INVESTMENT PROPERTIES
Baja Mexico Properties, LLC
La Paz, Baja California Sur, B.C.S.
Legalities
Legalities
If you are truly considering what it might take for you to invest in the purchase of property in Baja, Mexico, build yourselves a home or mansion, build to sell for profit, you will want to understand how this is done.
Here you will find many of the answers to those questions, however we recommend that you investigate these matters in detail for yourselves, and create your own channels of verification.
Don’t be intimidated, remember – “Knowledge is Power!” The more you research, the more you will find that most legal concerns related to foreign ownership of properties to buy and sell are well regulated by Mexican land use laws. And although they are often quite different than what we in other countries might be familiar with, they are safe and sound, and not too difficult.
There is also a wealth of information you can obtain online. Spend some time checking this out. Most of the information you will find here, where obtained from these kind of resources.
What Every Buyer Should Know
fideicomiso
There's one category of restriction, but it's easy-and completely legal-to get around.
What is the "restricted zone"? As defined under the Mexican Constitution, the Restricted Zone is the area 100 kilometers from any Mexican border, and 50 kilometers inland from any coastline.
Nearly a hundred years ago Mexico made it illegal for foreigners to own property in a restricted zone. Then realizing that it was missing out on foreign investment, Mexico changed the rules in 1973 so that foreigners can now own land in Restricted Zones through fideicomisos, or bank trusts.
What is a fideicomiso? The fideicomiso, or trust, is not only one of the most misunderstood legal instruments but also one of the most dynamic. The fideicomiso is the vehicle used by the government to exercise its discretionary power permitting foreigners to acquire ownership rights to real estate within the "restricted areas" of Mexico, granting the trustee (a Mexican Bank) legal title to the property for a determined period of time.
The parties to a fideicomiso are:
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The settlor (Seller-fideicominte)
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The trustee (the Mexican bank-fiduciario)
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The beneficiary (buyer-fideicomisario)
As trustee, the Mexican bank acts on behalf of the foreign beneficiary in any and all transactions involving the property held in fideicomiso. However, the beneficiary retains the use and control of the property and makes the investment decisions regarding it. The beneficiary has the right to use, mortgage, encumber, improve, lease without limitations and sell without restrictions and to pass the property to named heirs. In essence, the beneficiary has the same absolute right to use, benefit and enjoy the property as if it were in fee simple (direct) ownership.
That means you can build on the land, rent it, resell it, or pass it on to your heirs just as if you held direct title.
Fee simple purchase: Foreigners may directly acquire property within the restricted zone, providing it is to be used for commercial activities. In other words, the usage must be industrial or retail (bed and breakfast, boutique hotel, restaurant, etc.) in order to qualify as nonresidential. Residential properties in the interior of Mexico (outside the restricted zone) may be purchased by foreigners in fee simple title with registration of their ownership to the Ministry of Foreign Relations.
Foreign Investment Law: In effect since December 28, 1993, this law has been a major step towards bringing ownership of Mexican real estate in line with other industrialized countries. It allows fee simple (direct) ownership of non-residential properties in the country's restricted areas provided that such property is owned by a Mexican corporation and that it is intended for commercial purposes. The Foreign Investment Law also extended the duration of the fideicomiso term for third-party residential properties from 30 to 50 years, with a renewal upon request by the party having an interest in the property.
You can also use the bank-deed structure to own property outside the Restricted Zone. Many people in the colonial cities, for instance, own their property through bank trusts. Owning property through a trust deed offers several advantages. First, you can list more than one person as beneficiary, which means, for example that a husband and wife can essentially be "co-owners". You can and should structure this in such a way that if one partner should die, the other has immediate, 100% control over the property.
Another advantage is you can list an "heir". This means that if both co-owners die, a new beneficiary is already in place - one who, incidentally, needn't be related to the original co-owners. This can be a very desirable option for un-married couples, friends who own a property jointly, or for couples in a second marriage with different children.
Trusts are issued for renewable 50-year periods. If you are purchasing property currently held in a trust, you can either establish a new trust for the next 50-year period or be assigned the existing trust deed. Maintenance fees for this kind of trust are typically $400 to $600 per year, the same amount that it's likely to cost for the initial set-up.
Trusts are one of three ways to own property in Mexico. The others are through a Mexican corporation or by direct deed. If you intend to use your property in a Restricted Zone as commercial and non-residential, then you can own it through a Mexican corporation, and the corporation can be 100%foreign owned.
The third way to own property in Mexico is through a direct deed (escritura publica en domino directo). This structure will work for foreigners buying property outside the Restricted Zone-in the colonial cities, for example, but not along the borders or coast.
When you hold the direct deed to a property, you pay no yearly or administrative fee to maintain it as you would with a trust. But you will be charged a one-time fee of about $300 for each foreigner whose name appears on the deed. If you are married, make sure that your name and your spouse's name appear on the document. As with a trust, you can designate a "beneficiary" on the deed so that the property will automatically transfer to that person should you die, but in this case, the beneficiary must be a direct blood relation-a parent or a child. Again, consult a knowledgable attorney before deciding which type of ownership is best for you and your family.
Financing: It's usually easier to pay cash for a second home in Mexico, but some developers offer financing, and a few U.S. companies provide mortgages. Tony Adams with Discover Mortgages in Eugene, Or is one of those companies.
http://discovermortgageeugene.com/index.html
Many foreigners who buy second homes in Mexico arrange loans through a bank in their home countries. If you own real estate in the U.S., for instance, taking out a second mortgage and using the funds to buy property in Mexico is often the best option in places where local financing isn't available. Sometimes, it's the best option even if you could get a local loan because the terms may be more attractive.
Taxes: Mexico is not a tax haven, and it's laws can be tricky. Second-home owners who maintain U.S. residency status shouldn't expect problems. According to one of Mexico's top financial advisors, Raoul Rodriguez-Walters, foreign residents with homes in Mexico and abroad, and who derive most of their income from sources outside of Mexico, generally need not worry about reporting and paying Mexican income tax.
The wisest strategy is to consult a tax advisor or attorney who is familiar with expat financial matters. Many U.S. advisors can recommend counterparts in Mexico, and it can also help to look at the list of attorneys provided by the American Embassy in Mexico.
Many of these attorneys also provide tax advise. Rodriguez-Walters is the founding partner of Mexico Advisor, a company that offers cross-border financial planning, legal, tax, and title services to English-speaking foreigners in Mexico. The firm also specializes in providing representation for home buyers in Mexico. For more information contact:
Mexico Advisor. tel. (52)415-152-0586 and (in the U.S.) 512-215-4482 and (toll free) 888-231-4707; website: www.mexadv.com.
Owners of second homes are likely to encounter several other types of taxes. The transfer tax, for example, is an acquisition tax levied on the transfer of real estate. Payable by the buyer, it is currently 2% of the official assessed value of the property.
If a foreign owner has lived on his or her property for six months before the sale (this is the general rule but varies state to state) and can prove this with utility receipts, etc., any gain is exempt from tax. Otherwise, capital gains tax is, subject to the discretion of the seller, either 25% of the gross income (sale value) or 32% of the net capital gain.
For residents of Mexico, rental income is taxable at regular income tax rates. Non-residents are subject to a withholding rate of 21%.
Mexican property tax is known as predial. It's payable quarterly and averages 0.1% of the assessed value of the property at the time of sale.
Title Insurance: As the words imply, title insurance is a way to make sure you hold clear title to your property and that, should anybody dispute that title, you'll have an advocate to defend your claim in local courts. We recommend that you buy title insurance, particularly for undeveloped land. And if the title insurer you've hired says he/she will not insure the property...don't buy it.
Rates range from about $5 to $7 per $1,000 of coverage, depending on the value of your property and the firm you hire. Two firms offering title insurance in Mexico are:
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First American Title Insurance Company, Caribbean/Latin America Division, 13450 W. Sunrise Blvd., Suite 300, Sunrise, Florida, 33323; tel.(954)839-2900 and (toll free) (877)641-6767; fax (954)838-9228; e-mail: Turalu Brady Murdock at tmurdock@firstam.com; website: www.firstam.com
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Stewart Title and Guarantee Company, Houston, TX; tel. 713-625-8753 and (toll free) 800-729-1900; website: www.stewart.com.
Mexico Essentials
Size: 761,605 square miles, nearly three times the size of Texas.
Population: About 107.5 million. Approximately 60% are Mestizos (a combination of European and Native American heritage), 30% are predominantly Native American, and 9% are European. Roman Catholics comprise about 89% of the population, Protestants 6%, and other religions 5%.
Capital: Mexico City
Other major cities: La Paz B.C.S., Guadalajara, Ecatepec, Nezahualcoyoti, Puebla, Monterrey, Tijuana, Ciudad Juarez, Leon, Naucalpan, Zapopan, Tlalnepantia, Guadalupe, Merida, Chihuahua, Acapulco, San Luis Potosi, Hermosillo, Matamoros, and Nuevo Laredo.
Government: Democratic federal republic.
Currency: The peso. One Mexican peso was recently worth slightly more than nine American cents, and one U.S. dollar was worth nearly 11 Mexican pesos.
Electricity: Since the standard in Mexico is 110 volts, most appliances from the U.S. or Canada don't require a transformer or converter. Many European appliances, on the other hand, operate only on 220 to 240 volts and therefore require a step-up transformer in order to be used in Mexico. Most wall sockets in Mexico accept polarized plugs that are now standard in the U.S. and Canada. To be on the safe side, however, it's best for visitors to take one or more inexpensive converters that allow you to put polarized plugs into older wall sockets that were made for non-polarized plugs.
Measurements: Mexico uses the metric system, so it's useful for property shoppers to know that 1 square meter equals about 10.8 square feet. One hectare equals 10,000 square meters, or 2.47 acres.
On rare occasions you'll run into other measurements in Mexico, including the fanega, cabelleria, vara, and legua. Unfortunately, the terms don't always mean exactly what they do in other Latin American countries. In Mexico, a fanega is 3.5663 hectares, and a cabelleria is 12 fanegas or about 42.79 hectares. A vera is 0.83800 meters, and a legua is 5,000 varas.
Languages: Spanish, various Mayan, Nahuati, and other regional languages.
Climate: In low-lying areas, Mexico is tropical or semi-tropical. Elsewhere, the climate varies according to the altitude. Lake Chapala and Guadalajara, for example, are on the high central plateau, where the weather is springlike all year round. Temperatures in Guadalajara vary between 57 degrees Fahrenheit and 88 degrees Fahrenheit in May and between 45 degrees Fahrenheit and 75 degrees Fahrenheit in January. Mexico City is at a higher altitude so temperatures are slightly lower. In Puerto Vallarta, on the other hand, daytime highs in the summer are usually in the mid-90s while nighttime lows may dip to the low 60s during the winter.
Rainfall varies substantially throughout the country. The southern coast-around Acapulco and Puerto Vallarta-is especially wet, with more than 10 inches of rain often falling in summer months. Summer is usually the wettest month in most other areas although the rainfall isn't as heavy.
Country code: 52
Two very informative web site addresses are:
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www.mexconnect.com. Most any answers to questions regarding legal matters, ownership rights, financial issues, taxes, buyer and seller regulations etc., can be found on this web site.
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www.internationalliving.com. This site is very much an “international” source of information, and with current developments in Mexico these days, there is much to find in this web site.
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Google: La Paz Real Estate! You’ll find over a millions links. Spend time on just the first few pages, you will find useful information. You will quickly see why we have the real bargains!
Have fun reading, and becoming informed. We can help you with further questions and answers. Fill out the information at our "Contact Us” page.
Baja Mexico Properties, LLC
Available Properties
8000 Square Foot Lots Available starting at $15,000.00
1 Acre Parcels (six lots) starting at $75,000.00
New homes under construction. Available soon!
New homes under construction. Available soon!
New homes under construction. Available soon!