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Did you know that a Fideicomiso (Trust) is an easy way to buy property in Mexico if you’re a foreigner? With a Fideicomiso, you’re the beneficiary, which means you have the right to use and enjoy the property as you see fit. And that’s not all! You can also buy, sell, rent, and even inherit the property without any hassle.
Another great benefit is that your investment is protected over time. How so? Well, a Mexican bank acts as your trustee, and they’re there to look out for your interests. They ensure all legal and tax procedures are handled correctly, giving you great peace of mind. So, go ahead and explore investment opportunities in Mexico with confidence!
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What is a Trust?
A trust is a legal agreement where the seller (settlor) transfers ownership or rights to a trusted entity, such as a bank (trustee). You are the beneficiary (trustee). It’s a secure and common way to manage assets, especially in real estate and financial transactions . It gives you legal protection and control over your assets to ensure they are used according to your wishes, because you are ultimately the beneficiary.
Imagine a legal “guardian” who manages your investments or assets on your behalf to protect your interests. This concept applies to a variety of situations, from financial investments to real estate and estate planning.
What is a Restricted Zone Trust?
In Mexico, there are different types of trusts. The Restricted Zone Trust is the legal agreement that allows foreigners to acquire property in the “restricted zone,” which encompasses 50 kilometers along the beaches and 100 kilometers along the border. Under Mexican law, you cannot purchase property directly in these areas, but the trust makes it possible.
The Restricted Zone Trust is like a team of three:
- The Seller (trustor) is the one who transfers the property.
- The Bank (trustee) is the one that manages the property.
- Your Foreign Buyer (trustee) is the one who gets the benefits.
Did you know that this type of trust is also used in many other countries? Such as Canada (Vancouver), Spain, Italy, Israel, Brazil, China, India, South Korea, Singapore, the United Arab Emirates, and many more. So, if you dream of owning a property on the beautiful beaches of Mexico, the Trust makes it easy and secure!
What are the benefits of buying property in Mexico with a trust?
Stress-Free Legal Compliance
First, a trust guarantees easy compliance with Mexican law. Foreigners often face restrictions when acquiring property in specific areas, such as the coast and borders. Don’t worry, a trust allows you to do so completely legally.
Protection and Tranquility
A Mexican bank acts as your fiduciary, looking after your interests every step of the way. From ensuring smooth legal and tax procedures to protecting your property rights, you’ll be in good hands.
Safe Long-Term Investment
Buying, selling, renting, and even inheriting your property in Mexico is easier than you think. Trusts give you flexibility and can also offer tax advantages that will optimize your financial situation while you enjoy your corner of Mexico.
Legal and Tax Benefits
These trusts allow you to acquire properties in restricted zones, all in compliance with Mexican law. They also offer significant tax advantages, such as lower tax withholding rates and efficient estate planning.
So what are you waiting for? Invest with confidence!
What are the Requirements for Buying a Property in Mexico with a Trust?
- Passport: You must present your passport to verify your identity.
- Current immigration form: This can be a temporary or permanent resident visa, but it can also be the Multiple Immigration Form (FMM) or tourist card that they give you on the plane when you arrive in Mexico.
- Proof of address: This can be a utility bill for electricity, water, telephone, gas, property tax, or bank statements. Issue date no more than three months old.
- Unique Population Registry Code (CURP): You can obtain a CURP in Mexico if you don’t already have one.
- Federal Taxpayer Registry (RFC): You can obtain an RFC in Mexico if you don’t already have one. This is necessary to comply with your tax obligations.
- Beneficiary Data: Full name and nationality of the substitute beneficiaries and their percentages.
What are the Documents and Procedures for Establishing a Trust?
- Purchase Agreement : A purchase agreement is required between the seller and the buyer and must be drafted by a real estate attorney.
- Trust Bank Application: Choose a trust bank authorized in Mexico and submit an application to open the trust.
- KYC Form: Duly completed and signed.
- Permit from the Ministry of Foreign Affairs (SRE): You must obtain a permit from the SRE authorizing the purchase.
- Trust Deed: Once the permit is approved, the notary public will draft the trust deed, which will establish the terms and conditions of the trust.
- Public Property Registry: The trust deed must be registered in the Public Property Registry to ensure legal validity.
How Much Does a Trust Cost in Mexico?
The total cost of a trust fund to purchase a property in Mexico can vary depending on several factors, but generally involves three main components that work together to make your real estate dreams a reality:
- Permit from the Ministry of Foreign Affairs (SRE): Paid only once.
- Trustee Bank Fees: Fees are a one-time payment to open the trust.
- Trustee bank annuity: This is an annual fee to manage the trust. You’ll owe this annual fee every year until the trust expires. Keep in mind that these fees may vary depending on the financial institution you choose.
These are the 3 most popular banks for processing your Restricted Zone Trust:
Bank of Bajío
- Bank fees: $400.00 USD + VAT 16%
- First annuity: $450.00 USD + VAT 16%
- Permission from the Ministry of Foreign Affairs (SRE): $1,214.00 USD
Monex Financial Group
- Bank fees: $450.00 USD + VAT 16%
- First annuity: $450.00 USD + VAT 16%
- Permission from the Ministry of Foreign Affairs (SRE): $25,700.00 MXN
Mifel Bank
- Bank fees: $464.00 USD
- First annuity: $464.00 USD
- Permission from the Ministry of Foreign Affairs (SRE): $26,125.00 MXN
Trust with Banorte
If you’re looking to acquire a property in the restricted zone of Quintana Roo, Banorte offers a reliable and competitive solution through its escrow service, in collaboration with Gestión Fiduciaria . This process involves two main stages: obtaining the permit from the Ministry of Foreign Affairs and establishing the trust.
Processing of the acquisition permit
The external office Gestión Fiduciaria will be responsible for processing your permit so you can acquire your property in the restricted zone. This process costs $27,500 MXN , which must be deposited into the designated accounts, applying the current exchange rate if you are making the transfer from abroad.
Trust establishment costs
When you formalize your trust with Banorte, you will be required to cover the following fees:
- $464 USD: Corresponding to the legal process before Banco Mercantil del Norte (including VAT).
- $464 USD: Advance payment for the first year’s administration.
The total for both concepts amounts to $928 USD , which will be deposited directly into the bank accounts, using the exchange rate of the day as a reference.
Exclusive Banorte benefit:
Unlike other banks, Banorte guarantees that the trust’s annuity will not increase over time. This allows you to plan your long-term finances with greater peace of mind.
Considerations for mortgages
If you are purchasing your property through a mortgage, an additional fee of $348 USD (including VAT) will apply for signing the mortgage.
If you feel you need a little more help processing the Trust, you have the option of hiring a lawyer to assist you. Remember, it’s not necessary to hire a lawyer, as the bank can also help you with the process. The decision is yours: you can choose to have a lawyer on your side or continue with the bank’s assistance.
What are the steps to buy a property in Mexico with a trust?
Here’s how you can navigate the process in a friendly and informative way:
- Start Your Property Search: Start looking for the perfect house or apartment. Work with an expert real estate agent who understands your needs and budget. Read our article on: How to Find a Real Estate Agent and Why You Need One
- Choose Your Investment: Once you find your dream place, make an offer to the seller.
- Reserve with a Deposit: Secure your new property by making an initial deposit, usually around $100,000 pesos or $5,000 dollars, to reserve the property.
- Sign the Contract: Carefully review the terms and conditions in the purchase agreement.
- Process your Trust: Choose an approved trust bank in Mexico and open your trust. The bank will act as custodian, while you will be the beneficiary.
- Obtain your permit from the Ministry of Foreign Affairs (SRE): As a foreigner, you will need a permit from the Ministry of Foreign Affairs (SRE) to acquire property in restricted areas.
- Complete Payment: Make full payment to the seller and close the transaction successfully.
- Sign the Deed: Once you have obtained permission, sign the trust deed in the presence of a notary public. This document is recorded in the Public Property Registry .
- Trust administration: Let the trustee bank manage the trust, ensuring compliance with all tax and legal obligations during the agreed period.
Remember, this journey is all about finding your ideal property, and we’re here to help you every step of the way!
Frequently Asked Questions about Trusts for Property Purchases in Mexico
- How does the trust work?
The trustee bank acts as the legal owner of the property, while the foreign investor is the beneficiary, ensuring that they have control and enjoyment of the property.
- Why do I need a trust to buy property in Mexico?
The Mexican Constitution prohibits foreigners from purchasing property in coastal and border areas. A trust allows foreigners to acquire rights to property in a restricted area.
- Why does Mexican law prohibit foreigners from purchasing property directly in coastal and border areas?
Mexican law safeguards the country’s sovereignty, especially in sensitive areas like its coasts and borders. It doesn’t allow foreigners to purchase property directly here, thus maintaining control over the land and resources.
- How long does it take to obtain a trust to purchase property in Mexico?
The process of obtaining a trust to purchase property in Mexico can take between 2 and 4 weeks.
- What is the duration of a trust?
Initially, 50 years, renewable indefinitely. Many investors consider this sufficient for their purposes.
- Can I sell or bequeath the property in the trust?
Yes, you can sell it, bequeath it to heirs, or transfer it to another person, provided you follow the proper legal procedures.
- Can I rent out my property in Mexico?
Yes, you can rent out your property in Mexico for long, medium, and short terms. You can also benefit from vacation rentals .
- What happens to the trust if a foreigner dies?
In the event of the foreigner’s death, the beneficiaries of the trust will be the foreigner’s legal heirs.
- What happens if a trust bank goes bankrupt?
In the event of the bankruptcy of a trust bank, the assets held in trust will be transferred to another trust bank.
- Who can help me with the trust process to purchase property in Mexico?
A bank will guide you through the process. A lawyer specializing in real estate law can also be helpful. Don’t worry, your real estate advisor will recommend the most experienced banks and attorneys in trusts. They will also help you obtain quotes so you can choose the best option for you.
How to Avoid Dangers and Fraud in Trusts?
Although trusts are safe, there are risks involved in any financial transaction. Here are some things to consider:
- Scams and Counterfeits: Some sellers may be fraudulent. Conduct thorough due diligence and verify all transactions.
- Trustworthy Fiduciary Bank: Choosing a trustworthy bank is key. Problems with the bank can cause delays or complications.
- Contract Enforcement: A solid contract is essential to avoid costly disputes.
- Transparency: Make sure everything is transparent and legal. Legal and financial advice can be very helpful.
- Legal Changes: Laws can change. Stay informed about changes that may affect your property.
With the right advice, you can avoid these risks and enjoy your real estate investment in Mexico with peace of mind.
What are other ways to acquire property in Mexico?
Aside from the restricted zone trust, foreigners have several alternatives for purchasing property in Mexico:
Purchase outside restricted areas
Foreigners can purchase property in areas outside of the restricted zones without the need for a trust. This means owning the property outright, but you must ensure that the location is outside the restricted areas defined by Mexican law.
Mexican Society
Some foreigners choose to establish a Mexican corporation (usually a Sociedad Anónima or SA de CV) to purchase and own property. In this case, the corporation owns the property, and the foreigners have control over it. However, this option can be more complex and entails additional tax and legal responsibilities.
Administration Trust
Although not as common as a restricted zone trust, some foreigners use a management trust to purchase property. In this case, the foreigner has some degree of control over the property and can make management decisions, but does not acquire direct ownership rights.
The choice will depend on personal preferences, investment objectives, and the property’s location. It’s important to seek local legal and financial advice before making a decision to fully understand the requirements and implications of each option.
Trusts in the Riviera Maya: Investment Opportunities
Come discover the Riviera Maya on Mexico’s beautiful Caribbean coast! Here you’ll find tourist destinations like Tulum, Playa del Carmen, Akumal, and Puerto Aventuras, as well as Cancún, Cozumel, Puerto Morelos, Bacalar, and Mahahual.
These places are famous for their idyllic beaches and rich culture, and are now also the epicenter of exciting growth in the real estate market. Want to know why you should consider investing here?
Diversity of Opportunities
In the Riviera Maya, you’ll find a wide range of investment opportunities. From luxurious beachfront condos to exclusive residential projects and first-class resort developments, this area has something for everyone.
Tourism on the Rise
The tourism boom supports a strong rental market, which means great income potential for investors. Demand for rental properties continues to grow, making the Riviera Maya a strategic location for real estate investment .
Stability and Legal Benefits
Mexico offers political and economic stability, and trusts offer legal and tax benefits that make investment even more attractive and secure.
Are you ready to embark on this exciting journey? The Riviera Maya welcomes you with open arms!
Learn About Some Real Success Stories in the Riviera Maya
Cindy & Brian – Living the Dream
Imagine being retired and living your dream on the Caribbean coast. That’s exactly what Cindy and Brian, American retirees, did. After thorough research, they decided to invest in a beachfront property in the Riviera Maya . They used a Trust to make their dream a reality. Now, they enjoy their Caribbean paradise during their retirement, and when they’re not there, they rent out their property, earning extra income that adds a touch of luxury to their lives.
Harry, an Extraordinary Canadian Investor
Harry, a savvy Canadian investor, made his move by purchasing a house in Playa del Carmen through a Trust. Not only does he enjoy quality vacations there with his family, but he also rents it out to tourists. Over time, the value of his property skyrocketed, and when the right opportunity presented itself, Harry sold it for a substantial profit, taking full advantage of the tax advantages offered by the Trust .
Monica – Turning Your Savings into Success
Monica, a Spanish investor with a keen eye for opportunities, decided to invest her savings in the Riviera Maya. She secured an apartment in Tulum during the pre-sale phase through a trust. Her investment proved to be a resounding success. Just two years later, her apartment was worth almost double its initial value, and the area’s vibrant tourist scene provided her with a steady stream of vacation rental income.
These are just a few examples of how real people have found their own success stories in the Riviera Maya. It’s not just a dream; it can be your reality too!
FREQUENTLY ASKED QUESTIONS
What is a Trust for Real Estate in a Restricted Zone?
This type of trust is a contract entered into between a Mexican national (individual or legal entity), a bank, and a trustee. In this contract, the Mexican national transfers ownership of a property to the bank, which retains title to the property and allows the trustee to enjoy it as if they were the owner. The trustee is authorized to use the property for residential purposes.
What does “Restricted Zone” mean?
Restricted Zone is any surface or construction within a 50-kilometer (approx. 31 miles) strip from the coast or 100 kilometers (approx. 62 miles) along the borders.
Why is a trust required for a foreigner to acquire real estate in a restricted zone?
This is necessary because Article 27 of the Mexican Constitution establishes that only Mexicans are authorized to acquire direct ownership of real estate in the Restricted Zone. Foreigners must do so through a trust.
How long does a trust last? Can it be for an indefinite period?
Under current law, such a trust can last 50 years. Before the end of the term, an extension for another 50 years can be requested. Therefore, there are no indefinite-term trusts.
What is the process for establishing a trust in a Restricted Zone?
The process begins when the parties involved provide information and documentation to the bank, along with the corresponding fees. The bank applies for a permit from the Ministry of Foreign Affairs (SRE). Once granted, the bank sends it to a notary public, who prepares the deed establishing the trust. After approving the text, the document is signed.
What are the obligations arising from the trust for the trustee?
The main obligations are: to use the property solely for residential purposes, to consider the trustee as Mexican with respect to the property, to pay an annual fee to the bank, and to cover the corresponding taxes and services.
What are the main rights of the trustee?
The main rights include: using the property for residential purposes, allowing its use to family members or friends, appointing substitute trustees, building or remodeling in accordance with local laws, and selling the property or assigning the trust rights.
How many trustees can be appointed for a trust?
The minimum number is one person, but there is no maximum. The number and names are decided by the property buyer.
Who can be appointed as a trustee in the trust?
Any person or entity may be appointed as a trustee.
How many substitute trustees can be appointed?
The trustee may designate any number of substitute trustees, such as spouse or children.
What should be the order of appointment of substitute trustees?
There’s no specific order. It depends on the buyer’s decision. Entities cannot appoint a substitute trustee.
Conclusion
We’re delighted that this guide has been a valuable companion on your journey to acquiring property in Mexico through a Fideicomiso. Together, we’ve explored essential topics such as law, taxes, and finances, and provided essential tips to help you navigate the world of Fideicomiso-related transactions and avoid potential pitfalls.
In this Guide to Buying Property in Mexico with a Trust , we’ve also shared the benefits, requirements, and costs, addressing frequently asked questions that foreign investors often ask.
Now, it’s time for you to embark on an exciting adventure to explore the incredible investment opportunities in this beautiful country. Remember that connecting with professional Real Estate Advisors can provide you with invaluable insight and confidence in your decisions. And if you’re considering investing in real estate in Playa del Carmen, Tulum, Cancun , or any destination in and around the Riviera Maya, guess what? Playa Real Estate is here, ready to support you in making your real estate dreams a reality.
Did you know that property taxes in Mexico are much lower than in your country?
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