How to Buy Real Estate in Mexico as a Foreigner

The US-China trade war has vaulted Mexico far past China as a U.S. trading partner, and as global companies seek to diversify their supply chains, Mexico offers proximity to U.S. markets, modern infrastructure, access to ports for global distribution and a highly skilled, well-educated workforce.

Mexico’s USD1.3 trillion economy is the second-largest in Latin America and the 15th-largest in the world, and Mexico ranked number one among U.S. trading partners in 2019 with a bilateral trade value of USD614.5 billion as well as USD144 billion in bilateral, reciprocal foreign direct investment (FDI). It is the first or second-largest export destination for the business communities of 27 U.S. states.

For American companies, in other words, Mexico is open for business.

We have clients who are buying real estate in Mexico to support manufacturing and distribution operations, and we have clients who are interested also in buying real estate for personal use, either as primary residences or vacation homes. Another group of clients is buying real estate in Mexico for its investment value, because they are persuaded of the market’s long-term prospects.

Mexico Real Estate Market Snapshot

For investors, the large and growing Mexican middle class, in combination with recent and ongoing improvements in infrastructure, provide a strong foundation for growth. For retirees and vacationers, attractive property prices, recent U.S. dollar strength versus the peso, along with the comparatively low cost of living and tax rates make Mexican real estate very appealing.

Costs of high-end real estate in Mexico City are significantly lower than in other major cities around the world, and infrastructure and services – in those areas frequently chosen by foreigners to live in, at least – are high quality. The same is true of the real estate markets in Mexican beach destinations such as Los Cabos, Ixtapa, Ensenada, Vallarta, Mazatlán and the Riviera Maya.

Another important factor in market growth, of course, is lower interest rates, which have created liquidity and provided opportunities for potential buyers.

Mexico’s Regulatory Framework for Real Estate

While historical restrictions on foreigners purchasing real estate have been mostly eliminated, a few traces of past systems remain, and in certain “restricted zones” purchase is only possible through a bank trust or a Mexican corporation. The restricted zones that affect most foreign property purchasers are the strip of land up to 100 kilometers from Mexico’s borders and within 50 kilometers of its coasts/beaches. Purchasing property within those zones is possible, but must be done, as mentioned before, through a bank trust or a Mexican corporation.

This bank trust, called a fideicomiso, is authorized by the Ministry of Foreign Affairs, and although the system is relatively safe, it rests on the credibility of Mexico’s banking system and property registry administration, which unfortunately discourages many foreigners.

For those who do proceed, while the trustee is the legal owner of the real estate, the beneficiary retains all ownership rights and responsibilities and may sell, lease, mortgage, and pass the property on to heirs. Properties held in trust are not considered assets of the bank.

In purchasing real estate in Mexico (and anywhere), it is crucial to conduct a title search to identify chain of title and to confirm that the property is free of liens or encumbrances, as well as to be able to provide the same reassurances to a potential buyer if/when the time comes to sell the property.

Finally, it is important to point out the role Notaries Public play in transaction closing. Unlike other jurisdictions, in Mexico a Notary Public is not a mere certifier, but an attestor before whom, by law, a transfer of property ownership is verified and formalized. The Property Deed, issued by the Notary Public and duly registered at the Public Property Registry, is what legally allows owners to claim legal ownership of their properties before third parties.

Additional considerations

In addition to conducting a title search, it is important to be thorough in completing and collecting all the paperwork involved in a real estate transaction. The time you invest up front will pay dividends if/when you decide to sell.

It possibly goes without saying, but I will say it anyway: a good understanding of the Spanish language is important in navigating the real estate purchase process, especially in dealing with government agencies and service providers. This is even more true in smaller communities. If you are not fluent in Spanish, you will want to enlist the help of a Spanish-fluent friend or trusted colleague. In my experience, you can expect a transaction to take 8-12 months to complete, from start to finish.

Professional representation

As I would with any large financial transaction, I recommend retaining expert counsel to support you throughout the purchase process. This is all the more important if you have your life savings on the line, as often happens with these transactions.

You will need a trusted guide who can help you navigate Mexico’s legal system, tax code and bureaucracy, and who can advise you on local contexts, especially when you’re doing business with companies and individuals that are operating in their native cultures and legal systems.

As an example, in addition to handling the legal aspects of their real estate transactions, we often also end up connecting our clients with our network of top local realtors, bankers, and architects. We also assist them in navigating the Mexican bureaucracy, closing transactions successfully in front of Mexican Notaries Public, and in registering title.

The factors driving the appeal of the Mexico real estate market are unlikely to change dramatically in the near future. For business people, investors, retirees and vacationers thinking about acquiring property, Mexico is an attractive destination.