Real Estate in Mexico

Owning Property in Mexico

Land ownership has a long history in Mexico dating all the way back to the 1500s. Today, foreign citizens cannot “own” land in certain regions of Mexico. These regions are any property within 60 miles from any Mexican border or within 30 miles of any Mexican coastline-which includes Los Cabos. There are measures in place that allow citizens from all over the world to essentially own real estate in Mexico do my homework for money. Foreign citizens who wish to buy property within designated regions of Mexico are required to obtain a “Fideicomiso,” which functions as a Mexican Property Trust.

In 1994, amendments to the Constitution permitted foreigners to purchase and own real estate in Mexico located within the “restricted zone” which is all land within 60 miles of a national border and within 30 miles of the Mexican Coast, which includes all real estate in Los Cabos. This Law permitted ownership through a land trust is called a “Fideicomiso”.

A “Fideicomiso” is a Mexican Trust. The way it works is the Mexican Government issues a permit to a Mexican Bank of your choice, allowing the bank to act as purchaser for the property. The bank acts as the “Trustee” for the Trust and you are the “Beneficiary” of the Trust.

The law authorizes Mexican banking institutions to act as trustees. A trustee takes instructions only from the beneficiary of the trust (the foreign purchaser). The beneficiary has the right to use, occupy and possess the property, including the right to build on it or otherwise improve it. The beneficiary may also sell the rights and instruct the trustee to transfer title to a qualified owner.

This is not a lease agreement. The home or property compare masticating juicers that you buy will be put into a trust with you named as the beneficiary of the trust – you are not a lessee. You have all the rights that an owner of property in the U.S. or Canada has, including the right to enjoy the property, sell the property, rent the property, and improve the property. An investor can renew the trust for an additional period of 50 years and this process can be continued indefinitely.

The History of Mexican Land

Foreign owners have dominated Mexico since the early 1500′s. In 1517, Spain laid claim to Mexican lands. It was not until 1822 that Mexico declared its independence from Spain, but even with this new independence, the lands of Mexico were still owned by wealthy foreigners, the Mexican upper class and the Church. Porfirio Diaz, a former President of Mexico for over 30 years, nearly sold all of Mexico to foreigners during his term.

Then there was the Mexican Revolution, which one million lives were lost and was the basis for the Federal Constitution of 1917. The new constitution imposed new laws and restrictions on foreign ownership and ownership of real estate by the Catholic Church. It restricts foreigners from owning land with the restricted zone. Foreign citizens must obtain a Fideicomiso, which acts as a bank trust, in order to buy property in Mexico.

During the 1930′s Mexican people saw the property being returned to them. President Cardenas disassembled the large property holding and distributed them in the form of cooperative farms or “Ejidos”. The people were given ownership of these properties and were allowed to farm and cultivate them and receive the profit from their efforts. Over 50 million acres of land was back in the hands of the Mexican people, but was still owned by the Federal Government. It was not until 1992 that they were allowed to sell the properties. The 1992 Agrarian Law recognizes property within the Ejido and allows for the owner of record to sell, making investing in Mexican real estate an attractive venture for foreign investors.

Investing in Mexico Real Estate

In an effort to promote foreign investment in real estate, Mexico has enacted new regulations designed to relax the restriction on foreign investment, which formerly limited foreign ownership of Mexican companies to 49 percent.
Under the new regulations, foreign investor’s can now own up to 100 percent. The Mexican Federal Corporate Income Tax ranges from 25 to 38 percent. Provisions in the income tax code have also been established to offset the detrimental effects of inflation on monetary assets and liabilities, inventories and depreciable assets. The Mexican government has stated that it wants to double the number of foreign tourist arrivals into Mexico. A key to achieving the government’s goal of ten million visitors a year is to develop new tourist destinations with modern facilities and infrastructure. The Los Cabos region is a priority area for this targeted growth!!

Ownership in Mexico

Today, there are established regulations for non-Mexicans owning land in Mexico that make the process of purchasing safer and easier than ever before. The key to purchasing in Mexico is an established and continually renewable Mexican property trust called a Fideicomiso. Because the Mexican Constitution prohibits non-Mexicans from purchasing or owning real estate within 60 miles of the U.S. international border, or within 30 miles of the Mexican coast, a secure method of holding title was created through a Mexican property trust called a Fideicomiso. This is a trust agreement, much like an estate trust in the U.S., which gives the Purchaser all of the rights of ownership.

In order to gain the rights of ownership, the Department of Foreign Affairs in Mexico City issues a permit to the Mexican bank of the Purchaser’s choice, allowing the bank to act as Purchaser of the property. Essentially, the bank acts as the “Trustee” for the trust and the Purchaser is the “Beneficiary” of the trust. The trust is not an asset of the bank; the banks simply act as the Trustee to hold the trust. The Beneficiary has the right to use, occupy, lease and possess the property, including the right to build on it or otherwise improve it. The Beneficiary may also sell the property by instructing the Trustee to transfer the rights to another qualified Purchaser. The initial term of the trust is 50 years, however the trust can be renewed for additional periods of 50 years indefinitely, providing for long-term control of the asset. Fact: Until the Purchaser has received the trust, and rights to the property have been transferred to the Purchaser, the legal Owner of record in Mexico is still the previous Owner. Fact: Purchasers cannot bypass Mexican taxes or fees by not getting a trust, even if the property is sold to someone else before the Purchaser’s trust is in place.

In the trust document the Purchaser must name the Beneficiary of the property. The purchaser can be an individual, multiple partners, a foreign corporation, an estate trust, a living will, or another entity. The Trustee of the trust (the Mexican bank) will take direction from whomever you name as the Beneficiary. If you are considering a real estate purchase in Baja, I can make certain that everything is done right. We can put our knowledge and experience to work for you. I am an independent brokerage, assuring our only interest is representing you in a safe, honest, and secure real estate transaction. Please keep in mind that I’m also a licensed Real Estate and Mortgage Broker in California since 1984 and accountable to the Department of Real Estate because of my marketing in California.

Closing Costs Estimates When Buying a Property in Baja

Closing Costs run about 4-6% of the sales price. At the time you purchase any property in Mexico, you are required to pay a 2% Acquisition Tax; however this 2% is figured in the 4-6% closing costs fees. Closing costs are paid by the buyer, and depend on the value of the property. They include a transfer tax, legal Notary fees, a property registration fee, and fees for the tax certificate, title search fees and property appraisal, as well as miscellaneous clerical expenses. I will supply you with a detailed pre-closing cost estimate from the Notary before we even submit an offer.


The Mexican bank trust is an entity commonly used for non-Mexican nationals, such as U.S. citizens and Canadians, to purchase coastal land in Mexico. This bank trust in Mexico is a fideicomiso. When talking about Mexican real estate in English, most people use the term bank trust simply because its easier to pronounce than fideicomiso.
When talking in Spanish expect to hear fideicomiso. First, from a non-Mexican national’s viewpoint, a bank trust is used to acquire property here in Mexico only on land that is within the restricted zone, arguably the most desirable amongst buyers. The restricted zone sometimes also called the Prohibitive Zone, is coastal land between 66 feet from the mean high-tide line, up to 32 miles inland from the ocean,and up to 64 miles from international borders. The land is restricted, because Mexico’s constitution reserved it for Mexico. In 1997, Mexico changed its foreign investment laws to encourage foreign investment in both real estate and corporations using fideicomisos to acquire land.
In the Restricted Zone, Mexican nationals have the option of using either a fideicomiso or an escritura publica to acquire real estate. An escritura publica is a type of deed used by Mexican nationals to acquire land. Non-Mexican nationals are restricted from acquiring title to land using an escritura publica. Foreigners, non-Mexican nationals are allowed to acquire Mexican coastal real estate using a fideicomiso.
This Restricted Zone is one of the four major types of land that foreigners will encounter when making a real estate purchase in Mexico. The other three types of land are the federal zone , unrestricted zone and ejido land.Knowledge about all of them is advised, since here in Baja California, all four types of land are present and common.
There are three parties that all play a part in the creation of a Mexican bank trust, or fideicomiso: the buyer/beneficiary, the seller, and the Mexican bank.
The seller is the grantor. They sell the real estate involved, and transfer all the rights that go along with the property.
The buyer of the Mexican real estate is the beneficiary of the fideicomiso. The buyer can be a individual, a husband and wife or family, any group of people, or a stateside corporation, or LLC This buyer/beneficiary will receive all the rights that go with the property.
A Mexican bank serves as the trustee, and has a legal relationship with the buyer, meaning that the Mexican bank is working for the buyer/beneficiary and in their best interests. The bank holds title to the property and carries out duties related to the property that serve the desires of the beneficiary, the buyer.
Having the deed deposited with the bank is all that is needed to satisfy the Mexican constitution in allowing a non-Mexican to hold title to property in the Restricted Zone. Without the bank trust this would be impossible.
The Mexican bank with the title simply means that the property deed is deposited with them, but its not an asset of the banks. The bank can’t sell, or receive any benefits from the property because they don’t have control of the property; they only have the title, meaning title without benefits. In the event that the bank servicing the bank trust goes bankrupt, then the fideicomiso is transferred to another Mexican bank to continue servicing the trust on behalf of the beneficiary.
The buyer/beneficiary has control of the property, and will count the property as an asset on their books for their accounting purposes. They have the right to occupy it, enjoy it, lease it, improve it, depreciate it, 1031 exchange it, finance it with there IRA, borrow money against it, will it, add beneficiaries to the trust to avoid Mexican probate, lease-option it, sell it, and anything that can be done with Mexican real estate. The life of the trust is 50 years with the option to renew .
Contact me and I will explain all costs associated with acquiring fideicomiso. Mexican banks do compete with each other on fideicomisos, so we can shop around to get best price

Title Insurance

Title insurance is a special type of insurance that protects the insured from loss on a specific piece of property. A Title Insurance Policy provides security against the loss of land as a result of a title problem. Title Insurance can be purchased with or without limitations and exclusions. When purchasing property in the United States, most Banks and Mortgage companies require Title Insurance prior to granting a loan.
It is equally important when purchasing property in Mexico. A Fideicomiso (Living Trust) DOES NOT take the place of or exclude the need for Title Insurance. (A Fideicomiso can be dissolved in the event of Fraud, Errors and Omissions and certain Gov’t and Ejido claims.) When purchasing Title Insurance in Mexico, be sure to read the master policy thoroughly and check for limitations and exclusions.
Some title insurance companies insure only the Fideicomiso (Living Trust) and exclude fraud, gov’t and Ejido claims, even certain developer liens.
When purchasing title insurance in Mexico make sure that the policy is on the land not just the Fideicomiso.

Title insurance, so common in many parts of the United States and Canada, is in its infancy in Mexico. While the Public Registry system operates in much the same manner as in other parts of the world, the actual work is still performed manually. Deeds are handwritten into large books, a computerized system is still a dream and title plants are non-existent. Maps of subdivisions and properties are uncommon or incomplete, in many cases.

Thus, information available to create a chain of title for a specific property requires a visit to the local public registry office in the municipality where the property is located, and may require hours of laborious research and investigation to determine if the property is private property, who the sellers are, and if there are liens or encumbrances on the property.

Several major United States title insurance companies have entered the marketplace and are now doing searches in certain parts of the country. One Mexican insurance company is also offering a policy. For those who wish title insurance, we need to have a general description of the property, the name of the current holder of title, preferably a copy of the deed, and the approximate amount to be insured. With this information, we are able to investigate the existence of any existing title data and confirm whether or not title insurance will be available for the specific property.

Those who acquire title in fee simple (Direct Deed) – in the interior of the country, rely upon the Notary Public to search title. Title search, in this case, consists of requesting and receiving a Certificate of No-Liens on the property, which is issued by the Public Registry Department.

Those who acquire property in the Mexican Bank Trust (fideicomiso) have felt comfortable in relying upon the trustee bank to research title. The standard fideicomiso (bank trust) document will have a disclaimer, in which the bank will supply a power of attorney to the legal representative of the beneficiary of the trust in order to settle title matters or problems, but the trustee bank will not be the responsible party if, indeed, title problems arise.