Ajijic Legal and Immigration Services

Ajijic Legal and Immigration Services

Real Estate

With proper advice, buying Real Estate in Mexico is safe and easy. Until recently, foreigners could not buy land in Mexico unless the title was placed in a Trust (Fideicomiso). Now a foreigner can purchase a home or vacant lot in his own name, except for property located within 50 kilometers of the coast, or national border. A home in Puerto Vallarta or Nuevo Laredo would still need to be purchased in the name of a trust. Some homeowners in Chapala continue to use the trust, but this option is becoming less attractive, because the trust fees charged by Banks are getting higher. Also, a deed to individuals can provide for secondary owners so that probate can be avoided by a clause that provides that descendants will acquire the property in the event of the death of the primary owners.

In Mexico, a deed (escritura) must be prepared and processed by a Notary. The original, signed document is kept in the notary's archives, and a summary of the transaction is certified and delivered to the purchaser. The purchase must then be reported to the town registrar (registro). Before a foreigner can buy land in Mexico, permission must be obtained from the State Department (Secretaría de Relaciones Exteriores).

When property is sold, the foreign seller needs to be careful to avoid unnecessary taxes. Capital gains taxes are not calculated as they are in the United States. There, taxes are paid on the difference in the amount expended on the property, and the amount for which the property is sold, i.e., the profit. In Mexico, an expert makes an appraisal (avalúo) of the property, and the notary's fees, as well as the taxes (impuestos) are based on a percentage of the appraised value. Non-resident foreigners pay much higher capital gains taxes than do residents.

Even though you can purchase a home or property on a Tourist Visa (FMT), you can avoid paying capital gains taxes down the road by getting a Temporary Resident Visa (FM3) or a Permanent Resident Visa (FM2). These migratory documents can easily be applied for here in Mexico. The FM3 can also be applied for in the United States or Canada at any Mexican Consulate. Please note, if you apply for an FM3 outside of Mexico, you have to have it registered in Mexico within 3 months of obtaining it. The other rule for saving on capital gains is you must own the property for at least 2 years and keep your migratory status, whether it is permanent or temporary, current.

The added bonus for having an FM2 or FM3 is that you have a 6-month window from the time your migratory document is approved to move down your personal belongings with no taxes, duties, or penalties applied. This is easily done by creating an inventory list of the items you want to bring down, including applicable model and serial numbers, in Spanish. Then bringing it to a Mexican Consulate nearest you and having them approve it. They will also advise you on how to label your inventory list on the boxes you are shipping or bringing down.

Even though an attorney in Mexico cannot process a real estate transaction without a notary he can be very helpful in selecting the best notary for a particular transaction, and in advising the client on the type of deed to use, and can help him avoid many of the pitfalls that foreigners encounter when dealing in real estate. My partners and I work with Notaries in Chapala, Jocotepec, and Guadalajara. We know that some notaries specialize in fields other than Real Estate, and may not keep up with the constantly changing rules regarding the sale of land. We have been successful in coordinating transactions to the benefit of foreign investors.

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