Fideicomiso…what exactly is it?

When it comes to real estate, Mexico is famous for two things. Amazing prices for beachfront property, and the fideicomiso. Many foreigners have heard that it isnt possible to outright own property in Mexico,, and offer up tales of 99 year leases laden with confusion. While that is definitely not the truth, there is importance to understanding the fideicomiso component of real estate in Mexico.

When a foreign buyer wishes to buy property in the federal “restricted zone”, it is necessary to use a fideicomiso. The restricted zone includes any property within 64 miles of an international border, as well as any property within 32 miles from a coast line. As a Puerto Vallarta and Bay of Banderas real estate agent, the vast majority of sales I broker are coastal properties which fall into this category.. The point of the fideicomiso or “real estate trust” is to comply with Mexican federal law which states that if a foreigner wishes to own beach property, the deed to the home must be held by a Mexican bank  wherein the bank acts as a trustee by holding the deed for the purchaser, who retains all legal rights of ownership. There are no downsides to this except for maybe the fact that you have to pay around $500 USD a year for your trust fees to the bank that holds your deed. Buyers often ask me wide eyed if the “Mexican government can revoke my property if they like”? Absolutely not!! You are still the rightful owner of your property and can not be stripped of it. The bank will be responsible for the ownership of the land, but that’s about it. The use, administration, maintenance, civil responsibility, rental income, mortgage loans, and income from its sale, belongs exclusively to the trustee. The trust institution makes very clear that they have no responsibility to the property and trustees can do pretty much whatever they want with it.

In fact, there are definite advantages to having your property in trust. It automatically includes a beneficiary which is a nice way for you to leave your property to a child or other beneficiary without having to reestablish a new trust. In the deed, you designate beneficiaries who inherit the trust upon your death by presenting a death certificate and a simple letter. Another benefit is that nobody can put a lien of your lot, simply because it is not in your name, so your legal/economic issues won’t affect the property. But that the biggest advantage is that, if the property qualifies and the trustee gets resident status, at the time of sale, the seller (trustee) can exempt 100% of the ISR tax (capital gains) up to a selling price of $3,800,000 MXN.

http://www.boardwalkrealty.com

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