While Mexican citizens can own property anywhere they wish, foreigners are bound by some stipulations. Foreigners are not permitted to directly purchase properties within 50 kilometers of the coastline or within 100 kilometers of the borders of Mexico. This area is referred to as Mexico’s Restricted Zone in constitutional law. This law has been in place since 1917 and isn’t likely to change anytime soon.
But don’t be discouraged, you can still have your second home in sunny Puerto Vallarta or Playa del Carmen! You can work with a Mexican bank where you will obtain a Fideicomiso de Zona Restringida (a real estate trust in a restricted zone). This is a common procedure that, for all intents and purposes, allows you to borrow the bank’s name in order to purchase the property.
For anywhere between $500 - 2500 USD and a yearly maintenance fee, the bank holds the property in name only, but the trust document itself outlines clearly that it has no rights to it. All rights including resale, rental and development belong to the trustee. The deed is good for fifty years, and is renewable after this for either you or your heirs.
One of the benefits of a fideicomiso is that it functions as a will, allowing you to choose beneficiaries who can inherit this trust without a lot of red tape. Not only that, if you obtain resident status and your property qualifies, you can exempt 100% of the capital gains tax up to a selling price of just under four million pesos.
Of course, the drawback to this document is the cost. The initial cost is paid in addition to all the other closing fees. There is also the yearly maintenance fee, which can run between 500 to 700 USD per year.
While the fideicomiso is an extra step and can take a few weeks to complete, it’s necessary if you would like to buy property in Mexico’s restricted zone. If you are working with an experienced professional, this process can be relatively painless and a worthwhile step to living your Mexican dream!
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