Mexico’s one of the top destinations for foreign real estate investors and retirees, and for very good reason: the cost of living is lower than in countries like the United States and Canada, the beaches are beautiful, and the people are always friendly!
But if you're thinking of buying property in Mexico as a foreigner, chances are you'll come across the term "fideicomiso" at some point.
Don’t worry, it’s much simpler than it sounds. In fact, a fideicomiso, or bank trust, is actually quite easy to obtain. In this article, we’ll go over exactly what you need to know about it to buy a property in Mexico.
What is a Fideicomiso?
A fideicomiso is the Spanish word for a specific type of trust, which is established by a Mexican bank and allows foreigners to purchase property within the restricted zone, which includes any land within 50 kilometers (31 miles) of the coast and 100 kilometers (62 miles) of any Mexican border.
The bank acts as trustee and as an intermediary between the buyer and the seller of the property. This allows expats to buy homes located in the restricted zone of Mexico with all the rights of a Mexican citizen.
The trust is renewable every 50 years. The bank retains ownership of the property, but you, as the buyer, are designated as the primary beneficiary and can use or modify it as you want. Additionally, you can rent or sell it and receive 100% of the profits. In short, you can make use of the property as you wish!
Setting up a trust is a fairly straightforward process. Once you have found the perfect property in Mexico, your real estate agent can help you apply.
How Does a Bank Trust Work?
A bank trust works by having a Mexican bank act as trustee. Through this method, the bank buys the property on your behalf, creating a fiduciary relationship with you, the beneficiary, meaning that they must always act in your best interest.
It’s important to note that bank trusts aren’t assets that are recorded on the bank's books, and banks cannot take any action without receiving written instructions from the beneficiary of the trust. If the bank fails, the trust is easily transferred to another bank, so there’s no risk posed to you.
What are the Pros of Using a Trust?
Some of the benefits that come when using a fideicomiso to buy a property in Mexico include:
- It allows expats to buy properties within the restricted zone (you can buy a house in one of the many beautiful beach destinations in Mexico!)
- It gives foreigners the same rights as Mexican citizens when it comes to owning property. This means you can buy, sell, rent, or modify it.
- The trust can be used to purchase multiple properties in the country.
- In the case of your passing, you can designate the rights to pass on to whomever you choose.
- It can be renewed every 50 years.
- It also makes it easier to sell to another foreign buyer if you choose to do so, simply by going through a name-changing process in the trust.
Are There Any Cons to Using a Trust?
There are not really inconveniences, but rather aspects that you should keep in mind:
- There’s a fee that you must cover to establish a trust. The amount can vary between $500 and $1,000 USD (depending on the bank).
- There are also annual maintenance fees, which are usually between $1,500 and $2,000 USD. These amounts may increase over time.
- Finally, as mentioned above, the foreigner is not the direct owner of the property. They are the beneficiary of the bank, who’s the one that holds the title to the property.
How to Get a Bank Trust to Buy a Home in Mexico
Once you find the property you want to buy in the country, creating a trust is relatively simple:
- Hire a lawyer to guide you through the trust creation process. He will help you coordinate everything with the bank that will be in charge of giving you all the necessary paperwork to create the trust.
- You’ll have to provide the bank with personal information and details of the property (or properties) you want to buy.
- Once the trust is approved, you’ll have to pay the associated fees with its creation: establishment fee, legal fee, and 1 year of payments in advance. The total cost of these can vary between $1,500 and $2,500 USD. Thereafter, the annual maintenance fee ranges from $1,500 to $2,000 USD.
- The bank will work with you, the seller, and the attorneys to establish legal title to the property in the trust.
- Once the process is complete, you’ll receive irrevocable property rights to the land or home you just bought!
Are You Ready to Buy your Next Beach House?
At Tao México, we’re experts in real estate in Mexico and have luxury developments in the top beach destinations in the country, such as Los Cabos, Puerto Vallarta, and the Riviera Maya.
Our agents are ready to help you find the perfect property for you, all according to your needs, tastes, and budget, and will guide you through the entire purchase process, including the establishment of the trust.
Get in touch with us, we would love to meet you and help you make the best real estate investment in Mexico!