Owning Property In Mexico : FIDEICOMISO OR BANK TRUST
Any foreigner or Mexican national can create a Fideicomiso (the equivalent to an American beneficial trust) through a Mexican bank in order to purchase real estate anywhere in Mexico, including the Restricted Zone. To do so, the buyer requests a Mexican bank of his/her choice to act as a trustee on his/her behalf.

The bank, as a matter of normal course, obtains the permit from the Ministry of Foreign Affairs to acquire the chosen property in trust. The Fideicomiso can be established for a maximum term of 50 years and can be automatically renewed for another 50 year period. During these periods you have the right to transfer the title to any other party, including a member of your family.

The bank becomes the legal owner of the property for the exclusive use of the buyer/beneficiary who has all the benefits of a direct owner, including the possibility of leasing or transferring his/her rights to the property to a third party or to a pre appointed heir. During this period, the foreigner is considered as a Mexican National. The trustee is responsible to the buyer beneficiary to ensure precise fulfillment of the trust, according to Mexican Law, assuming full technical, legal and administrative supervision in order to protect the interests of the buyer/beneficiary. Fideicomisos are not held by the trustee as an asset of the bank.

For practical purposes, even in unrestricted zones many foreigners and Mexican nationals, for the matter, prefer to hold their property under a Fideicomiso.

IS TITLE INSURANCE AVAILABLE?
As in other countries, Title Insurance is available through the Mexican escrow companies. Based on the title search, you can either obtain an "owners" or a "lenders" policy of title insurance, securing your investment in Mexico. Comprehensive Title Reports can be acquired on your potential investment in order that you find out who really owns the property you are interested in; the meters and boundaries; the encumbrances and the chain of title, etc. Investing requires knowledge and the more information you have the better your decisions will be. Therefore, if you are thinking about purchasing real estate, your first move, as with any other investment, should be the proper information regarding your potential investment.

THE PROPERTY IS OWNED THROUGH A TRUST. WHAT ARE THE LIMITS IF ANY ON WHAT I CAN DO WITH THIS  PROPERTY?
Beneficiaries are allowed to modify their property. Construction, in accordance to local zoning regulations, is permitted at the owner's expense. The Beneficiary has all of the benefits of a direct owner, including the ability to lease or transfer his/her rights to the property to a third party or a pre-appointed heir.

WHAT IS THE PERCENTAGE PAID FOR THE CLOSING COSTS?
Closing costs are paid by the Buyer and depend on the value of the property purchased. They include a transfer tax (ISAI) of 2% which goes to the Mexican government, an average of 2% for legal Notary fees, a registration fee of .05% of the assessed value of the property, fees for the tax certificate, title search fees and property appraisal, as well as miscellaneous office expenses.

 WHAT IS THE COST OF THE TRUST?
The normal annual trust fees are approximately $500.00 plus IVA. Costs to set up the trust varies by bank.

 WHAT IS THE PERCENTAGE AMOUNT OF PROPERTY TAXES?
Property taxes are very low here. The property tax, known as "predial" is a rate of .06% of the assessed value for private residences. Commercial properties will be assessed at a slightly higher rate. The assessed value is determined at the time of the sale. Historically, property taxes have always been low because they have never been perceived as a source of revenue for the government.

CAN MY PROPERTY BE USED AS A RENTAL?
Property that you purchase here in Mexico can be used as rental property, providing that you register with Hacienda (Mexico's federal tax agency), establish residency and obtain an FM3, and that you acquire permission from the Minister of Foreign Affairs to do so. The language in your trust must include this permission. A Mexican C.P.A. can advise you on these procedures. Please note that your property tax percentage may increase once it becomes “commercial”.

CAN I BUILD ON MY PROPERTY?
Yes, most property if it is located within a development will be subject to the CC&R's. A local building permit must be obtained and plans must be drawn and engineered by a licensed Mexican architect/ engineer.

US FINANCING
Until very recently buying property in Los Cabos was for cash buyers with some limited developer financing available. With the passing of NAFTA in 1993 there have been some changes. For the first time in Mexico financing is available through US mortgage companies. There are several mortgage companies offering financing, with differences in interest rates and terms. Century 21 can work with you to help you decide which one is the best for you. Please contact us for more information.