Tulum real estate is attractive to many. But what is the process for foreigners to own land in Mexico?
Are you thinking about investing in Tulum real estate, but are not sure how to deal with the legal side of purchasing land in Mexico as a foreigner?
Let’s face it. Tulum is becoming a hotspot, where real estate prices are growing monthly, but are still relatively low. According to Senior Property Consultant Mauricio Olvera-Mijares, the interest and search for real estate deals is reaching a high fever level. From 2012 till 2014 beach land prices went from $75 USD for 1sq m up to $150 USD, while in 2007 the price was only $30-40 USD. Here is an example: in 2012, the 1,000 sq m land in Tulum village was priced at $31,000 USD; in 2013 the price went up to $46,000 USD; in 2014 this land costs $77,000 USD.
There is a good reason for that, Olvera-Mijares reassures. After all, which other part of the world has such stunningly beautiful beaches, combined with easy-going, relaxing atmosphere, a touch of glamour, and borders the fascinating biosphere reserve, Sian Ka’an? Easy to reach from Cancun International Airport, Tulum is now a highly desired paradise for those who want to invest in their future or those who simply want a vacation home in a beautiful tropical oasis that’s on the way of explosion.
However, if you are not a Mexican, it’s normal that you have some doubts about the legal process of investing in Tulum real estate. So what is the purchase process really like if you are a foreigner?
As a foreigner buying land in Mexico within 50 km (32 miles) from the coastline and 100 km (64 miles) from the international border, you will use the means of a bank trust (fideiocomiso). Residential properties outside of the restricted zones can be purchased by foreigners without fideicomiso. Another way to legally buy land in Mexico is to establish a Mexican corporation or to use an existing company. Below are the details:
1. Purchasing land in Mexico though bank trust (fideiocomiso). This is the most popular option, especially for residential properties. A fideicomiso is a real estate trust where the bank (trustee) holds the trust deed for the purchaser (beneficiary). You can choose your bank: Scotia Bank, HSBC, Banamex (Citigroup), Santander, etc. The bank acts as the Trustee, and you are the Beneficiary of the trust. You maintain complete control over the trust, and may sell, lease, mortgage, and pass the property on to your heirs. The trust is the beneficiary’s property. Fideicomiso is equivalent to a Living Trust in the US. A trust is granted for a 50-year period, renewable at any time (for another 50-year period) by submitting an application to the bank. If the 50-year period expires without renewal, the owner has another 10 years in which he/she may submit an application to renew the trust.
- Applying for the Fideicomiso: $2,000 USD
- Taxes, notary and lawyer fees: 8% on the cost of purchasing the land or home
- Maintenance of the Fideicomiso: $450 USD a year
- Tax on the property fee: about $100 USD per year (for a property worth $100,000 USD); VAT of 16% on fees.
2. Formation of a company. Buying land through establishing a corporation is most often selected when the purpose is to own a commercial property and/or to conduct the investment as a business. This applies when the purpose is to rent the property, to own more than one property and to buy and sell it. The two most common types of a Mexican corporation are a limited liability corporation (LLC) and a limited liability partnership (LLP). A foreign corporation in Mexico requires two or more individual foreign investors, who control 100% of the corporation, combined. Once your Mexican corporation is formed, it has the legal capacity to buy property in Mexico, including the restricted zone. Choosing which type to set up is important for tax purposes in both the US and Mexico.
- Formation of a company (including fees, notaries, lawyers): $1,500 – 2,000 USD
- Taxes, fees notary and lawyer: 8% on the cost of acquiring land
- Management of the company by an accountant: $1,100 USD per year.
3. Existing company. You can also use an existing company to purchase land in Mexico.
- Purchase of a company: $4, 000 – 5,000 USD
- For the purchase of the property or land prices remain the same.
In the end, the process is easy and realtively fast. You don’t event have to be present! Through Mexican consulates you can give a power of attorney to someone you trust in Mexico with instructions to perform various operations necessary for the purchase of land and/or property.