Investing in Mexico

Property prices are up in almost every market in our country. Overall, in the U.S., property prices have risen about 12.5 percent in the last year. And some of our U.S. markets have even increased as much as 20 percent in the same time period. Such markets include California, Florida, and Hawaii – coastline property in the U.S. is always a hot commodity, but not so for the average American investor.

Enter: Mexico. Our neighbor to the south offers thousands of miles of pristine coastline, property prices lower than the U.S. and Canada, lower property taxes and an open-armed government that encourages tourism and investment. No wonder North Americans are seeing 30 percent and higher appreciation over two years time in Mexico: basic laws of supply and demand dominate the Mexican resort/residential market just like anywhere else in the world.

Yet, there are many myths, untruths and rumors surrounding ownership of property in Mexico that continue to perpetuate.

MYTH #1: Americans can’t really own property in Mexico.

MYTH #2: You have to have a Mexican partner to own in Mexico.

MYTH #3: Americans can lease land in Mexico, but they cannot own it.

MYTH #4: The Mexican government can take your land away.

It’s time to wake up and smell the margaritas! Nothing could be farther from the truth. It is estimated that 300,000 to 500,000 Americans and Canadians spend more than six months each year in Mexico. Many of these myths stem from laws that were once on the books but are no more. It’s just a matter of getting to the facts.

FACT #1: You (and any other foreigners) absolutely can own property outright in most of Mexico, with fee simple title, the same as we have here in the U.S. In the restricted zone – 50 kilometers from the ocean and 100 kilometers from the borders – the use of a Fideicomiso (bank trust) is required to own property. North Americans have the same rights and responsibilities of ownership in Mexico as they do in North America.

FACT #2: You don’t need a Mexican partner to own in Mexico. Once upon a time, a partnership or corporation had to have a Mexican partner or partners who owned at least 51 percent interest. Twelve years ago the new Foreign Investment Law of 1993 came along, allowing that a corporation could be 100 percent owned by foreigners, and the corporation can buy and own any non-residential property, just like in the U.S. or Canada.

FACT #3: Leases are not the way to hold property in Mexico. Prior to 1971, the Fideicomiso was not available, and leasing was the only way for Americans to hold property. Today, with title insurance available, a buyer wouldn’t confuse a lease with true ownership.

FACT #4: The Mexican government can not take your property away from you, any more than the American government can take property away from a foreign owner. To protect you further, title insurance is available, from the same large companies that cover your American properties, to cover your Mexican property.

There is a lot to consider when buying property in Mexico, just as there is when buying property in the U.S. or Canada. While we are following laws taken off the books decades ago, many other people we know are enjoying a beautiful seafront vacation home and double digit appreciation while they drink their margaritas.