I am travelling to Mexico next week to complete my research for an investment in Tulum.
You have been extremely helpful on other post gathering a ton of info for which I thank you ( thank you Mike).
Now it's time to go there and see and visit a few locations and developments, compare and hopefully decide.
Now, I haven't been able to find reliable information about taxation on rentals for non residents or alternative channels for the investments.
Alm I read is that , as a a non resident individual, rental incomes are taxes at 25% with no possible deduction.
I dont know if it is possible to simply declare your taxes locally with corresponding deductions and what requirements you would need ti be able to register locally.
Second option would be to create a Mexican company and this would be the vehicle to buy the property.
Again , I don't know whether this could be a better option for a sole property. I'm thinking long term, minimum 10-15 years.
First option has the Fideicomiso costs, both issuance and maintenance. Second has the costs of creating a Company in Mexico plus the services of a local accountant or Tax advisor.
Furthermore, a company will certainly be able to consider deductions over the Income.
I wonder if you could share your experiences and advice in these regards and I'd very much appreciate if you could share the contact of some local reliable Accountant/ Tax advisor.
I'm certain I need proffesional advice on this topic.
I don't know anything regarding that specific development and had a look. Do you have any information about the developer because I can't find any anywhere and it's very important to know whether you can trust them. I wasn't very impressed with Max Properties when browsing through their website, to say the least. First of all, in the English version, only the title is in English and the rest is in Spanish. Then, when I click on that specific development, I can't get any additional info and the renderings are those of a development in Cozumel. That doesn't inspire any confidence as far as I'm concerned.
Having looked at it, one of my closest contacts on the ground suggests it's fishy. It was my first reaction too after seeing the price. Don't get me wrong. I've warned buyers many times in the forums against overpaying so I like lower prices and that's what I intend to provide when I sell anything (at equivalent quality). A low price is great provided that there is an explanation for it. That explanation shouldn't be either of the following in my opinion: a) bad/low quality, b) scam, c) the developer doesn't know what he's doing or d) they can't sell and are desperate. These are some obvious reasons but there could be other ones.
Finally, assuming everything is legit, I don't like the large size of the development. While these have their place in a city like Playa del Carmen, I don't think they're very Tulum and I suspect they'll be less favoured by renters, which wouldn't be optimal given the number of people with similar units.While we know of plenty of boutique projects that have been successful, the success of such large projects with renters (and resale buyers) in Tulum is unproven as far as I know.
2. When it comes to the units for sale and for rent, it's important to put things into context to understand and appreciate what's going on. This is the explanation for all the construction going on
In 1969, Cancun was merely a coconut plantation. The Mexican government then decided to create one of the biggest tourist destination in the world through massive public investment (through its Fonatur arm) and (foreign) private investment. They pulled it off through best-in-class infrastructure and hotels and direct flights from all over the world to fill them. Today Cancun's population is almost 900,000. Then, they did the same with Playa del Carmen, which was transformed from a small fishing village into an international cosmopolitan beach city with a population of around 300,000 today! More recently, the path of progress has reached Tulum, which now still only has a population of 46,000. While the Mexican government and Fonatur are encouraging the construction activity, they're not letting the developers, buyers and investors high and dry. They're still investing massively in the area to bring more tourists, as evidenced by the mammoth high-speed Mayan train project and the upcoming Tulum international Airport.
Will Fonatur pull it off again? They've done it in Cancun, Playa del Carmen, Puerto Vallarta, the Riviera Nayarit, the Cabo area and the others where they have invested but, of course, nobody has a crystal ball and there are no guarantees of success in any investment opportunity.
I'm a conservative investor so I've always been suggesting to buyers/investors to avoid getting in a position to need that massive upside to make money so that they almost don't have to care. How? By buying the right properties at the right price without overpaying, you will be in a superior competitive position if you ever have to compete on price, as you'll still be able to make good returns when others cannot. It's basically the same as buying/investing anywhere else. By buying right, you're less dependent on what the market does and you can do well in any circumstances.
Finally, thank you for asking about our own developments. We're going to launch soon but it's neither allowed nor ethical for me to talk about it in the forum as it could be seen as a form of selling and I intend to hold that line. If I'm not mistaken, you DMed me about it and have been added my email list anyway.
The general advice is that you would go for the trust if you buy a single property given the costs and admin of using a Mexican corporation.
You cannot pay taxes as a local if you're not a resident of Mexico for tax purposes.
If you use a corporation, you could have deductions and pay your taxes later. People who use a corporation could try to evade taxes. For that reason, there has been talk of an impending tax reform to crack down on the use of corporations. Corporations are meant for a business and what you're doing is an investment so the talk is that they'll impose the withholding tax on "fake" corporations that don't generate enough income. If they do that, that'll most likely apply to you with a single rental unit and you'll have to pay the same taxes as with the trust + you'll have the additional costs to pay and admin to do.
Also, even if Mexico allowed you to have deductions, you'd have to pay the differences between your German and Mexican taxes (assuming the German taxes are higher). So, provided that there is a treaty for the avoidance of double taxation between the two countries, the higher your Mexican taxes, the lower your German taxes so it's not that bad if you think about it.
Bear in mind that I'm neither a tax advisor nor a lawyer.
The general advice is that you would go for the trust if you buy a single property given the costs and admin of using a Mexican corporation.
You cannot pay taxes as a local if you're not a resident of Mexico for tax purposes.
If you use a corporation, you could have deductions and pay your taxes later. People who use a corporation could try to evade taxes. For that reason, there has been talk of an impending tax reform to crack down on the use of corporations. Corporations are meant for a business and what you're doing is an investment so the talk is that they'll impose the withholding tax on "fake" corporations that don't generate enough income. If they do that, that'll most likely apply to you with a single rental unit and you'll have to pay the same taxes as with the trust + you'll have the additional costs to pay and admin to do.
Also, even if Mexico allowed you to have deductions, you'd have to pay the differences between your German and Mexican taxes (assuming the German taxes are higher). So, provided that there is a treaty for the avoidance of double taxation between the two countries, the higher your Mexican taxes, the lower your German taxes so it's not that bad if you think about it.
Bear in mind that I'm neither a tax advisor nor a lawyer.
Hi Mike,
Ive been out for some time but Thank you very much for your reply.
Your point about possible upcoming regulations on purpose created corporations is interesting and unfortunately sounds feasible.
Im going to talk with a couple of Legal advisors about it.
Today Im travelling back to Europe after 8 days in Tulum. Ive had the chance to look at a couple of showrooms and presale opportunities.
At the end, I have narrowed it down to a pre construction in Aldea Zama: Parques Zama II
I have an offer for a 2 bedroom with lock off con 100m2 for 165000 usd.
Its not exclusive or luxury but its got most of the usual amenities: rooftop pools, gym, coworking, bar and even a cinema. Its a 112 Units development located next to the commercial area.
Do you know this development?
Its commercialized by Maxproperties.
Now Im doing my research about situation of shirt and long term rentals in Tulum and I ve got a bit off about the number of properties on sale and rent.
Though my investment is long term, it still should pay for the financing (50% ) so Im hesitating.
I don't know anything regarding that specific development and had a look. Do you have any information about the developer because I can't find any anywhere and it's very important to know whether you can trust them. I wasn't very impressed with Max Properties when browsing through their website, to say the least. First of all, in the English version, only the title is in English and the rest is in Spanish. Then, when I click on that specific development, I can't get any additional info and the renderings are those of a development in Cozumel. That doesn't inspire any confidence as far as I'm concerned.
Having looked at it, one of my closest contacts on the ground suggests it's fishy. It was my first reaction too after seeing the price. Don't get me wrong. I've warned buyers many times in the forums against overpaying so I like lower prices and that's what I intend to provide when I sell anything (at equivalent quality). A low price is great provided that there is an explanation for it. That explanation shouldn't be either of the following in my opinion: a) bad/low quality, b) scam, c) the developer doesn't know what he's doing or d) they can't sell and are desperate. These are some obvious reasons but there could be other ones.
Finally, assuming everything is legit, I don't like the large size of the development. While these have their place in a city like Playa del Carmen, I don't think they're very Tulum and I suspect they'll be less favoured by renters, which wouldn't be optimal given the number of people with similar units.While we know of plenty of boutique projects that have been successful, the success of such large projects with renters (and resale buyers) in Tulum is unproven as far as I know.
2. When it comes to the units for sale and for rent, it's important to put things into context to understand and appreciate what's going on. This is the explanation for all the construction going on
In 1969, Cancun was merely a coconut plantation. The Mexican government then decided to create one of the biggest tourist destination in the world through massive public investment (through its Fonatur arm) and (foreign) private investment. They pulled it off through best-in-class infrastructure and hotels and direct flights from all over the world to fill them. Today Cancun's population is almost 900,000. Then, they did the same with Playa del Carmen, which was transformed from a small fishing village into an international cosmopolitan beach city with a population of around 300,000 today! More recently, the path of progress has reached Tulum, which now still only has a population of 46,000. While the Mexican government and Fonatur are encouraging the construction activity, they're not letting the developers, buyers and investors high and dry. They're still investing massively in the area to bring more tourists, as evidenced by the mammoth high-speed Mayan train project and the upcoming Tulum international Airport.
Will Fonatur pull it off again? They've done it in Cancun, Playa del Carmen, Puerto Vallarta, the Riviera Nayarit, the Cabo area and the others where they have invested but, of course, nobody has a crystal ball and there are no guarantees of success in any investment opportunity.
I'm a conservative investor so I've always been suggesting to buyers/investors to avoid getting in a position to need that massive upside to make money so that they almost don't have to care. How? By buying the right properties at the right price without overpaying, you will be in a superior competitive position if you ever have to compete on price, as you'll still be able to make good returns when others cannot. It's basically the same as buying/investing anywhere else. By buying right, you're less dependent on what the market does and you can do well in any circumstances.
Finally, thank you for asking about our own developments. We're going to launch soon but it's neither allowed nor ethical for me to talk about it in the forum as it could be seen as a form of selling and I intend to hold that line. If I'm not mistaken, you DMed me about it and have been added my email list anyway.
I am travelling to Mexico next week to complete my research for an investment in Tulum.
You have been extremely helpful on other post gathering a ton of info for which I thank you ( thank you Mike).
Now it's time to go there and see and visit a few locations and developments, compare and hopefully decide.
Now, I haven't been able to find reliable information about taxation on rentals for non residents or alternative channels for the investments.
Alm I read is that , as a a non resident individual, rental incomes are taxes at 25% with no possible deduction.
I dont know if it is possible to simply declare your taxes locally with corresponding deductions and what requirements you would need ti be able to register locally.
Second option would be to create a Mexican company and this would be the vehicle to buy the property.
Again , I don't know whether this could be a better option for a sole property. I'm thinking long term, minimum 10-15 years.
First option has the Fideicomiso costs, both issuance and maintenance. Second has the costs of creating a Company in Mexico plus the services of a local accountant or Tax advisor.
Furthermore, a company will certainly be able to consider deductions over the Income.
I wonder if you could share your experiences and advice in these regards and I'd very much appreciate if you could share the contact of some local reliable Accountant/ Tax advisor.
I'm certain I need proffesional advice on this topic.
Thanks in advance and greetings from Munich
@Javier Sequeros You'll definitely want to speak with a local law firm in Mexico that specializes in Mexican real estate law.
What a coincidence that we visited Tulum during the same week!!!
It would have been great to meet on the ground!!!
As per the development I was talking about, Developer is called Alsadi and they seem to have several developments already built in Tulum : Tikal, Coba, Zama Towers Zama Premium Village, Balance Aldea Zama premium, Kaan in Aldea Zama.
I visited a finished Unit at Coba development and it looked very good though this was clearly set at a higher price point and higher expected quality too.
The local realtor (an Italian lady from TheAgency) told us that Developer is well known and send me their CV (I can share it with you if you share your email).
So I wanted to think this is all legit but your comments are very appreciated and I'll need to be careful.
Is the price point to comparably low?
They are making 10% friends and family discount and We added 4% more with higher advanced payment.
As per the size of development, I get your point. I want to think that this should redund into lower HOA in the future with more units to share. Also, the fact that they ll have 25 commercial space at the ground floor already committed to shops, restaurants, a gym , etc.
I don't know these people so I can't really tell whether they're legit. Mind you, I know of a legit developer who had a good track record but 3 or 5 years extra (I don't remember which one exactly) to finish a project because they weren't fully sold and run out of money so, yes, it's always a good idea to be careful.
Regarding the size of the project, it isn't necessarily the case that a larger project will have lower HOA fees because the cost of the amenities is going to be spread between more condos. Indeed, a larger project oftentimes means more or bigger amenities.
Hola @Javier Sequeros - Did you end up buying something in Tulum? I own a few properties there and a property management company. Happy to answer any questions you have or share my experience. Regarding taxes, my approach has been to use trustworthy accountants to manage taxes on my behalf. Personally, I hold my properties in fideicomisos/trusts.This is the approach that makes sense for most foreigners, depending on how many properties you hold and if you live and have deductible expenses in Mexico.