Here you will find many articles concerning purchasing property in Mexico.
Article 1.
How
Foreigners can purchase Real Estate
Article 2.
What is a Notary
Public?
Article
3. Legal
Residency
Article 4.
Using Your IRA!
How Foreigners can purchase Real Estate:
Foreigners can buy or invest in real estate in Mexico without any restriction, except in the coastal and border areas. There, foreign individuals and branches of foreign corporations can have 100% control of property through a real estate bank trust. Mexican corporations with foreign capital are allowed to buy directly if the property is to be used for profitable purposes.
Definition and Mechanisms of Trust:
A 'Fideicomiso' or bank trust is defined for real estate purposes as a transaction between a Mexican bank and foreign individual or firm investing in areas otherwise restricted to foreign investment, with the bank serving as a trustee or legal owner with respect to a certain real estate property interest and the investor serving as the legal beneficiary of the trust. The bank holds the title to the property in trust for the beneficiary who retains the exclusive right to use and control of the property.
As a trustee, the bank acts on behalf of the beneficiary in transactions involving the property, including the decision to transfer, assign or otherwise dispose of his or her interest in the property. The trust Is essentially a contractual arrangement which, in most respects, is identical to the type of trust used in North America. Trusts are established for an initial 50 year periods and can be renewed.
Investment in Real Estate through Trust:
New rules governing foreign investment through Real Estate Trust were put into effect in 1993. These rules provided the stability and protection of legal certainty for foreign investments. Mexican law now expressly provides that at the end of the 50 year term of the trust, upon request, the Mexican government will issue a new permit which provides for a new 50 year term no matter how much time remains on the original trust.
While a Mexican bank holds title to the property in these transactions, the bank is legally obligated to follow terms outlined in the trust documents that comply in all areas with the request of the foreign investor who is the trust beneficiary.
As the beneficiary, the foreign investors have a personal and exclusive right to use, occupy and possess the trust property/ including the right to build upon It, subject to applicable construction and zoning regulations. In addition, the beneficiary may transfer or assign his/her beneficial interest to any person and may keep the profits from the sale of the property according to the instructions given to the trustee, subject to applicable tax laws and expenses of sale.
The Mexican Notary
Public (Notario Publico):
In Mexico, the
notary public is a public official appointed by the State Governor.He has the capacity to attest and certify documents and business and legal transactions
that require authenticity. He also provides for strict security of original records and documents. There are very strict rules for becoming a notary public unlike in the United States where
almost anyone can become a notary. The notary must be a Mexican citizen and be thirty-five
of age. He or she must have a law degree and three years of work experience in a
notary public office. He or she must also take and pass an exam and if the exam is passed,
in time the governor will give him an appointment.
In Mexico, every legal document, such as deeds, wills, powers of attorney, constitution
of corporations; establishment of trusts and other legal
transactions must be made
before a notary public in order to be valid. If a Mexican notary public does
not notarize
the document it is not legal.
When the sellers and the buyers reach an agreement on a
property they go to the notary public first. The buyer chooses the notary
public. The notary public is completely capable and
legally authorized to carry out the real estate transaction.
To find a local Notary, take a look at this list
to find phone numbers and addresses. .
It is completely legal for Foreigners to own property
in Mexico. You may own property
through a Mexican bank trust or fideicomiso. In some instances
you may also own property
in your own name.
An escritura (similar to our deed) is a
document that will be prepared by the notary public.
It is possible to name beneficiaries in the escritura in some
states. If this is not the case it is wise to have a Mexican will prepared.
Have the notary public determine that the land is not
ejido land (Mexican agricultural).
The right to use this type of land can be purchased, however, it is always a
risk,
as you really don’t own the land and only have the right to use it so it
could be taken
from you at a future time. On the other hand ejedo land is
generally much less expensive
than privatized land because of the risk. There are ways to purchase
ejido land. To learn
more on this subject see
here.
One of our professional representatives can assist you with
the purchase of ejedo land however it would be at your own
risk.
The notary public will need from both parties to the
transaction proof of full names, proof of
dates and place of birth, official identification with a photograph
(such s a passport or driver’s license, and your visa to prove that you are
in Mexico legally.
The notary public will need from the seller his deed, up
to date tax receipts,
water bills, subdivision (fraccionamiento) fees, and any other
public utilities bill, paid up
to the date of the sale.
The notary public will determine capital gains
taxes through an official appraisal (avaluo).
The seller pays the capitol gains tax, however by mutual agreement
it could be paid by
the buyer. As a seller it is advised that you check with the notary public
when you list
your property. The notary public will be able to calculate this cost before
any transactions
almost to the penny.
The buyer normally pays the closing fees which average
from 6% to 8% of the
total sales price. The notary public can also give this figure to the buyer
when there is
an agreed upon sales price.
The standard down payment is 10% of the
sales price and is usually in the form of
a certified check made out to the seller that is held but not cashed by the
notary public.
This money is turned over to the seller at closing with the balance due also
in the
form of a certified check made out to the seller. There are trust
escrow accounts that
can be set up in the United States by the buyer. The cost of this is about
five hundred dollars. Sometimes it is wise for the buyers to do so for their
own protection.
After the closing the notary public must register the
escritura in the Registro Publico de la
Propiedad (Public Registry of Properties). This should be done
promptly, as the transaction
is not valid until registered. A normal time frame for this is about two
weeks.
Property with in sixty-two miles (100 kilometers) of the
border and thirty-one miles
(fifty kilometers) of the coast must be held in a bank trust. The notary
public as part of his duties will set that up and obtain your permit from
the Secretary of Foreign Affairs.
There is an annual fee of about five hundred dollars to the bank to handle
this service for you.
If buying property from a builder or developer have the
notary public check to see that
he has his permits for the development and for construction. Mexico does not
have
basic safeguards on real estate purchases as the United States or Canada.
There is no credit bureau to check on the developer’s financial condition
and it may be
difficult to locate liens. Some developers now offer title insurance and
some private properties
are also eligible for title insurance. Ask your notary public or go to
www.stewart.com.mx.
Most buyers need a notary public from the first steps of the transaction; a
title search
takes at the most just a few days. The notary public will not foul his good
name and will
let you know immediately if there is a problem.
There are many great real estate opportunities here in
Mexico for both foreign and
Mexican buyers. It is unlikely that you will have any problems with buying
real estate
here in Mexico as long as you follow these guidelines.
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LEGAL RESIDENCY STATUS IN MEXICO
Foreigners can go legally into Mexico under the following conditions: a)
Non Immigrant (non resident) |
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A Non Immigrant, is a foreigner that with a specific permit granted by the Mexican Government Secretary goes legally and temporary into Mexico under one of the following characteristics: Tourist: For health and recreation purposes only, for a period of a six months temporary stay that is not extendable. This permission is called an FMT. It is a tourist visa for people traveling to Mexico. The usual time period is 180 days if you are traveling by car at the discretion of the Immigration officer. If you arrive by plane for a vacation your FMT is usually for a period of 90 days however it can be renewed for an additional 90 days at any Mexican Immigration office however there are no guarantees. What you need is proof of citizenship – either a passport or a certified copy of your birth certificate accompanied by a photo ID. You will need to fill out the requested information that includes your place of birth, your destination and the reason for your visit. You can pick up a blank FMT form at any Mexican Consulate or at the travel agency issuing your plane ticket. If they do not provide you with one you can pick one up at the check in counter at the airport or on the plane while en route to your destination which is the usual way most tourist obtain their FMT if flying. If you are driving you can request an FMT form at the border. You will not be allowed into the country without it and you will have to turn it in upon returning home so it is strongly recommended that you don’t lose it. Should it get stolen or lost report it immediately to the nearest Mexican Immigration office and be prepared to show proof of citizenship as well as your airline ticket, if you came to Mexico by plane. A tourist visa is simply a permit to enter the country as a visitor. While you are here you may not work and the amount of things you can bring with you will be limited. If you are planning on being in Mexico longer than that time allowed by the FMT you will want to consider the other alternatives listed below. FM-3: An FM-3 is a one year permit to reside in Mexico. This document makes the holder a No Immigrant (Non-Immigrant) like the tourist card however you are allowed to live in Mexico for an extended period of time. Your FM-3 must be renewed every year as long as you choose to reside in Mexico. After five years of having an FM-3 you can apply for an FM-2 which will be described later. You can obtain an FM-3 at any Mexican Immigration office or through a Mexican Consulate. You will need the following information: *A letter addressed to the proper Immigration authorities in, Spanish, which includes your full name and current address requesting your change of immigration status from tourist to FM-3 and you must also submit the following information. *A current tourist visa *Your Passport *Proof of income. This figure does change and is based on the minimum wage (250 times the minimum wage in Mexico City) and this does fluctuate with the exchange rate. You should check with Immigration as to this amount. Your proof could be in the form of your bank statements showing your investments that generate that amount or more. You can also use a letter from you consulate stating that you receive social security, a pension, etc. They may charge you a one time administration fee which is usually under $100. but this fee changes so check with your consulate. *The monthly income requirements are reduced by 50% if you own and reside in your Mexican home. If this is the case submit a notarized copy of either your deed (escritura) or bank trust. *If you are married and your spouse also wishes to apply for an FM-3 have your original marriage certificate. *Requirements change from year to year so it is best to request any other information that you may need from the Immigration office or Mexican consulate. *You will not be able to work if you are classifies as a renista. If you are moving to Mexico because of work your employer will help make all the arrangements necessary to allow you to get working papers or check with your nearest Mexican Consulate as to what is required. *IF YOU HAVE OBTAINED YOUR FM-3 THROUGH A MEXICAN CONSULATE IN YOUR COUNTRY YOU MUST REGISTER IT WITHIN 45 DAYS OF YOUR ARRIVING IN MEXICO WITH THE LOCAL IMMIGRATION OFFICE. Your FM-3 needs to be renewed annually for a period of five years. After 5 years you may apply for an FM-2 or simply apply for a new FM-3. The FM-3 allows you to bring your vehicle with you across the border as long as your FM-3 is valid, so your car is legal within Mexico. FM-2 An FM-2 can be obtained after five years of holding an FM-3. An FM-2 is very similar to holding an FM-3, however, you cannot drive a foreign plated car. Holding an FM-2 should be discussed with a Mexican attorney or notary in order to determine the benefits to you. An FM-2 does have certain benefits, however there are also disadvantages. You also need to renew your FM-2 every year at a higher fee. Immigrant It is possible to immigrate to Mexico on a permanent basis after a period of time; however, we advise that you seek the advice of a professional in all matters of immigration. This subject matter is just an overview of normal procedures to come to Mexico either for recreational purposes or on a semi-permanent or permanent basis.
Transmigrate:
Foreigners that temporarily cross the border into
Mexican from another country and are allowed staying in the national
territory no longer than thirty days. Buy Real Estate in Your IRA: This article was published on: 09/01/2003 Retirement Planning Buy Real Estate in Your IRA A little-known IRS provision lets you extend your real estate purchasing with tax-deferred dollars. BY KELLI L. CLICK Are stock market woes preventing you from building wealth in your retirement account? If so, you might be interested in a small, but growing, trend among individual retirement account owners—investing their retirement funds in real estate. How It Works If the option of using tax-deferred funds to purchase property sounds appealing, you'll need to locate an independent IRA custodian that allows real estate investments and work with that company to set up an IRA account. Most banks and brokerage companies—the most common IRA account options—limit your choices to certificates of deposit, stocks, mutual funds, annuities, and similar financial instruments. But Section 408 of the Internal Revenue Code permits individuals to purchase land, commercial property, condominiums, residential property, trust deeds, or real estate contracts with funds held in many common forms of IRAs, including a traditional IRA, a Roth IRA , and a Simplified Employee Pension plan, or SEP-IRA. To find a custodian that specializes in real estate, search under terms such as "real estate IRA" or "self-directed IRA." This latter term was coined by the financial industry in the 1980s to distinguish the self-directed IRA from other IRAs that focus on stocks and bonds. The IRA account holder can't serve as the custodian of his or her own account. However, it's important to select a custodian knowledgeable about the types of investment you're interested in, because the custodian holds title to the real estate. Do your homework, and understand what you're getting into. Fees can vary widely among custodians, as can the flexibility of the services provided for account holders. If the custodian holds real estate on your behalf, but does not service it (collect the rent, etc.), you may have to contract with other providers. However, be sure that all rents are paid into the IRA and that all taxes are paid by the IRA. Purchasing the Property Most IRA custodians that hold real estate will usually allow you to purchase raw or vacant land, residential properties, or commercial buildings for your portfolio. In addition, some custodians may permit foreign property or leveraged property. Since buying a property may require more funds than you currently have available in your IRA, you also can have your IRA purchase an interest in the property in conjunction with other individuals, such as a spouse, business associate, or friend. Also keep in mind that if the property is leveraged, the debt must be a non-recourse promissory note. Unfortunately, Internal Revenue Service regulations will not let you use the real estate owned by your IRA as your residence or vacation home. Nor can your business lease space in your IRA-held property. The underlying premise for any real estate investment purchased with IRA funds is that you can't have any personal use or benefit of the property. To do so may cost you plenty in taxes and penalties. There are a few other IRS limitations as well. You cannot place a real estate property that you already own into your IRA. Your spouse, your parents, or your children also couldn't have owned the property before it was purchased by your IRA. Property owned by siblings may be allowed, since the Internal Revenue Code (section 4975) specifies that only "lineal descendents" be disqualified. Once you've chosen a property, your IRA custodian—not you personally—must actually purchase it. The title will reflect the name of your IRA custodian for your benefit (such as Silver Trust Co., Custodian FBO John Doe IRA). In addition, if you put up earnest money with your personal funds, you'll need to make sure you include that amount in the total due so that the title company can reimburse you upon closing. Operating an IRA-held Property Because all property expenses, including taxes, insurance, and repairs, must be paid from funds in your IRA, you'll need liquid funds available in your account. Of course, all income generated from the property will be deposited in your IRA account so you can use that money to cover your costs. You also can make annual contributions within federal guidelines. Currently, you can contribute $3,000 annually to a traditional or Roth IRA ($3,500 if you're age 50 or older) and as much as 15 percent of your annual compensation, up to $40,000, if you're a self-employed individual with a SEP-IRA. If your account doesn't have funds to cover property expenses, you will have to withdraw the property from your IRA and pay taxes on the value of the property, as well as possible penalties for early withdrawal. It's also possible to sell properties while they are held by your IRA, so long as the purchaser is not a family member. Once a deal closes, your IRA account now holds the cash proceeds—ready for you to make your next investment. An alternative is to sell an IRA-held property with seller financing so that all payments made by the buyers are paid to the IRA. Distributing Your Property You can withdraw real estate from your IRA and use it as a residence or second home when you reach retirement age (age 59_ or older for a penalty-free withdrawal). At that time, you can elect either to have the IRA sell the property or take an in-kind distribution of the property. Under that arrangement, your IRA custodian assigns the title to the property to you. You will then have to pay income taxes on the current value of the property if it's been held in a traditional IRA. If the property was held in a Roth IRA, you won't owe taxes at distribution. This makes a Roth IRA extremely attractive if you anticipate that your real estate investments will appreciate over time. Whether your retirement strategy is to hold properties or buy and sell for gain, real estate investing through your IRA can yield extraordinary returns toward your future retirement. IRA Options While any form of IRA allows for real estate investment, there are other pluses and minuses to consider when choosing the account type that's best for you: • A traditional IRA lets you deduct annual contributions (currently set at $3,000, or $3,500 if you're age 50 or older) from your income. However, once you begin withdrawing money, those funds will be taxed as regular income. • A Roth IRA gives you no deduction on your current contributions (again $3,000), but does allow you to withdraw funds tax-free. If you expect to buy a real estate investment in an IRA and hold it for a long period, this is probably your best option, particularly if the property increases in value over that period. • A SEP-IRA is designed for self-employed individuals and small companies. You can contribute up to 15 percent of your compensation, or $40,000, whichever is less. However, keep in mind that if you have employees, you must make contributions for them as well. This option is a great alternative for real estate practitioners who can make the higher contributions because they can build up funds more rapidly to purchase properties. Withdrawals from a SEP-IRA are treated like those of a traditional IRA for tax purposes. Kelli L. Click is vice president of sales and marketing at Sterling Trust Co., a self-directed IRA and 401 (k) custodian, in Waco, Texas. She can be reached at 800 955-3434, ext. 250. Use the service of one
of our professional
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