Can a US Citizen Buy Property in Mexico?

Purchasing a property abroad as a US citizen can be an appealing notion for many reasons. Mexico’s rich culture and beautiful tourism spots make it popular for a home away from home for people of any nationality. Additionally, owning property in Mexico is affordable and has the potential even to be profitable.

There are many things to consider when asking yourself, “can a US citizen buy property in Mexico?”

From location to cost to legal specifics, it is critical to have all the information possible. Whether you want a summer home or would like to retire in the country, there is a set process to go through.

Besides knowing where you can and cannot live, there are some considerable risks. You may also need to take out a loan. Both US and Mexico have loan options, and you should weigh the benefits of each.

Regardless of any other elements, having a trustworthy Mexican lawyer might be one of the most crucial aspects of buying a property there. The main thing you want to ensure is that the law firm will give you a Guaranty of Title. Without this, it is not a legal purchase, and the property is liable to seizure.

An aerial image of the hotel zone in Mexico.

Do I Need To Be a Mexican Citizen to Own Property?

Mexico allows people from any nation to buy property in the country. There are restrictions, however. Certain areas only allow Mexican citizens and companies to own property there directly. For some areas, however, you can now purchase a property after going through some additional obstacles. 

What is The Restricted Zone in Mexico?

The Mexican Constitution of 1917 prohibited non-citizens from buying any Mexican land. In 1973, however, that changed with the Foreign Investment Law. This legislation allowed non-citizens to own Mexican land but still kept certain areas restricted. 

So, can a US citizen buy property in Mexico? The answer is yes, but in restricted zones, it may be a little more complex than you may think.

These areas where non-citizens are not allowed to own property are known as the restricted zone. In 1993, the Mexican government further modified the 1973 law to allow non-citizens to buy restricted property indirectly. With a fideicomiso, foreigners can make a trust agreement with a Mexican Trust Bank.

A fideicomiso authorizes a 50-year renewable trust with which a Mexican bank holds the property title. While they have the official title, they relinquish the ownership rights to you. These rights also include remodeling, occupation, selling or giving away, and leaving the property to your heirs. 

In the past, the IRS considered a fideicomiso to be a foreign trust. This idea meant that the IRS would heavily tax those who did not fill out the correct forms in addition to the Mexican paperwork and fees. Luckily, a court case in 2013 motivated the IRS to issue a ruling removing a fideicomiso’s designation as a trust.

Another way for foreigners to buy property in the restricted zone had to do with non-residential properties. This method uses a 100% foreign-owned Mexican corporation that follows only Mexican laws and registers with the Foreign Affairs Ministry. Additionally, the property must be strictly for non-residential activities. 

Related: Best Neighborhoods in Panama City, Panama

Where is The Restricted Zone in Mexico?

Article 27 of Mexico’s constitution establishes a restricted zone near both national borders and oceanic borders. As for national borders, the restricted area comprises any land within 100 kilometers (~62 miles.) Anything 50 kilometers or less(~32 miles) from any oceanfront counts as restricted land as well.

Also included in the restricted zones are areas called Ejido land. This land, administered by the government, belongs to Mexican nationals. Even though you may get a fantastic offer on real estate there, it is impossible to own it as a foreigner legally. 

Some have paid good money, even getting a contract, only to learn that it is not legally theirs. Ejido land is not for private sales, and the authorities may consider foreign buyers as trespassers. Removal from the area is likely, and any money spent goes to waste.

The only legal way to buy property on restricted land in Mexico is to go through the avenues discussed above. While there may be some extra steps to buy that beautiful beachfront property, it is entirely possible. Despite that, it is still vital to ensure that any property you purchase is not on Ejido land.

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Risks of Buying Property in Mexico

Having concerns about various risks of buying a property in Mexico is understandable. Several types of risks can pose as a deterrent to this purchase. There are legal risks, financial risks, and physical ones, as well.

A credible and trustworthy Mexican lawyer is your best defense against legal peril. Additionally, a legitimate real estate agent will help you to avoid scammers. Scams are quite common because of the lack of regulations for real estate agents.

Inflation and economic growth are always in flux. Because of this, you must be wary of investing in property. Doing market research on your own is essential here.

Physical risks not only have to do with the property itself, but they also include how other people will treat the property. If there is construction going on, delays or problems with the quality of materials and the work itself may occur. If you plan on only using the property during vacations, it is essential to consider your property’s security.

Lastly, buying an oceanfront property has a particular risk that other locations do not. Weather and climate change have the potential to wipe the property you invested so much in to clear off the map. Rising sea levels and increasingly unpredictable hurricanes have no regard or qualms with anything but moving forward.

Can the Mexican Government Seize Foreigners Property?

As long as you take the correct avenues to purchase a property in Mexico, there is little worry about government repossession. Not only does the Mexican government legally lack the right to take the property, but they also want to encourage foreign investments and tourism, not discourage it.

Because of the North American Free Trade Agreement (NAFTA), whether it be indirect or direct, Mexico cannot confiscate any property. The only exception to this is if it is in the interest of the public. If this occurs, the property’s owner must receive compensation.

An example of this exception is if they need to repossess the land for building railways or roads. It is a seldom occurrence, however. This system is the same for Canada, the US, and many other countries.

Furthermore, If you fail to pay property taxes on time or use the property for illegal affairs, those are grounds for reclamation. The only other way the government can take back property is if it is on Ejido land. As mentioned earlier, legal ownership of Ejido land by anyone other than Mexican Nationals is prohibited. 

Do Property Values Appreciate in Mexico?

Depending on location, the appreciation of property values in Mexico can be very high. For example, property on the coast can be 50% or more. To get the most out of this, consider buying property early on in a real estate cycle.

Doing this can increase appreciation in the long-term. Additionally, focusing on areas that do not have a large amount of development will bring even more value. As with most sites, appreciation depends on the current market, so further research is necessary.

3 Areas With High Appreciation

While many areas are ideal for investing in a property, some stand out from the others. Whether they have consistent growth or are just getting started, keep them in mind when deciding if you want to rent out your property any time in the future.

  1. Riviera Maya

The whole region of Riviera Maya has consistently high gains in equity. This area’s projections show continual growth, meaning real estate in this region is not likely to depreciate. 

  1. San Miguel de Allende

Voted the “Best Small City in the World” two years in a row, this region is a fantastic and popular tourist spot. With beautiful Spanish architecture, cultural festivals, and top-rated hotels, this hidden, charming city is an excellent area in which to invest.

  1. Los Cabos

Los Cabos is not only a gorgeous vacation spot, but it is also having a boom in development and building. This boom meant that it is a perfect time to consider an investment property there.

Best Websites for For Finding Property in Mexico

Not all real estate websites are of the same caliber. Those with the most visitors and highest rankings make the top of the list of best Mexican real estate websites. The following are just a few of them, in no particular order.

  1. https://www.segundamano.mx/
  2. https://www.inmuebles24.com
  3. https://www.lamudi.com.mx/
  4. https://www.mercadolibre.com.mx/inmuebles/#menu=categories
  5. https://www.vivanuncios.com.mx/ 

8 Steps to Buying Property In Mexico as An American

Once you have chosen a property, it is time to go through the actual buying process. You can go through three different avenues for the purchase. Those ways include direct ownership of property outside of the restricted zones, through a Mexican corporation, and with a fideicomiso. 

Regardless of the method you choose, the process will be the same. Here are eight simplified steps that give you an idea of what goes into the purchase. A lot more detail goes into the process, so this is just a baseline.

  1. Make an Offer

Your attorney will draw up a promissory agreement to finalize your offer.

  1. Set Aside Escrow Funds

Once the offer is accepted, you will set aside 10 to 20% of the purchase price into escrow. Be cautious about where and with whom you hold this money.

  1. Acquire Title Insurance

If possible, get Title Insurance. You may be discouraged from this, but it is incredibly important. This insurance prevents other people from claiming the property as their own.

  1. Wait and Gather Necessary Documents

While the notary does their investigation of the title and gets an appraisal, it may be useful to get all of your documents in order. The notary will then get the closing papers in order, which can take some time. 

  1. Close on the Property

Once everything is legitimized and put together, the seller, notary, and attorney will meet with you to sign the documents. This step also includes making the final payment and receiving the deed to the property. 

  1. Get Notarized

Follow up with the notary to ensure that they register your deed with the registry office. Then you will take it to the office and have it approved.

  1. Make a Mexican Will

A Mexican will, created by your attorney, guarantees that your property transfers to your heirs seamlessly. 

  1. Notify the Ministry of Foreign Affairs

Your notary or attorney should handle this step, and they usually do it reasonably quickly.you can attain the permit yourself if you are buying through a trust. Either way, your receipt will arrive within 30 days of the application.

Cost Associated with Buying Property in Mexico

When it comes to money, it always pays to be cautious. If your gut is trying to tell you that something is not right with a price, listen to it. You can always have the property appraised by an American company with experience in the Mexican housing market if you want to be sure.

As noted earlier, there are no regulations for who can call themselves a real estate agent. Because of this, scammers are rampant and will try to take advantage of you. A legitimate real estate agent will answer all of your questions and have ample familiarity with the area in which you are interested.

Run far away if a seller attempts to get you to sign a long-term lease. Demanding a deposit or pushing you to decide immediately warrants the same treatment. Sellers like that do not have your best interest at heart.

There are many costs associated with buying a property in Mexico. Factors that go into the final price include location, fees for the real estate agent and lawyer, taxes, insurance, registration fees, appraisals, travel, notary fees, utilities, and even other miscellaneous fees. These components may add up, but fortunately, many of these costs are considerably less than you will find in the US.

There are two types of fees that you will have to pay when purchasing a Mexican property. Firstly, there are upfront costs that you will need to pay before the property is officially yours. The costs to maintain the property once purchased should also be taken into account while calculating your budget.

Upfront Costs

  • Expedition fees are vital because it is never wise to buy any property without seeing it in person. These travel fees include accommodations and transportation to Mexico’s region (or regions) that you are considering. You should check out the property and get a feel for the area around it.
  • If you plan on having someone come to survey the property, they will need payment as well. This practice is not common, but it might be a good idea to hire one if it is an older property. Additionally, if the seller is against a surveyor visiting the property, it is a definite red flag.
  • The seller may hire a professional to assess the neighborhood and the property itself. You may want to do research as well, especially if the seller commissions them. While not a frequent practice, it is possible to hire an assessor of your own if the seller is okay with it.
  • The fees you will need to pay to finalize the property’s legal transfer are called closing fees. Once you make an offer and the seller accepts it, the resulting contract will include the closing fees. This document helps to avoid any misunderstandings by laying out who pays what and whom. It will also have sales tax and notary fees, and other required charges for the transfer’s completion.

Recurrent Costs

  • Property tax is due annually and is payable by the property owner at the local Municipality. The region you buy property in may or may not send a bill, but all tend to run local advertisements as reminders. Rates depend on the part and the property’s size and can come to as low as USD 100 or less.
  • Property service fees will apply if you buy a penthouse, condominium, property inside a gated community, or an apartment. These fees go towards services, maintenance, and any amenities that the property provides. A new property will likely have lower costs for some time since it will not need much care.
  • Land trust fees only apply if you purchase a property in a restricted zone. This fideicomiso has both an initial payment and an annual one. While there is no obligation to have a fideicomiso for properties outside of this zone, some still choose to have one.
  • Utilities such as electricity and water can be complicated to deal with at first. Electricity tends to be relatively expensive if you do not remain within the allowance subsidized by the region. Additionally, the tap may not be safe to drink with water, so you might want to buy bottled water.
  • If you do not intend to stay at the property full-time, you will need someone to manage it during the off time. This property manager can not only keep the house in good shape, but they can also deter burglars that target vacant properties. Renting out your property will require extra fees as well.
  • Home insurance is critical to protect a valuable asset such as a property in Mexico. It is especially beneficial to purchase an oceanfront property since wind, storms, and floods can cause severe damage. Volcanoes and earthquakes are other possible events during which you will want to have insurance. 

How Do I Get a Loan for a Property in Mexico?

Mortgages in Mexico differ from those in the United States. They have become more common as more Americans choose to request credit. Some banks in both the US and Mexico offer mortgage loans for the purchase of property in Mexico.

Wrap-Up

Can A Us citizen buy property in Mexico? The answer is yes, and they should!

Buying a property in Mexico can be intimidating, but it can be a breeze with adequate research. A lot of property options depend on the location and your budget. Finding an authentic lawyer and real estate agent is essential, for they can facilitate the process. 

Whether you are looking for a vacation home, investment property, or want to spend your retirement in Mexico, there are many opportunities. As a citizen of the United States, there may be a lot to do to buy a property in Mexico, but it is usually worth it.

Related Sources:

  1. https://legal-dictionary.thefreedictionary.com/Title+Guaranty
  2. https://open.mitchellhamline.edu/cgi/viewcontent.cgi?article=2273&context=wmlr
  3. https://www.americansabroad.org/fideicomiso-no-longer-considered-a-trust-by-the-irs/
  4. https://mexlaw.ca/can-mexican-government-seize-property/
  5. http://www.lawmexico.com/wp-content/uploads/2016/01/Orange-County-Register-For-Americans-Buying-a-Home-in-Mexico-Can-Be-Risky.pdf
  6. https://www.researchgate.net/publication/261510584_Risk_Assessment_for_the_Housing_Market_in_Mexico
  7. https://grist.org/climate-energy/do-not-buy-oceanfront-property/
  8. https://www.cbp.gov/trade/nafta
  9. http://www.livinginmexico.net
  10. https://cdn2.hubspot.net/hub/187098/file-52311633-pdf/mexico-real-estate-guide.pdf
  11. https://www.forbes.com/sites/lealane/2020/10/08/san-miguel-de-allende-mexico—once-again—chosen-best-small-city-in-the-world/?sh=6ae4a6135982
  12. https://www.segundamano.mx/
  13. https://www.inmuebles24.com/
  14. https://www.lamudi.com.mx/
  15. https://www.mercadolibre.com.mx/inmuebles/#menu=categories
  16. https://www.vivanuncios.com.mx/
  17. https://www.hg.org/legal-articles/real-estate-transactions-in-mexico-in-a-nutshell-24455