Foreign to Foreign Exchanges:
Real Estate Opportunities:
Mexico's Real Estate Market is Heating Up
Did you know Mexico allows foreigners to legally own property in their country?
Since the Omnibus Budget Reconciliation Act of 1989, US taxpayers have been permitted to exchange foreign property for foreign property. In Mexico, foreigners are permitted to own property located anywhere in the country including property located in what are called “restricted zones.” Restricted zones are strips of land located within 100 kilometers (about 62 miles) of the Mexican border and within 50 kilometers (about 31 miles) of any Mexican coastline.
More than 1 million Americans already live in Mexico and record numbers of baby-boomers are expected join them over the next 20 years. According to the Mexican government, foreign investment into Mexico is on track to hit $20 billion this year; that’s up almost $4 million from last year. Properties in resort areas are especially hot - in some remote locations, property purchased for $60,000 just four years is worth nearly $300,000 today.
Driving up interest and investment in Mexico is the construction of a four-lane public highway that will line the coast of the Mexican state of Sonora. This 375-mile highway will saunter down Mexico’s coastline from California to as far south as Guaymas, opening up Mexico to California’s marketplace and providing foreigners better access to two of Sonora’s biggest tourist hot spots: Puerto Peñasco (known to most Americans as Rocky Point) and San Carlos.
So...how do you purchase land in Mexico?
Americans and other foreigners can obtain direct ownership of
property in the interior of Mexico. However, purchasing property in the restricted zones is a little more complicated. To permit foreign investment in restricted zones, the Mexican government requires buyers to use a “fideicomiso,” which, roughly translated, means a real estate trust. Essentially, this type of trust is similar to trusts set up in the United States, but a Mexican bank must be designated as the trustee, hold title to the property and is the owner of record. By using a “fideicomiso,” foreign buyers are designated as beneficiaries of the bank trusts and can enjoy unrestricted use of the property without violating the law.
How safe is your purchase in Mexico?
Provided the proper procedures were followed and the title was taken in the proper manner, a sound, viable title is obtainable. Although the concept of “eminent domain” does exist in Mexico, so does the concept of private property. The government cannot take away your real property without just cause.
A US investor should always consult with an experienced, local attorney when buying property in Mexico. A local attorney is necessary to create the transaction and exchange documentation in both English and Spanish. Local real estate companies often offer title insurance, but hiring a well-connected lawyer is a very useful source for accurate information about the local real estate environment. It is recommended that buyers never hire a lawyer recommended by the seller because the buyer won’t know where that attorney’s interests lie.
MEGA 1031’s Mexico and Latin America affiliate, Vernon Penner, has practiced law in Mexico for three decades. Mr. Penner is an attorney licensed exclusively in Mexico, specializing in Mexican real estate, business consulting to Latin American and foreign investment matters. He is the founder of Penner & Associates with offices in Phoenix, Arizona, San Miquel de Allenda and correspondent offices in Mexico City.
For more information about purchasing property in Mexico, visit Mr. Penner’s website at www.mexicolaw.com or click one of the following links for more information:
- Participants Involved in Mexico Real Estate Transactions
- Mexico Real Estate Title Process
- ABC’s of Real Estate Transactions in Mexico
- Buying Mexico Real Estate FAQ
PENNER & ASSOCIATES 
Tel: (623) 242-7442
Fax: ( 623) 937-7787
P.O. Box 42773
Phoenix , Arizona 85080
VP@MEXICOLAW.COM
Additional Mexico Information
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