider working with a qualified real estate attorney to draft a sales contract and protect your interests throughout the transaction.
Financing Options for Buying Property in Mexico
Yes, foreigners can buy land in Mexico. However, the process, risks, costs, and financing options vary depending on various factors. In this section, we'll discuss the financing options available for buying land in Mexico.
The most straightforward method is the purchase in cash. But for more expensive real estate transactions, this is only sometimes an option. Instead, buyers opt to acquire some sort of financing.
Seller financing is another option to consider. With owner financing, the property seller typically agrees to carry the loan, and the buyer makes payments directly to them.
This arrangement typically requires a larger down payment and may have a higher interest rate. It can be advantageous for those with difficulty obtaining a loan from traditional financial institutions.
Cross Border Mortgage
While exploring financing options in Mexico, consider using a cross-border mortgage. This type of mortgage allows you to borrow money in the United States but apply it to the land in Mexico.
Cross-border mortgages can provide savings on conversion fees and better exchange rates, but they may come with certain restrictions and requirements. These can be trickier to find, forcing buyers to acquire a Mexican mortgage instead.
Costs & Fees To Expect When Buying Property in Mexico
When buying Mexican real estate, knowing the various costs involved is essential. Here are some necessary expenses to consider.
Real Estate Fees and Commissions
A real estate agent in Mexico typically charges a commission of 3-7% of the property's sale price. Negotiating and agreeing on this fee beforehand is essential to avoid any surprises later.
Notary fees are another significant expense when purchasing land in Mexico. These fees vary depending on the property's value and the complexity of the transaction but usually range from 1-2% of the sale price.
These fees cover the services of a public notary, who is responsible for ensuring the legalities of the transaction and transferring the property title.
Taxes and Permits
Several taxes and permits are involved in purchasing land in Mexico, including the following.
- Acquisition tax: A tax charged at the state level, typically around 2-5% of the property's assessed value.
- Fideicomiso fees: This Mexican bank trust has initial fees that typically range between $2,000 and $5,000, plus annual fees.
- Property tax: These tax rates are extremely low, between 0.275% to 1.350%.
It's essential to factor in all of these costs when determining the affordability of purchasing land in Mexico. Doing so will help prevent unexpected expenses and ensure a smoother acquisition process.
About THE AUTHOR
Brittany has been in the land business since 2020 when the world was starting to shut down. Since then, we’ve sold to dozens of people from ATV weekend warriors to camping enthusiasts to retired truck drivers. Our inventory spans mostly in the western United States. We’ve been trained by experience, land acquisition courses, and hundreds of hours meeting with county assessors and clerks, zoning officials, realtors, and land investors. We’ve answered hundreds of questions from people regarding the buying and use of land.Read More About Brittany Melling