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Read the guideDo you need residency to own property in Mexico?
Property prices in Mexico are low, and the cost of living is lower than in the US, Canada, and many European countries. Also, Mexico offers good weather year-round and a vibrant cultural experience. However, for expatriates who are not Mexican citizens, one of the first considerations should be whether buying property in Mexico without residency is possible. This guide will answer this question.
The short answer is no, residency is not needed. Foreigners can buy property in Mexico without residency.
However, while Mexicans can purchase property anywhere in the country, noncitizens cannot. Article 27 of the Mexican constitution restricts foreigners from directly purchasing property in certain restricted zones. These include:
- Areas within 50 km (31 miles) of the coast
- Areas within 100 km (62 miles) of a border
Foreigners who want to purchase a property in the restricted zone must go through a real estate trust with a Mexican bank known as a fideicomiso.
In this bank trust agreement, a Mexican bank is granted the title to the property. However, this bank acts as a trustee bank and follows the instructions of the trust beneficiary (foreign owner). Thus, while the foreign owner may not hold a direct deed to the property, they do not lose authority.
Step-by-step guide to buying property without residency in Mexico
The steps for buying a property without residency in Mexico are as follows:
- Step 1: Find a property you like and make an offer.
- Step 2: Engage a notary public (notario) who will draft the purchase agreement.
- Step 3: Do due diligence (optional). This optional but essential step includes investigating the property title to ensure it is free of all encumbrances.
- Step 4: Sign the purchase agreement. To be legally binding, the agreement (contrato de compraventa) must be in Spanish.
- Step 5: Pay an earnest money deposit. The deposit is usually 5-10% of the property selling price for pre-construction and 20% for already-built property.
- Step 6: Open a trust (if applicable). When buying property in a restricted zone, the notary will help you establish a fideicomiso with a bank of your choice.
- Step 7: Complete the sale by paying the remaining balance of the purchase price.
- Step 8: Pay closing fees and taxes. This is usually 5-7% of the purchase price.
- Step 9: The notary registers the property with the land registry office. The Public Registry issues the final deed (escritura) to the property, and it is officially yours.
Best locations for real estate investment in Mexico
Some of the best places to buy real estate in Mexico are:
- Mexico City: As the capital of Mexico and its biggest city, Mexico City is a major economic hub and offers world-class entertainment and recreational spots. Plus, there is huge profit potential as continuous infrastructural improvements continue to enhance property value.
- Cancun: This beautiful city is a world-renowned tourist destination. It is known for its beautiful beaches, resort offerings, and nightlife. It also has an international airport that makes traveling into and out of the city easy.
- San Miguel de Allende: This beautiful colonial town is recognized by UNESCO as a world heritage site. With its picturesque streets, many consider it the prettiest colonial town in Mexico. It offers a calm atmosphere that makes it perfect for retirees and vacationers.
- Los Cabos: This city has a reputation for exclusivity and glamor. Here, you'll find stunning landscapes, beautiful beaches, and a well-developed tourism infrastructure. This makes Los Cabos excellent for individuals looking for high-end second homes and investment properties.
- Tulum: This small city is one of the most popular places on Instagram. It is an archeological site with the famous Mayan ruins. It also has amazing underground waterways (cenotes) and some of the most beautiful beaches in the world. Tulum has eco-friendly developments that attract environmentally-conscious buyers.
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What financing options are available to foreign buyers?
The financing options available to foreign buyers in the Mexican real estate market are limited. These include:
- Mexican mortgage brokers who specialize in foreign buyer financing
- Direct Mexican bank mortgage
- Developer or seller financing
Tax implications and costs for expats
Just like in the US, owning property in Mexico has tax implications. Some taxes expats buying property in Mexico must pay are:
- Acquisition tax: This is a tax the buyer pays when the property officially becomes theirs. It varies by location (but is usually between 2% and 5% of the property price).
- Property tax (Predial): This is an annual tax on Mexican property. It depends on the price of the property and varies by location.
- Rental income tax: This is a tax on rental income from Mexican property.
- Capital gains: If you sell your Mexican property, you’ll pay a capital gain tax of up to 35% of the profit.
Key considerations for buying property in Mexico
There are many things to consider when buying property in Mexico. We’ll examine these as we answer the following questions.
Purchasing property in Mexico does not automatically grant you residency. However, owning property can help your case when applying for residency, as it is proof of your financial stability.
Some risks to consider when purchasing property in Mexico are:
- Legal complexities: Mexican laws, especially those regarding buying property near the coast or border, can be confusing.
- Property scam: There have been cases of unclear titles and dishonest sellers.
- Financing problems: Financing options are limited, and you may have to pay more interest.
- Language barrier: Property contracts and other paperwork are in Spanish, which can be problematic for many expats.
Documents required for a real estate transaction in Mexico include:
- Identity document (e.g., a valid passport)
- Cadastral Certificate (Certificado Catastral) - a document showing the property’s location, dimensions, and boundaries
- Title Document (Escritura)
- Purchase Agreement (Contrato de Promesa de Compra-venta)
- No Liens Certificate (Certificado de Libertad de Gravamen) - a certificate confirming that the property is free of liens or encumbrances
- Fideicomiso document (if applicable)
- Mortgage document (if applicable)
When negotiating with Mexicans:
- Be polite and respectful
- Establish rapport
- Be patient
- Be very clear about your needs
- Be willing to explore various possibilities
- Learn to express gratitude
As you may already know, buying property in Mexico will cost you more than the actual property price. Some other fees you should expect are:
- Notary fees
- Acquisition tax
- Cost of registering the property with the Public Registry
- Cost of setting up a fideicomiso when buying property close to the coast or border
- Legal fees
Connect with local real estate experts
You don’t need temporary or permanent residency to buy a property in Mexico. However, when buying property in restricted zones, they must do so through a bank trust.
Navigating the Mexican real estate market can be complex, but you don’t have to do it alone. Properstar offers access to a network of trusted local agents across Mexico who can guide you through every step of the process. Whether you’re looking for a beachfront condo or a quiet retreat in a charming town, our agents are ready to help you find the perfect property and ensure a smooth buying experience.
Ready to find your dream home in Mexico? Connect with a local agent on Properstar today and get expert support from start to finish!
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