Buying Real Estate in Playa del Carmen and All Riviera Maya, Mexico.
YES as a foreigner you can own real estate in Playa del Carmen and all Riviera Maya, Mexico.
It does not matter what country you currently live in, Playa del Carmen and all Riviera Maya Mexico is a great place to own real estate.
Riviera Maya Mexico boasts great climate, great food, beautiful people, and wonderful culture of Mayan History. As well as all that, investing in real estate in Playa del Carmen is a great lifestyle investment because of its hip city vibe, with pedestrian only 5th avenue so close to the beach lined with Euro style shops cafes and outdoor restaurants. No other city in the world offers this. The draw of buying real estate in Playa del Carmen with amenity-rich developments all at lower prices of what you'd pay for comparable property in the U.S. or Canada make it the ideal place to own a vacation or retirement home or a condo. Strong world wide demand to rent and vacation here produce strong rental income on investment and vacation properties in Playa del Carmen.
NO you don't need be a resident of Mexico to own property here in Playa del Carmen or all Riviera Maya.
You could choose to use residency status later when you sell. BUYING real estate in Playa del Carmen it is NOT a requirement.
Foreigners own real estate within 100 kms of borders and 50 km of the beaches, such as Playa del Carmen and All Riviera Maya, Mexico
CALL US NOW FOR MORE INFO : 1 760 994 1716 Direct / +521 984 116 3251 MX CELL
THE MEXICAN “TRUST” OR FIDEICOMISO
A trust is created with a Mexican bank and the title is submitted into the trust. The bank acts as a trustee in this case and the trust is formalized after receiving a permit from Mexico's Ministry of Foreign Affairs. The buyer is named as the beneficiary of the trust, and the beneficiary's rights are recorded by a notary public.
Banks charge around $2500 USD to set up the initial trust - which involves establishing the trust and writing the trust agreement. Then, a percentage of the value of the property is added on. As well, a small annual fee is charged by the bank to covers its services as trustee.
Within the trust deed, the current owner of the Mexican property acts as the settlor and conveys the title of the property to the trustee who will then hold the title for the life of the trust - 50 years, renewable in an indefinite amount of 50-year periods.
The trust may be transferred or sold like any interest in real estate. If the property in Mexico is sold to another foreigner, the Secretary Foreign Relations in Mexico must, by law, issue a new trust permit to the buyer. If the property in Mexico is sold to a Mexican national, the trust can be dissolved.
The History of Foreigners Owning Real Estate in Mexico
While foreigners were always allowed to own property in Mexico, there were restrictions. Previously, the Mexican constitution banned foreigners from owning property within 62 miles of any Mexican land border and 31 miles of any coastline. These areas are known as the "restricted zone." Yet most vacation properties were built on prime land that fell into these restricted zones.
Since these restrictions were written into the Mexican constitution, and could not be changed, the Mexican government created a way to work around the system called "fideicomiso" (pronounced: FEE-DAY-E-CO-ME-SO). Roughly translated, the word means "real estate trust." By placing property in this trust, foreigners are allowed to own property within the restricted zones.
In essence, the trusts holds the deed to the property, while the buyer, and others whom the buyer specifies, are beneficiaries of the trust (and, of course, the property). The beneficiary has full control over the property and can rent, sell, improve and even give the property away if they so choose.
Buying Property in Playa del Carmen and Riviera Maya.
Buying real estate in Riviera Maya is very similar to how one would buy property in the U.S. Lawyers, real estate agents, notary publics and banks all play a part in the buying process.
Required documents include a certificate indicating a title free and clear of any liens, statements from the local Mexican municipality outlining property assessments, water bills and other tax information, and finally a property appraisal to determine the property's value for tax purposes. It's common for the buyer of property in Mexico to pay all closing costs, including the transfer of acquisition tax. As in the U.S., the seller pays capital gains tax and real estate brokers' fees.
The transfer tax is typically between 1% and 4% of the property's appraised value - which is quite often less than the sale price. Closing costs (not including transfer tax) range from 3% to 5% of the appraised tax value. These percentages are applied to whichever is greatest:
- The property's sale price
- The official appraised value for taxes
- The value of the property as determined by the assessment authorities
THE MEXICAN NOTARIO (NOTARY PUBLIC)
Notary Publics in Mexico are first licensed attorneys in Mexico, then they apprentice in notary-ship law and practice with another notary public for a period of time, then pass a notary public examination and thereafter are appointed by the Governor of their state to act as a Notary Public in a given geographical location (a town, a district).
Notary Publics are invested with the "public faith" granted by government and can assert this Public Faith in reference to the existence of an event they witnessed, the existence of certain documents, the existence of official acts, the content of a contract, the signature of a party, and as well the due representation of an agent on behalf of a principal. As one can see, their authority is substantial.
The Notary Publics normally perform their duties either in the issuance of a Public Instrument ("Escritura Pública") that will contain that sought by the parties or they will affirm to the signature of a party that signs a document before them.
In cases where title of ownership of real estate is transferred, the Notary Publics are charged with the preparation of the title transfer document/contract (their own document or a draft given by the intervening parties that they will review and revise as needed) which takes the form of a Public Instrument and with the acquisition and attachment (to the Public Instrument file) of documentation evidencing the seller's ownership, any power of attorney (in the event of an agent acting on behalf of a principal), the certificate of non-encumbrance and title-holding from the corresponding Public Registry of Property, an affidavit of appraisal, non-debt of water, and non-debt of land taxes. As well, the Notary Public calculates the taxation and fees that will be payable to government agencies and collect them from the intervening parties and (when the parties so request) performs the registry of the new title at the corresponding Public Registry of Property.
THE CLOSING PROCEDURE
Once your offer of purchase and sale has been accepted, the closing process begins. In order to validate the Offer of Purchase and Sale, a deposit (normally 10% of the purchase price) is required. The money is held either by your attorney, Notario, real estate agent or placed in an escrow account. These funds are held during the time needed to close. The balance is payable upon the signing of the trust deed or deed at the office of the Notario. Most real estate agents have one or two Notarios with whom they usually deal. In order to obtain the trust deed or deed, the Notario will;
- Ensure the property is free of any liens and clear by checking the Land Registry Office- This is guaranteed by obtaining a non-lien certificate and tax statement from the treasury. Additional checks are made for outstanding utility bills andmunicipat taxes.
- Obtain a permit from the Minister of Foreign Affairs to establish the trust deed.
- Prepare all documents for both buyer and seller.
How long does the closing process take in Mexico?
In most cases a real estate transaction can be closed in 30 to 60 days for a cash transaction and 90 days for a transaction involving financing. However due to Mexican holidays, permit delays, Tustee Bank paperwork, etc., delays may occur. These delays are not considered defaults by buyer or seller as they are events beyond their control.
What type of fees can be expected when purchasing a property in Mexico?
Closing costs are determined by the declared value which is usually slightly lower than the sales value. In new constructions, the sales value and declared value should always be the same. This value becomes the basis for all related taxes and fees. Generally the seller pays the real estate fees and the buyer is responsible for the transfer tax and the cost of establishing the bank trust (if it isn´t already in existence from a previous owner), notary fees, registration fees, tax appraisal fees and trust permit fees. The buyer´s total closing costs average between 4% - 6% of the purchase price.
TITLE INSURANCE, WORTH EVERY PESO
Title insurance for property is the responsibility of the buyer and is highly recommended, just to be safe. The title insurance company in Mexico will research the title and make certain that it is free and clear. If the title is ever disputed in the future, the insurance company will defend, and advocate for, the buyer in court if necessary.
Rates typically costs between $5 and $7 per $1,000 of coverage depending on the insurance company and the value of the property.
FINANCING IN MEXICO
Between 2007 and 2012 mortgages in Mexico with Mexican banks were available for foreigners. In mid 2012 Mexican banks have stopped the usd based loan for foreigners and are not taking any more applications. Bancomer ( Compass Bank in US) and Scotiabank were the two major lenders in usd for properties in Mexico for foreigners. IN Jan 2012 Bancomer stopped their program and in April 2012 Scotiabank stopped taking new applications also. We are told that they will resume some time in the near future.
As of 2018 there are still no Mexican bank lending programs on the horizon.
There are limited sources of loans such as peso based bank loans, or private lenders.
Some owners will offer short term financing to buy real estate Playa del Carmen. Just ask me for options. However our market is mainl cash based which means you know how much you would like spend on your Playa del Carmen property, based on your assets in your home country.
CAPITAL GAINS IN MEXICO
Understanding Mexican tax law is an integral part of the purchasing process. What you do today dictates your tax liabilities tomorrow.
The following is an overview of the capital gains tax regulations currently in place for individuals. Note that the information is intended for individuals, not corporations.
Capital gains tax law in Mexico states that tax is owed on the profit you receive when you sell your home property.
Capital gains tax, called ISR in Mexico is governed by extensive and complex laws.
The info provided here is in no way extensive nor is meant to replace the advice of lawyer.
First and foremost it is important to understand that the Notario is the only personality that can assess and collect capital gains tax.
Tax is basically assessed from purchase price to sale price based on pesos value.
The tax can be up to 35% of the gain however there are many strategies to reduce this gain, depending on the notario and the specifics of the property being sold.
One of the benefits of working with our team at Living Riviera Maya is that we routinely provide the lowest capital gains tax assessment with our personally vetted and highly effective notarios and lawyers.
The key is understanding these laws before you buy, not when you decide to sell. We will make sure you are protected when you buy so you do not pay excessive capital gains tax when you sell.
PRIMARY RESIDENCE CAPITAL GAINS EXCLUSION
Mexico, as well as the U.S. and Canada provide for its residents and citizens a capital gains tax incentive for their primary home. The tax incentive in Mexico states that if you sell your “primary residence” there is a tax exemption allowed of capital gains, to a limit. This law is in place for “residents” of Mexico and Mexican citizens only, and there are several items required to claim your home as your primary residence in Mexico.
One must be able to prove residency status for 3 years in the property. At closing you will be required to provide the Notario with a residence visa, and your tax ID ( called an RFC) as well as water, phone and electric bills – all in your name- all with the address of the home. Please keep in mind that this is just a guideline of the requirements. It is necessary to consult with your attorney and the Notario prior to closing your transaction in order to know if you are eligible for the exemption.
FINDING A LAWYER
An attorney based in Mexico should be hired to write contracts and review all of the conditions and terms regarding the sale of property in Mexico. Also, the attorney is capable of doing a title search and point out any issues or areas of possible concern.
To protect their own best interests, buyers should have their own attorney and should be dissuaded from using the attorney of the seller simply because that lawyer's services were offered for free as an incentive.
All attorneys licensed in Mexico should be able to produc e a "cédula profesional" - a document signifying a registered license to practice law in the document includes a photo of the attorney and his signature.
To ensure an attorney is licensed to practice in Mexico, a foreign buyer should request to see the attorney's license, and have the attorney's license number added into any retainer agreement before employing any services.
LIVING YEAR ROUND IN MEXICO
If you've decided to purchase real estate and live in Mexico for more than six months at a time (or permanently) you must apply for your FM3 immigration papers.
The FM3 is very easy to obtain, and you can complete most of the paperwork on your own.
The FM3 grants you non-immigrant status. You apply for it through the local immigration office. The FM3 must be renewed on a regular basis.
After you've held your FM3 for a minimum of five years, you are eligible to apply for your FM2. The FM2 grants you immigrant status and is applied for at your local immigration office
NEED MORE INFORMATION?
If you have more questions about purchasing property in Playa del Carmen or Tulum or anywhere in Riviera Maya, Mexico, please contact Living Riviera Maya Real Estate. We have the knowledge, the contacts and the integrity to answer all your questions and handle your real estate needs. +1 760 994 1716.