There are many reasons to buy real estate in Mexico, and there are many places in Mexico to buy. Some of the most attractive places to buy fall into the "Zona Restringida" or Restricted Zone.
The Restricted Zone
The Restricted Zone is comprised of a belt of land that stretches 50 kilometers from the coast and 100 kilometers from national borders wherein foreigners are not allowed to purchase property. This zone was established in Mexico's 1917 constitution after years of territory losses due to wars and political corruption and was designed to stop foreign interests from purchasing large strategic areas of land where they might be annexed or used as a point to launch invasion.
The Fideicomiso
Today the risk of invasion is low, but as a part of the national constitution, the law remains. In order to stimulate and protect foreign investment, the Mexican government established a foreign investment law which establishes legal grounds for foreign citizens to invest in highly desirable costal properties through a bank trust, or as it is called in Spanish, a "fideicomiso"(pronounced fee day co mee so). Fideicomisos are the backbone of the foreign investment law and give beneficiaries all the rights of ownership that one would normally expect from a fee simple title, such as selling, leasing, renting, improving, leaving the property in a will (all within normal legal limits, of course), etc. In fact, the trust allows for a secondary beneficiary to which all the rights of ownership would pass should the primary beneficiary pass away... without the need of a will. The Fideicomiso trust is established at the time of purchase and is good for fifty years and renewable for another fifty years beyond that. There are many who think the only way to acquire property in Mexico is through long term leases. This is simply not true. As stated earlier, the fideicomiso gives the beneficiary all the rights of ownership. Ultimately the trustee (usually a bank) holds the title to the property and has a fiduciary responsibility to act on the beneficiary's behalf in all matters related to the home, condominium, or other property held in trust.
The Notary
When purchasing property in Mexico, it is important to do so through a notary ("notario" in Spanish). In fact, if you make a purchase without the help of a notary, chances are the deal is not legally binding and you are setting yourself up for some very costly headaches. The notary not only ensures that the property is in fact sellable, and confirms the identity of the seller, they are also responsible for collecting taxes on behalf of the federal government and registering the transaction with the public registry. Closing costs in Mexico are quite high due to the taxes and fees involved with the closing process. They usually run about 5% of the purchase price. This may seem high to a lot of foreign buyers, but when you consider that annual property taxes run in the neighborhood of .25% (one quarter of one percent) of the tax value of the property, the long term cost of ownership is actually much lower than in many countries.
The Real Estate Agent
Another indispensable tool when buying real estate in Mexico is a qualified real estate agent. A good real estate agent can provide you with sound advice on where to buy, help you avoid common pitfalls and put you in touch with the right professionals for mortgage, closing, and after closing services, making the entire purchase process much smoother. Because there are currently no licensing requirements for a real estate agent in Mexico, be sure to ask if they are affiliated with any national or local real estate associations. These organizations have requirements to join and help to ensure the agent you are dealing with is a qualified professional. By following these guidelines, and with a little care, you can soon be watching the sun set over the Pacific Ocean from the balcony of your new home in Puerto Vallarta, secure in the knowledge that your investment is safe.
The Restricted Zone
The Restricted Zone is comprised of a belt of land that stretches 50 kilometers from the coast and 100 kilometers from national borders wherein foreigners are not allowed to purchase property. This zone was established in Mexico's 1917 constitution after years of territory losses due to wars and political corruption and was designed to stop foreign interests from purchasing large strategic areas of land where they might be annexed or used as a point to launch invasion.
The Fideicomiso
Today the risk of invasion is low, but as a part of the national constitution, the law remains. In order to stimulate and protect foreign investment, the Mexican government established a foreign investment law which establishes legal grounds for foreign citizens to invest in highly desirable costal properties through a bank trust, or as it is called in Spanish, a "fideicomiso"(pronounced fee day co mee so). Fideicomisos are the backbone of the foreign investment law and give beneficiaries all the rights of ownership that one would normally expect from a fee simple title, such as selling, leasing, renting, improving, leaving the property in a will (all within normal legal limits, of course), etc. In fact, the trust allows for a secondary beneficiary to which all the rights of ownership would pass should the primary beneficiary pass away... without the need of a will. The Fideicomiso trust is established at the time of purchase and is good for fifty years and renewable for another fifty years beyond that. There are many who think the only way to acquire property in Mexico is through long term leases. This is simply not true. As stated earlier, the fideicomiso gives the beneficiary all the rights of ownership. Ultimately the trustee (usually a bank) holds the title to the property and has a fiduciary responsibility to act on the beneficiary's behalf in all matters related to the home, condominium, or other property held in trust.
The Notary
When purchasing property in Mexico, it is important to do so through a notary ("notario" in Spanish). In fact, if you make a purchase without the help of a notary, chances are the deal is not legally binding and you are setting yourself up for some very costly headaches. The notary not only ensures that the property is in fact sellable, and confirms the identity of the seller, they are also responsible for collecting taxes on behalf of the federal government and registering the transaction with the public registry. Closing costs in Mexico are quite high due to the taxes and fees involved with the closing process. They usually run about 5% of the purchase price. This may seem high to a lot of foreign buyers, but when you consider that annual property taxes run in the neighborhood of .25% (one quarter of one percent) of the tax value of the property, the long term cost of ownership is actually much lower than in many countries.
The Real Estate Agent
Another indispensable tool when buying real estate in Mexico is a qualified real estate agent. A good real estate agent can provide you with sound advice on where to buy, help you avoid common pitfalls and put you in touch with the right professionals for mortgage, closing, and after closing services, making the entire purchase process much smoother. Because there are currently no licensing requirements for a real estate agent in Mexico, be sure to ask if they are affiliated with any national or local real estate associations. These organizations have requirements to join and help to ensure the agent you are dealing with is a qualified professional. By following these guidelines, and with a little care, you can soon be watching the sun set over the Pacific Ocean from the balcony of your new home in Puerto Vallarta, secure in the knowledge that your investment is safe.
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