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Written by Max Katz   

How to buy Mexican real estate using Bank trust, "Fideicomiso"

How to buy Mexican real estate using Bank trust, Mexico Real Estate is always in high demand especially among American citizens. There are some laws that any foreigner interested in buying Real Estate in Mexico should be familiar with. Under Mexican law, foreigners may obtain direct Ownership of Mexican property in the interior of Mexico; however foreigners cannot acquire direct ownership of residential property within the area 100 kilometers from the border and 50 kilometers from the coastline. This zone in Mexico is known as the "Restricted Zone". But there is an another safe and completely legal way to purchase and enjoy Mexican property in the restricted zone through a Bank Trust or "Fideicomiso" which has been authorized by the Government of Mexico. Fideicomiso and is the legal equivalent of deeded ownership (commonly referred to in the U.S. as fee simple)

Earlier, foreigners were barred from owning Property in Mexico but with the passing of the North American Free Trade Agreement beginning in January 1, 1994, the Foreign Investment Act of 1993 was passed by the Mexican congress to promote foreign investment into Mexico. This law allowed foreigners to own 100% of the shares of a corporation and purchase property. As a foreigner, you can acquire irrevocable and absolute ownership rights to Mexico Real Estate through a Bank Trust which can be renewed every 50 years without restriction, perpetually and is irrevocable.  The rights to the Bank Trust can be transferred to a third party as well. This enabled foreigners, as beneficiaries of the trusts, to legally enjoy unrestricted use of land located in the restricted area.

The Fideicomiso has many advantages. One is avoidance of probate in case of death of the primary beneficiaries and another is there is no transfer tax imposed if the owner decides to sell.

How it works.
Upon the purchase of Real Estate in Mexico through a Fideicomiso, the Mexican government issues a permit to a Mexican bank of the buyer's choice. The property Title is then delivered to a Mexican Bank which acts a "Trustee". The Bank then designates the buyers as the beneficiary of the trust. The beneficiary now can use the property. The Beneficiary has the same rights as would a fee simple owner such as the ability to Lease, mortgage, sell, pass on to its heirs  and to improve the land as any other Real Estate owner in Mexico.

What Does a Bank do? There are selected banks that are authorized by the Mexican government to hold the Real Estate Fideicomiso. The process of getting authorization is very strict. The bank reviews property documents to ensure that they are complete and legal. Remember, you can transfer Fideicomiso to any authorized Bank. A property bought in Mexico under Fideicomiso cannot be expropriated by Mexican Government except for public purpose. In such cases Mexican Government has to pay market price with any interest accrued.

What does it costs? The costs incurred include:

1) Permit Fees from Secretary of Foreign Affairs, Mexico
2) Registration fees with National registry, Mexico City and
3) Annual Administration fees for the first year (depending on the bank)
4) The Bank acceptance Fees
5) 11% IVA tax
6) Closing Costs which include the Title Search, Appraisal fees, notary fees for the Deed, tax certificate, filing fees, Transfer Taxes to acquire the property(2% of the purchase price) and Recording Fees.

Hope this helps you understand the ownership in the restricted zone for a prospective Foreigner Buyer interested in purchasing Real Estate in Mexico. If you still need help or have further questions we will be happy to go over them with you personally.

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Author: Maz Katz
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