The ABC’s of investing in a Mexican paradise

Real estate transactions in Mexico have become an attractive business for foreigners. But, at the moment they decide to purchase a property, they typically come up with many questions related to mortgages, domestic and foreign banks, and the immigration issue, among others.

Gerardo Gnzalez, partner at MEXLAW, a firm based in Mexico and owned and operated by Canadian and American lawyers, said that the Mexican financial system does not distinguish between the nationalities of those who want to invest, other than noting whether the person is a Mexican citizen (by birth or naturalization) or a foreign national.

The coasts of Mexico have a lot of value and the Foreign Investment Law (published in 1993 with many amendments throughout the years) gives stakeholders who are not Mexican citizens trust options, so that they can buy in restricted areas such as those close to land borders and beaches.

This tool allows the foreign national to legally buy property in Mexico through a bank; the bank acquires the property rights on behalf of the foreign citizen; and he then has a contract with the bank through which he has total control of what happens to the property. The bank charges an initial fee for this service and then an annual fee to maintain the property in the trust.

There is another way for foreigners to purchase real estate for foreigners,through the creation of a Mexican company, which acquires the rights to the property. Determining the most appropriate purchasing method depends on the business or the type of investment. A third option, getting a direct mortgage to buy a property in the Mexican financial system, is somewhat difficult because foreigners cannot get a loan on a tourist visa.

But once such a loan has been paid, the beneficiary would automatically be the foreign citizen.

Trust Advantages

Depending on the trust type and the clauses, foreigners can get certain advantages when they invest in this way. Here are some advantages that usually apply to all or most trust agreements:

  • Managed assets are indefeasible.
  • Accounting and independent audits are included.
  • Tax benefits.
  • Can be used to perform unlimited purposes, as far as they are lawful.

What are restricted areas?

Many foreigners receive the wrong information and think they can not invest because of the so-called “restricted areas” (formerly called “forbidden zones”).

This is the strip of land which is 60 miles across land borders or 30 miles from the beaches. Foreigners can buy property in this area, but may only do so through a bank trust.

To obtain prior permission from the Mexican government, it is necessary to go to the Ministry of Foreign Affairs personally, or through a legal representative authorized by an attorney.