“I heard that foreigners aren’t permitted by law to own property in Mexico. How were you able to buy a condo there?” – Reader from Philadelphia, PA

 

It sounds like you’re referring to foreigners purchasing property in the restricted zone, which is within 50 kilometers of any coast or 100 kilometers of any border. There are fewer restrictions on foreign ownership outside of that area.

My condo is only a few minutes from the beach, so it clearly falls within the restricted zone. Nevertheless, I was able to adquire ownership of the property by establishing a bank trust, called a “fideicomiso” here in Mexico.

Basically, it works like this: The bank holds a naked title for the property and serves as the trustee for the property. The buyer of the property is named as the beneficiary of the trust and enjoys full ownership rights. That means that they can occupy it, rent it out, borrow money against it, make improvements to it, leave it to someone in their will or do anything else that can typically be done with real estate.

Just to be clear, the bank does not own the property. The naked title means that it is a title without benefits. The bank cannot sell, depreciate, lease or exercise any control over the property. In fact, the bank is not even permitted to list the property as an asset for accounting purposes.

The trust is valid for a maximum of 50 years, but it can be renewed indefinitely. The cost to maintain the trust averages around $500 USD a year. This fee is charged by the bank for providing the service.

I’ve known several potential foreign investors who have gotten cold feet once they found out about the “fideicomiso”.

I have to admit, the concept concerned me a bit at first too, but once I thoroughly researched it, I felt completely comfortable with it. When it comes down to it, I have the same property rights that I would have if I bought in the U.S.

The only thing I don’t care for is the reoccurring yearly fee to maintain the trust. However, as Linda often reminds me, that’s a very small price to pay to live in paradise – and as usual, she’s absolutely correct!

 

Blog by: Two Expats Living in Mexico.

For more blogs by him: http://qroo.us/

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