How foreigners can legally buy and sell real estate in Mexico
Real estate brokers are often posed with the question, can foreigners buy real estate in Mexico? Millions of foreigners live and work in Mexico and many of them own the home in which they live. Transactions involving expats buying and selling real estate in Mexico with Mexican real estate agents happen every day.
It is also common for foreigners to buy investment property in Mexico. People who buy investment property in Mexico do so for the sole purpose of renting their house or condo to tourists. This is often a very lucrative form of income.
People interested in buying real estate in Mexico can do so in one of three ways:
It is possible for foreigners to obtain direct ownership to land and real estate in Mexico. It’s an ongoing misconception that foreigners cannot buy land or real estate in the country. Part of this misconception is confused with the restricted zone rule.
Mexico’s 1917 Constitution prohibited foreign ownership of land within 100 kilometers of all Mexican land borders and 50 kilometers from Mexican coastlines. Article 27 of the Mexican Constitution states that no foreigner will be allowed to acquire direct title to land within the restricted zone, but to encourage investment in the restricted zone, Mexico enacted legislation in 1971 authorizing foreigners to own property inside these restricted zones.
Mexico’s Foreign Investment Law allows foreigners to acquire indirect title to land in the restricted zone by one of two methods: through a bank trust (fideicomiso) or through a Mexican corporation.
If you’re looking to buy real estate in economic industrial cities such as Puebla, Monterrey or Mexico City, you can buy real estate in Mexico via the direct ownership method. If, however, you’re looking for a beachfront property in Mexico, you’ll need to exercise one of the other methods.
A fideicomiso, which is a three-party bank trust, allows foreigners to buy land and real estate. This three-party trust is a contract by which the seller (settlor / fideicomitente) irrevocably transfers to a bank (trustee / fiduciario) real property so that a third party (beneficiary / fideicomisario) can buy the property. The transfer of the real property from the seller to the bank is a definite and irrevocable transfer of title. Under Mexican law only an authorized Mexican banking institution can be a trustee.
The fideicomiso gives the foreign buyer full ownership of the real estate they are purchasing, but instead of being called the “owner”, the foreign buyer is stated as the beneficiary. It is important to understand that the bank does not own the fideicomiso but only holds the fideicomiso on behalf of the foreign buyer for protection under Mexican law.
When the fideicomiso is formed, the title to the property is delivered to the bank who then becomes the trustee. The foreign buyer is designated as the beneficiary of the fideicomiso.
A third way to purchase real estate in Mexico is to set up a corporation under Mexican law. As of 1995, foreigners can fully own, operate and administer Mexican corporations with some restrictions on the activities.
Choosing which type of corporation to set up is important for tax purposes in both the US and Mexico. You should speak with an attorney or accountant on both sides of the border to understand the benefits and costs each one entails. The Mexican legal system is a very formal system in that there are forms or procedures that must be followed.
Once your Mexican corporation is formed, it has the legal capacity to acquire property anywhere in Mexico, including the restricted zone. Acquiring property is also a formal procedure so you need to make sure all of the proper steps are done to secure title. This is where hiring an experienced and properly licensed Mexico real estate agent will come in handy.