How to Buy & Own Property in Mexico as an American

It is perfectly legal for foreigners to buy & own Mexican real estate. Beyond the somewhat tedious process of setting up a bank trust (fideicomiso), buying property in Mexico as an American or Canadian is fairly straightforward. With a relatively low budget, you can purchase a beach property in Mexico (a house or a condo) that you’ve always dreamed of! All it takes is a little research and due diligence. Below we’ll cover everything you need to know to get started on purchasing real estate as a foreigner and expat condo ownership in Mexico.

Can Americans buy property in Mexico?

It’s time to put an end to the most enduring myths about buying property as an American or Canadian and if it is even possible to own a condo in Mexico.

Mexican citizens are able to buy properties anywhere within the country, but foreigners face some extra fees when purchasing in some of the more desirable areas. Properties within 50 km of the coast or 100 km from a border will have to purchase the property(a house or a condo) through a trust with a Mexican bank known as a fideicomiso.

International buyers are encouraged to work with a notary as they figure out all the paperwork and documents needed to create the fideicomiso. Thefideicomiso is a renewable 50-year trust that costs on average $600 per year, and is set up during the closing and title point of the sale.

It should be noted that all real estate transactions in Mexico require the involvement of a Notario Público for all the paperwork and documentation requirements. These notaries have significantly more experience and responsibility than a typical notary public in the United States and thus the two should not be confused.

While the process may vary, the general process for a Canadian or US Citizen buying property in Mexico’s “restricted zone” should be:

1. Find your dream property (a house or a condo) and make an offer.
2. Sign the initial sales agreement to sell/buy. A 5%-10% deposit is usually expected from the buyer for pre-construction (but a bigger deposit gets you discounts) and 20% is the minimum for already built property but we have seen 10%. The legally binding contract is in Spanish and should be written by a Mexican lawyer.
3. Send your deposit via wire transfer, along with any other sequential payments as outlined in the terms of your sales contract.
4. Once you have paid the full balance for the property, the seller contacts your bank to start the trust application for your fideicomiso. Many times you are able to take posession of the property at this point.
5. Pay closing costs, taxes, & fees. Closing costs average around 6% in Jalisco and Nayarit. See our closing costs calculator.
6. Within 3 months of your closing date, the Public Registry issues the final deed (escritura) to your property and the property is officially yours. This can take longer for pre-sale properties. We’ve seen titles taking about a year in some cases.

The whole process of registering a property can be completed in 45 – 100 days. The process may be slightly different depending on the type of property; e.g. pre-construction deals, beachfront properties, land purchases, etc.

What is a fideicomiso?

A fideicomiso is a trust that allows a Canadian or American to buy property in Mexico with all the rights of a Mexican citizen. This is a safe, legal, and extremely common vehicle for foreign ownership of real estate in Mexico. Sell it, rent it, build on it, live on it, or pass it down to your heirs… the choice is yours!

• It can be held by one or more individuals. This means that a husband and wife can be co-owners. Owners can also list an heir.
• It lasts for 50 years and after that, it is renewable by the owner or their heirs. This means that ownership does not expire as long as it is renewed.
• The trust is easily transferrable when an owner is ready to sell.
• With a single fideicomiso, international owners can hold multiple properties in Mexico.
• Fideicomisos do add some time and cost to the buying process. The setup costs range from $500 to $1,000 USD and maintenance fees cost around $500 to $700 USD per year.

Buying Property via a Corporation

 A Mexican corporation can be formed in two weeks with at least two partners. (They can both be foreigners; no Mexican citizen is needed, so don’t fall for that story.) It costs a maximum of $1,500 USD and from there you can use it to acquire property through a normal transaction as a Mexican national would. So in a month and a half, you can have the corporation formed and the property under its name. You can also buy a car and pretty much anything you want with it. But price and speed are the only benefits of a corp.

The corporation ties you to an accountant for life. Even if it reports zero income, an accountant will charge you a fee. To act on behalf of the corporation as a partner you need to get your resident status, otherwise you will have to act through powers of attorney given in the corporation to Mexicans (which means that somebody else will have, for lack of a better word, control of your money, land, car, and everything you buy or do through a corporation). Everything, and we mean everything you buy through a corporation, has to be done through a check and or wire transfer made from the corporation bank account, so cash is not an option. And finally, the biggest downside: there is no way to avoid capital gains when selling the property. If you manage the property properly and get fiscal receipts for everything you do in the house, you can deduct that against the profit at the time you sell to lower the tax bill, but you can´t avoid it completely.

That makes this the best option for people interested in starting a business. If you intend to open a business or even buy property for a non-residential reason, a corporation is the best route. It will save you some money on income tax, and most of all, it will allow you to create a legal source of income in the country.

Our opinion:

In our opinion, a Fideicomiso is the way to go if you plan on buying property in Mexico and using it for residential/personal reasons that will not generate any major income. If you intend to open a business or if you’re buying the property (or multiple properties) to function as a business, then you will want to form a corporation.

Closing Costs

Before buying real estate in Mexico, make sure you are considering the closing costs into your budget. Real estate closing costs in Mexico consist of various fees and expenses. They generally total between 4% to 6% of the purchase price. These costs are always the responsibility of the buyer. The seller, on the other hand, will have to pay other real estate fees and their capital gains taxes.

Property taxes in Mexico

• Transfer Tax: A 2% acquisition tax is payable by the buyer when the property changes ownership to them. This is part of the closing costs.
• Property Tax: This is called predial, and the average cost is approximately 0.1% of the assessed value of the property at the time of sale.

How to send the payment?

If you’re planning to pay your down payment or full payment from a non-mexican bank account, you’ll want to keep an eye on the exchange rate and associated fees from your bank. Most property is listed in USD, so no matter what, you will have to ask your bank to convert to USD before sending the transfer.

Wire transfers are the gold standard and are sometimes the only available method when sending payments to purchase property in Mexico, and are also very secure. If the amount is not greater than $10K USD, we suggest using Wise.com as they consistently offer the best exchange rates and the lowest fees.

Property Purchases in Mexico and Escrows

Escrow accounts are fairly a new thing in Mexico, adopted from the US and Canada. This really depends on the seller, and if the seller wants to arrange these services. If a seller does not wish to set up the escrow, but the buyer requests it, then many times the buyer is responsible for the escrow setup fees ($600-$800 USD). Escrow is rare when it is a single-family home or a direct sale by owner of a property that is already built. Escrows are more common in pre-construction or pre-sale properties, but even then they are typically are only offered to buyers towards the last 25% of a new project being complete.

To sum it up, don’t be afraid if a seller or developer doesn’t offer escrow. A lot of Americans or Canadians that are in Mexico will tell you “don’t buy unless there’s escrow!”, and that’s good general advice, but it is still a new thing in Mexico, and until it is more widely adopted you won’t see it very often. So, if you find your dream property and they don’t offer escrow, it’s not a deal-breaker. There are other ways to make sure your purchase is safe.

Sending less than $5000 USD to MXN

For amounts below $5000 USD, we always use Wise (formerly Transferwise). Wise.com offers the best exchange rate to send money to Mexico since they are independently provided by Reuters, guaranteeing fair and low-cost money transfers. Based on our past experience with them, the recipient’s Mexican bank account usually gets the money transfer within 3 days.

We personally use them at least once a month to send our HOA fees, and we used them to send the payments for both of our property purchases in Mexico!

Sending more than $5000 USD to MXN

If you are sending amounts higher than $5000 USD, the cheapest way to send money would probably be a wire transfer directly with your bank.

When making the wire transfer, select “SEND IN USD” or choose “I do not know the currency of the receiving account”. Banks want you to accept their terrible exchange rates. For example, for a $55,000 USD wire transfer, the bank wanted me to accept their terrible exchange rate, which (after crunching the numbers) would have cost me over $1500 for sending the money. Instead, simply send the amount in USD, pay the one-time fee (in my case it was $45 USD), and the funds will be converted to local currency at an exchange rate that’s set by the receiving bank. See example below:

Do you really need a realtor?

A realtor can help you get a grip on the market (see our trends article!) and narrow down options based on your criteria since it can be a challenge for buyers to search for properties on their own, especially if they are not in the area themselves. If you are not familiar with the area and want to be shown around, a realtor is worth it. If you are going directly to the developers of exclusively pre-construction and pre-sales, a realtor won’t help too much since you’ll be able to get all the info you need directly from the source. It just depends on if you want representation or feel confident on your own. It is worth noting that if you go to a development on your own, and register with that development, then if you bring a real estate agent in later to buy at that same development, you will most likely need to cover the realtors fee since the developer will not give that realtor any commission.

Mexico and MLS

There is an MLS system in Mexico, but it does not have all available listings like Zillow or Realtor.com in your home country. A lot of sellers or developers don’t want to put up their property on MLS because to do so would require a realtor, and in the Banderas Bay area realtors take 8% of the sale, which is much higher than you would see in the rest of Mexico. So most of the time developers will hire an internal sales team because it’s cheaper for them and they can keep all communication in one place.

If a property is not listed on MLS, it’s not a red flag. MLS is relatively new in Mexico, and since hiring a realtor is so expensive in the Puerto Vallarta area, many sellers here opt not to list their place with a realtor. And if they do, they’ll raise the price to make up for that expense! However, there is something to be said for a seller that is willing to list the property with a broker/realtor and eat that cost – it could show that they are serious about the sale, and is a sign that everything is in order to sell. In order to list on MLS (flexmls) a property must have all paperwork in order and go through a verification process. It could also show that they were never able to sell the property on their own, and there could be an underlying reason for that. We wouldn’t generalize that all direct-sale-by-owner deals are not serious or legit though, it’s just something to think about. There’s always so much to think about!

What to look for in a realtor

Our number one piece of advice is to contact an agent who not only knows the market and the inventory, but can also guide you through the legal, tax, and immigration requirements for foreigners. Try to find a real estate agent or buyer’s agent that has been established in the area for at least 2 years. It may also be wise to hire a local real estate attorney to coordinate the closing on your behalf.

Important Tip: Realtors in this area will be reluctant to show you a property that does not give them a full commission, so you could potentially miss out on some great opportunities.

Should you hire your own lawyer?

A notario in Mexico is an experienced lawyer who has been licensed by the Federal Government and the State, but the notario does not represent you. They are an unbiased representative of the government that finalizes and verifies all real estate transactions. They will perform a complete title search on the property, researching the chain of ownership, confirming the seller is authorized to sell the property, and make sure no one else has a claim on the property.

Having a notary or personal lawyer look over your sales contract can give you peace of mind since any legit contract in Mexico must be in Spanish. In the rare case that the seller doesn’t offer a translated sales contract, then you can find a local translator to provide you with a word-for-word translation. A seller should be able to tell you who did the translation, and a good seller will name that person in the English version of the sales contract. Most sellers will use a standard contract. AMPI – the people who certify real estate agents – have boilerplate contracts and those contracts are what everyone uses or bases their contracts on.

So what will a lawyer do?

A lawyer is your representation. Your lawyer will deal with the following processes on your behalf:

• Prepare or review your sales contract and assure that it is fair and legal.
• They will file for all permits necessary for you to own the property with the notary.
• Collect all the no-debt certificates on utilities, taxes, liens, HOA from the notary.
• Coordinate with the bank to create your Fideicomiso.
• Coordinate with the notary public, bank, and the sellers agent to assure that all documentation is provided.
• Help to create tax strategies in the event of a sale.

Do not expect your lawyer from back home to represent you during a real estate transaction in Mexico since only a licensed Mexican attorney can provide advice on Mexican law.

As you can see, a notary and lawyer work hand in hand. But if you feel savvy enough with contract law, then you might be able to manage on your own. Most real estate agents can take a peek at it too – they see a lot of contracts and know a thing or two. Real estate agents have access to in-house lawyers and closing coordinators which make the process a lot easier.

Due diligence when buying pre-construction

Everyone gets a little nervous about pre-construction or pre-sales, but almost all projects complete relatively on time. The, “I’ve heard horror stories!”, exclamation comes up a lot, and sometimes we question if they really have heard those stories, or if we can find some firsthand accounts of those stories (If have experienced or know firsthand of a horror story, write us! We’ll need specifics though). Regardless, you should definitely do some steps of due diligence when buying into a new project:

1. Legal due diligence: Confirm that the Seller is the legal owner of the property, or has a legal contract of sale or transfer from the owner. Insist on seeing the deed (escritura) for the property on which the construction is to take place.
2. Building permits: Confirm that the Seller has current/paid-up construction permits in place for the project contemplated
3. Confirm the reputation of the developer. Ask for references of happy previous clients, and check them out.
4. The same goes for the master broker/marketing entity. Confirm his track record, reputation and experience in preconstruction projects.
5. Finally, be sure you are happy with the sales agent who you are dealing with directly. Do they understand, and can they explain to you the legal structure on which the development is based?

Most pre-sale or pre-construction sales contracts will outline the penalties and repercussions of a project delaying or not being completed. Normally the developer is obliged to pay you a daily or monthly delay fee, and if the project does not complete, you will be entitled to the return of your money after the developer is able to sell the project to another buyer.

The delivery date of projects is usually a guideline – try to keep in mind that the completion date could be delayed 1-3 months due to supply chain problems with materials (seen during covid). Developers tend to build from the bottom up – so if your unit is on the top floor, it would be one of the last ones to complete. A good developer will offer a 1-2 year guarantee on the construction.

Land & Lots

Purchasing land is always a full-cash purchase and is a simple transfer of title transaction. You’ll need to get a notary to check that the land does not have any liens and that the land is not deemed ejido.  

Ejido Land

Ejido land is mainly used for agriculture, on which community members farm designated plots and collectively maintain communal holdings. Today, many Ejido properties are abandoned, with no farming activity taking place. However, by law foreigners are not allowed to be owners of ejido land, only Mexican citizens.

A Mexican citizen wishing to purchase Ejido land must have the agreement of the whole community that “owns” the land. If an Ejido property is sold without the consent of all owners, the buyer can risk a legal battle after the fact, which, in the worst-case scenario means the land will be returned to the original owner. The owner has rights of possession over the communal land, but does not have a Deed, and if he wants to sell it, he needs the approval of the assembly of the commissary.

The only way to acquire Ejido land is to go through a privatization process that transfers the property to a Mexican citizen through a Title or Deed. Transferring Ejido property into private ownership is a time-consuming process, and there are no guarantees it will succeed. Until an Ejido Title has been transferred to private property by a Mexican, foreigners cannot acquire ownership of Ejido land.

Leased Land

In the USA or Canada, there are areas that are protected and the homeowner essentially is leasing the land from the government for 99 years. That is not the case in Mexico. Land leases in Mexico are always involving private individuals, and have a max time limit of 9 years and 11 months. The landlord may also choose to lease his land on a month-to-month basis as there is no legal minimum.

There are a lot of cases where people have entered into the “informal” rolling 10-year agreement with landlords. This is a bad idea because the fact is that if your landlord decided to just terminate the agreement after the first 10 years – THEY CAN. The landlord can simply opt to not recognize the next 10 years of the so-called deal.

Always ask if the land is leased when purchasing a property in Mexico.

The price of land

Areas that are close to the beach and highly desired can see prices upwards of $70 USD per square foot for land. $40 USD per square foot and under is considered a good deal for a lot in a decent area for a small home. Lots that are huge that are meant for development, or lots that are way out in the rural areas with minimal services can get as low as $2 per square foot.

Financing Options for Purchasing Property in Mexico

99% of sales in the Puerto Vallarta area are cash sales due to the lack of affordable financing options.

We have not found any available mortgages in the USA or Canada for purchase of a property in Mexico. Mortgages in Mexico are only available for already-built property with an established title, and the interest rates for traditional mortgages are 7%-12% (as of 2022). However, some mortgage brokers specialized in foreign buyer financing may get it down to 5% but there are tons of extra setup fees.

Mortgages are not available for pre-construction or pre-sales, since there’s no deed, thus no collateral. You also cannot use property or assets in other countries as collateral. Refinancing is not available in Mexico at any lender, and you cannot do any remodeling to the property until you have the title (after it’s paid off). Most do not have any pre-payment penalties.

Mexican Mortgage Brokers

Mortgage brokers can help you navigate the process the easiest, since they will be dealing with the banks on your behalf. Requirements for getting a mortgage from a Mexican mortgage broker:

• Passport
• Tourist visa or residence visa
• Tax returns
• Bank statements
• Pay stubs
• Credit history
• Proof of funds for the deposit and the closing
• Life insurance from mexican insurer
• Pass a health examination

Direct Mexican Bank Mortgages

Direct bank mortgages do exist but you must be ready for a long process of paperwork. Requirements for getting a mortgage from a Mexican bank (3-4 month process) and you can borrow up to 90% of the purchase:

• 3 months of historical Mexican bank statements proving you can make the payments
• Temp or permanent residency
• RFC – Mexican Tax ID
• Medical certificate
• Life insurance
• Property insurance
• Proof of address in home country
• 6 months of bank statements from USA or Canada
• Credit report from USA or Canada

Developer or Seller Financing

This financing is private between the seller and the buyer. This is most common with pre-construction or pre-sale condos and homes. The terms are outlined in the sales contract and both parties are held accountable for their end of the bargain.

A Note on Escrow

Escrow is new around here, but most real estate brokers and agents are using escrow. HOWEVER, not all sellers are open to it. Escrow’s have about a $750 USD start-up cost paid for by the buyer, and there are very few escrow companies in the area that are recommended. The best Escrow companies in Mexico are actually title companies in the US. Mexico does not have any regulation over escrow companies so to protect your money you will want to go with a company that is backed up and regulated by a federal body in either the US or Canada. Hypothetically, anyone can start up an escrow company in Mexico and no one will check the funds or whats going on with that company, but companies based in the US are regulated by the federal banking commission. Many brokers use US-backed escrow companies.

Tips when Looking for Property in Mexico

• Keep an open mind – many experience a reality check when it comes to prices, neighborhoods, amenities, and other various quirks about property in Mexico
• Tropical property maintenance is a lot of work – you will need a property manager
• Some agents advertise that they are an AMPI certified agent – this is the real estate certficate for Mexico, but it is not legally required for anyone to practice real estate.
• You can usually find some good properties on Facebook. Join the groups and search on Marketplace. Many sellers also list their property on Vivaanuncios.com or Point2Homes.
• Location is always the #1 factor, but you’ll always have to sacrifice something. Whether it be an amenity, build quality, price, HOA fees, parking, highway noise – there are tons of factors when choosing a property. Pick the top 3 most important things to you and stick to them.
• Due diligence of a property purchase in Mexico includes researching the developer, checking that all deeds on the land and the property are official (if it is already built property), and making sure the identity of the seller is verified. A good developer will have multiple sucessful previous projects, major investors, and have a large and professional crew. The construction license should always be posted with a permit number at the construction site.
• Furniture is not as cheap as many would assume. In fact, some argue it’s probably cheaper to furnish a home in the US than in Mexico.

What you Pay to Sell your Property in Mexico

There are 3 main costs to sellers in Mexico:

• Real estate commission is 6% – 10% of the sale price, and they will add 16% IVA on top of that percentage that you will pay. The full commission you pay a real estate agent is deductible as an expense when calculating your capital gains.
• Capital gains taxes – 25% with no deductions – or – 35% minus eligible deductions. There is a deductible that you can use one time, and to get that deduction you need residency, an RFC (Mexican Tax ID), and you need to be able to prove that the property is your primary residence. You can only use that deduction once every 3 years. You can also deduct any capital improvements, the closing costs when you purchased, and the cost of the agency fee. You will need facturas to prove all of these deductions.
• Properties in the area are sold in USD, but capital gains are calculated in pesos, so any currency fluctuations could help or hurt you when it comes time to sell.
• Closing the fideicomiso will cost $1,000 USD.

Register for the Buying in Mexico Class!

We have partnered with great instructors offering an online course about buying property in Mexico that will offer the run-down and answers to your most asked questions. It is a great course to get you started, and will be your first step towards making the move to Mexico, retiring in Mexico, or investing in rental real estate in Mexico!

Our class will offer information from professionals with years of experience and a network of support that will always be available as you go on your buying in Mexico journey.

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