BUYING A PROPERTY
IN PUERTO PEÑASCO
GUIDE
Discover the allure of beachfront
living in Mexico.
Jesús Mirazo – Real Estate
Yes!
There are, of course, legal steps to follow when buying property in Mexico as a foreigner, but when you buy with Coldwell Banker, you will receive all the support and guidance necessary to make this process a breeze.
In Rocky Point, Mexico, foreigners buying property need to own it through a bank trust referred to as a ‘Fideicomiso’.
Important to know!
The Mexican Constitution on 1917 designated the area whiten 100 KM (62 miles) on Mexico’s border and whiting 50 KM (31 miles) of the coastline as off limits to direct real estate ownership by foreigners. This area known as the “Prohibited zone” but new beneficial legislation in place now refers to it as the “Restricted zone”.
A foreigner can purchase the right to hold, occupy, use, improve, develop, rent and sell real estate by purchasing a beneficial interest in a bank trust which holds the legal title of the property.
The bank holds legal title to the real estate and acts as trustee while the beneficial interest in the trust is owned by the foreign individual.
The trustee bank is obligated to deal with the property only for the benefit of the beneficiary.
The bank takes its instructions from the beneficiary owner only.
The beneficiary may be a foreign individual or other foreign legal person such as a corporation or an LLC.
The trust exist strictly for the benefit of the beneficiary who is for all practical purposes the owner of the underlying property.
The property may be passed on by will or inheritance, it can be used as collateral for a loan and the property can be freely enjoyed, rented or sold as determined by the owner beneficiary.
The Foreign Investment Law of 1993 went even further and authorized the out-right ownership of non residential real estate in the Restricted Zone by Mexican corporation with can be 100% foreign owned. This includes real estate purchased for development which can only be sold off to foreigners for residential use. The corporation is considered Mexican and therefore the foreign shareholders can own land directly through this Mexican person.
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It may be a good idea to buy as a corporation when buying more than one property.
Any foreigner or Mexican National can constitute a fideicomiso (the equivalent to an American beneficial trust) through Mexican bank in order to purchase real estate anywhere in Mexico, including the Restricted Zone.
When buying property in Mexico as a foreigner buyer request the Mexican bank of his/her choice to act as a trustee on his/her behalf.
The bank, as a matter of normal course, obtains the permit from the Ministry of Foreign Affairs to acquire the chosen property in trust.
The trust term is 59 years and can be automatically renewed for another 50 years period.
During these periods you have the right to transfer the title to any other party, including a member of your family.
The bank becomes the legal owner of the property for the exclusive use of the buyer/beneficiary who has all the benefits of a direct owner, including the possibility of leasing or transferring his/hers rights to the property to a third party or to a pre appointed heir.
The bank ensures precise fulfillment of the trust, according to Mexican Law, assuming full technical, legal and administrative supervision in order to protect the interests of the buyer.
“Fideicomisos” are not held by the trustee as an asset of the bank.
The Trust works as a will and testament for the property purchased and saves time and money by avoiding a lengthy probate case (which can be up to 3 years in Mexico).
No!
Foreigners often worry about their land being expropriated by the Mexican government, so it’s also important to stress that under the North American Free Trade Agreement (NAFTA), the Mexican government may NOT (directly or indirectly) expropriate property, except for special circumstances that involve a clear public purpose.
Although exceeding rare, this is basically the same as “Eminent Domain” in the U.S. If it ever does become necessary to expropriate land in Mexico, the law demands that swift and fair market compensation must be paid, together with accrued interest.
The Federal Maritime Zone (or ZFM) refers to all beachfront property located up to 20 meters inland, which not even Mexican citizens are permitted to own outright. Under the Federal Maritime Zone Law, these portions of Mexican territory belong to the Federal Government.
Apart from having the necessary funds, there are standard documents you will need to present to the Notary when buying property in Mexico as a foreigner:
WHAT IS A CURP?
A CURP is a formal identification number that all Mexican nationals acquire at birth (on their birth certificates). Mexican residents acquire this CURP number on their Resident Cards and foreigners have it on their Resident Cards ( both Permanent and Temporary).
DO I NEED A TEMPORARY OR PERMANENT RESIDENT CARD IN MEXICO?
If you do not plan to stay in Mexico for more then 6 months at any time then no, you don’t.
If you are planning to stay for more than 6 months in Mexico then the answer is yes.
If you decide to place your new vacation home in the rental pool program and want to generate the maximum income possible you may benefit from becoming a resident. This is something the vacation rental management company can help you figure out when the time comes.
HOW DO I GET A MEXICAN RESIDENT CARD? If you wish to stay for more than 6 months consecutively in Mexico then you will need a Resident Card. This is how you get your FM-3 and CURP number.
The process is relatively simple, although it does involve going to Mexico a couple of times. If you want to become Mexican resident there are several companies in Rocky Point that are specialists and will be happy to assist with this.
WHAT DO I NEED TO DO TO BE A REGISTERED TAX PAYER IN MEXICO?
The RFC is a unique tax ID number issued to all active and non-active taxpayers in Mexico.
The RFC is issued by the local SAT office (Mexican IRS). To obtain the RFC, you will need to present your passport, immigration card (FM-3), and proof of address. When you are ready for this step, Coldwell Banker can guide you through the process.
•All sales are conducted through a Notary Public.
• A Spanish sales contract with a courtesy English translation is presented to you for review then initial each page and sign.
• An escrow account ($800 USD) is set up to hold funds until closing.
• The initial secure deposit required by the seller usually can be negotiated depending on the price of the property.
• Standard timing is 45 days for closing in a private contract and can be around 90-120 days if the property is acquired through financing.
• The final balance of the purchase price is transferred to escrow a few days prior to closing.
•As a real estate company in the area, Coldwell Banker has established relationships with all the parties involved in the transaction and is ready to guide buyers and sellers every step of the way to ensure a seamless process from beginning to end.
• On closing, the buyer is given a copy of the certified deed but the original can take up to 6 months to get formally registered in the Public Registry office. Once it is ready, the Notary will let the buyer know to come and collect it.
WHO PAYS FOR CLOSING COSTS?
In Mexico, the Seller will have to pay commission and some small closing costs, but the majority of closing costs are always incurred by the buyer, similar to real estate transactions in the U.S.
DO I NEED TO PURCHASE TITLE INSURANCE WHEN I BUY REAL ESTATE IN MEXICO?
No, your Notary Public will be responsible for ensuring the property title is clear and free of any aliens, encumbrances and/ or debts for any kind.
The Coldwell Banker team will assist you throughout the process to ensure that the property you are buying is free of debt or any legal issues.
No if you do not wish to be there.
If this is the case, we typically recommend that buyers sign a Limited Power of Attorney with their English-speaker Mexican lawyer, who can then close on your behalf.
WHAT IS PUBLIC REGISTRY?
• In Mexico, deed, usually known as public instruments, can be researched at the local Public Registry of property which is open to the public.
• The deed must be finalized and signed by a Notary Public.
• The deed will typically list the parties involved in the transaction including the Notary, seller, buyer and the trustee bank.
• The deed identifies the property.
• Once the deed is finalized and signed by the Notary, by the seller, by the bank as trustee (if bank trust is involved) and the buyer (who will also be trust beneficiary if a trust is used), the purchase price changes hands and the transaction is considered closed.
Yes!
Currently financing is available for citizens of Mexico, USA and Canada.
There are financial institutions that work locally and have been improving the quality of service, speed of the transaction and lowering the interest to attract more buyers.
Certainly!
Coldwell Banker can guide buyers through a third party (Mexican banks). The process is very similar to that in the United States.
Yes, you can!
There are several banks in Rocky Point, where you can open an account in pesos and one in US Dollars. It is a simple process. Your local accountant can guide you every step of the process as well and go with you to facilitate everything.
THE PAPERWORK REQUIRED IS:
• Passport.
• Proof of address.
• Tourist card of FMM given an arrival in Mexico.
• Local references.
• Small amount of money to open the account.
If you made money yo need to pay tax.
Yes, if you are not a full time resident and tax payer in Mexico (You need a valid Permanent Resident Immigration Card or a Mexican voter card and all bills in your name as proof of resident).
In Mexico, the concept of capital gains tax does not apply in the sense on which it is determined in the United States. Here, the tax on the gain is 35%. For example, selling a property for $200,000 USD when it was bought for $100,000 USD generates $35,000 USD tax. However in order to determine that gain, the following cost and expenses are deducted from the amount for which the property is officially sold:
– The original land cost and the depreciated construction cost, based on the number of years the property was held and adjusted for inflation according to the official consumer price indexes.
– Additions, modifications and improvements, but not maintenance, made on the property ( construction ), adjusted as above.
– Commissions paid to real estate brokers by the seller.
– The closing costs, including all expenses, taxes and fees paid by the seller. The Notary will retain the calculated gain after deductions forwarding it to the Mexican tax authorities. The seller will then deduct this amount against his/her annual tax return, which becomes an adjustable tax credit in the U.S.
In order to ensure you are paying what you should be and not being over charged, we work with qualified legal tax accountants to help us ensure the whole process is legal and straightforward.
When you buy with Coldwell Banker, we’ve got your back. We will guide you every step of the way to make the process clear and easy. Our team is always available to answer any questions you may have — as are the title company, the notary, and the fiduciary bank, which are the parties involved in the legal portion of the transaction.
Whether you seek a permanent residence or an idyllic vacation retreat, our Mexican beach town offers endless possibilities. Let us guide you towards making your dream of coastal living a reality. Embrace the magic of this enchanting destination and start your new chapter in paradise today.
