Home Investing in Mexico Land in Mexico – A Quick Guide for Buying

Land in Mexico – A Quick Guide for Buying

by Alice Genes

The first thing you may want to know about buying land in Mexico is that Mexican law prohibits “in principle” all foreign ownership of real estate property (land, houses etc.) that is situated less than 100 kms from the border and 50 kms from the coast. This is enshrined in the 1917 constitution and the law is a historic one, with roots in the American-Mexican conflicts from the 19th century. With that being said, you should not panic, as Mexico could not afford the thousands of beautiful holiday houses, apartments and other luxury bungalows if they could not legally be purchased by foreigners. This is where a “fideicomiso” comes in place for making buying land in Mexico as a foreigner legal.

The fideicomiso is the equivalent of “trust” in American English, i.e. a notarized contract in which it is possible to integrate four wills on all kinds of subjects concerning heirs or simply the conditions under which you want your assets to be managed before death. In the case of real estate, there is a notarized contract between a legal person and a bank that “officially” owns the property but acts according to your wishes. The cost is relatively low, up to 5000 pesos and the fideicomiso is revocable at any time.

To be clear from the beginning, buying land in Mexico may seem expensive for residents, but it is general a very good deal for foreigners who are favoured by the exchange rate. As for areas, the Pacific  is generally much more accessible than outside PuertoVallarta and Riviera Maya. Now with the crisis it is possible to negotiate with property dealers and especially because of the nine manufacturers borrow to build and need cash. This is also available for land purchases.

Credits in Mexico are still quite expensive in pesos, with an interest rate between 10 and 12% per year, but it is possible to borrow in dollars at lower rates (6.5% or 5%). In fact, all depends on your situation and your anticipation of the exchange rate. Of course you’re not going to commit if you do not have the means, but an alternative is to borrow in pesos if you have your income in USD if you anticipate a continued devaluation of the peso. Indeed, if the peso loses 10% per year, your credit will be free. However, you would need the advice of a specialist if you are not a financial expert.

Besides the issues arising from the Mexican legislation regarding properties, there are some other things that should be taken into account when considering buying land in Mexico. You should ask yourself whether it is worthwhile to buy land as opposed to already built properties. Depending on the type of property you are interested in, you should consider your choices carefully. For instance, if you are interested in a retirement or holiday home with beachfront views, you may find out that your preferred area simply does not have a high enough number of properties that you may consider. One of these examples is Cancun, a very sought-after area that only has a few communities near beachfront areas and in this case, buying a lot and having a house built makes sense.

Another reason for which you may want to think about buying land in Mexico is the fact that you may have a specific design in mind. It is a known fact that beachfront houses in Mexico tend to be more and more expensive, especially if they are custom-built. By simply purchasing a lot and designing the house of your dreams you can decrease the total costs of the property and moreover, enjoy the house of your dreams exactly as you’ve wanted it to be. Buying land in Mexico can also turn out into a profitable investment for those who are interested in building for commercial purposes. The growing economy of the country means that a large variety of business investment is available and a careful business plan may turn out to be extremely profitable in the long-run.

On the whole, buying land in Mexico does not have any major pitfalls. The thriving tourism industry of the country makes it possible for lots to become more and more valuable over time, which means you are less likely to make a bad investment. Make sure you contact an experienced agent before making a land purchase in Mexico in order to make sure your investment is protected.




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