Real Estate Investment in Mexico

12 Replies

Yes...I believe NOT within 50 miles of the coast or border.  Many use fideicomisos to get around this rule.   Not sure if that is a good way to do it or not, but lots and lots of people do it.   Biggest risk is potentially a change in government which then says fideicomisos are skirting the intention of the law and deemed illegal.   If I remember right about 20 years ago or so there was a big issue in Escondido in BCN.  Not sure if people lost their property or not.   If I remember right there have been similar schemes in Spain and/or Portugal where people did loose their property.  

Hi Brandon! Well I mostly do Lofts and apartments in beaches, also cabins but those are in the woods, far from the border and the coastline. I worry about the apartments on the beach. The developers doing these buildings have been doing it for awhile, so I guess they are aware of the situation, I justa wanted to get ahead in case a client asks. I’ve been in real estate for awhile now, but hadn’t worked in this particular area. @Brandon Goldsmith

There are no restrictions for foreigners to buy real estate in Mexico. However, if they want to buy within 32 miles of the coast or 62 miles from the international borders (which they do most of the time for obvious reasons), they have to own through a bank trust (fideicomiso) or a Mexican corporation. The great thing about the fideicomiso is that it gives you free asset protection given that the property is in the name of the bank, who, as trustee, has absolutely no power.

@Bruce Lynn

Properties in Spain or Portugal are freehold for nationals and foreigners alike. These stories are fake urban legends.

There is hardly chance that Mexico will do anything to the fideicomiso system, aside from allowing foreigners to own without them one day. It would have devastating consequences for the country's economy and they're not stupid. The current Mexican government is probably the most leftist government Mexico has had since the 1916 revolution. They have done absolutely nothing against foreign investment and they have no plans to do anything of that sort.

There have been stories going the round about people losing their property in Mexico, as in other countries. The Mexican government doesn't expropriate properties owned by foreigners in Mexico. What happens though is that uninformed foreigners buy ejido properties because they're cheaper. They're cheaper for one reason: they don't have a clear property title. I always tell people not to buy ejido property because they're running the risk to be expropriated. That's probably where your Escondido story falls. If, however, you buy a property with clear title, you're fine.

There are a lot of rumours and falsehoods that do the round about foreigners owning property in Mexico. They're invariably spread by people who have never invested in the country and don't know what they're talking about. My advice remain the same: if you want information about investing in Mexico, ask people who are doing it.

@Mike Lambert     You think governments and rules never change and everything is always safe?   That's irresponsible and maybe even fraudulent if you are telling your investors that.  Things do change.   Ask all the UK citizens who bought in Spain and are now no longer EU citizens.  What's the demand in Spain for UK citizens now and why has that dropped so much?   

Your first sentence says there are no restrictions for foreigners to buy in Mexico, but there clearly are restrictions, thus the 
Fideicomiso. It is specifically constructed to "get around" the restriction. So all you have to get is an Alexandria Ocasio-Cortez elected to Congress in Mexico and that whole system could fall apart. How big is that risk, who knows, could be small, but we don't know, but it is there. It is risky to do things anywhere where your intention is to "get around" the law and the intent of the law. Ask all the people who bought STR only to have cities come back in and prohibit STR around the world.

I have never purchased property in Mexico, but I have considered it many times, and still considering it.  I'm lucky my wife is Mexican/American so we don't have to use Fideicomiso, but there is risk to it.

@Bruce Lynn

Can you explain what difference it makes for a UK citizen to own property in Spain now that the UK has left the EU? I'm an ignorant EU citizen so I have no idea. Now, jokes aside, I personally know brokers in Spain and Portugal and I can tell you they're busy selling to British people hand over fist.

That interdiction of foreign ownership in the so-called forbidden zone comes from an old law which was enacted in order to limit the risk that Mexico would be invaded by foreigners. Now in the 21st century, the Mexican government probably realized that an American owning a piece of property in Cabo won't increase the risk of Mexico being invaded. So they came up with the fideicomiso, which is totally legal. Why didn't they repel that old law instead? I don't know. Maybe it was more complicated because it's in the constitution.

You wrote "Your first sentence says there are no restrictions for foreigners to buy in Mexico, but there clearly are restrictions, thus the Fideicomiso". Isn't that playing with words here. There are no restrictions. The law doesn't say that foreigners cannot own property in the forbidden zone. The law says that they can own property in the forbidden zone but it has to be through a fideicomiso or a corporation. Many US investors own US real estate through an LLC or a trust? Is that a problem? Are they not the beneficial owners of the property? So I stick to my guns. Foreign ownership isn't restricted. It's only the form of foreign ownership that's restricted. That's not the same thing and, who cares? I don't mind owning through a fideicomiso, which gives me almost free asset protection.

I never wrote or said to anyone that governments and rules never change and everything is always safe. I wrote above: "There is hardly chance that Mexico will do anything to the fideicomiso system, aside from allowing foreigners to own without them one day." Yes, governments and rules can change and that's why I wrote "there is hardly a chance" rather than "there is no chance".

AMLO is already more to the left than AOC. However, there's no guarantee that Mexico one day doesn't elect another Hugo Chavez, as there's no guarantee that the US doesn't one day do it either. Whether you own a property in Mexico through a fideicomiso or in your own name, it won't matter if the Mexican government one day decides to nationalize your property. Doing that would be suicidal to the Mexican economy and don't forget that Mexico is part of the USMCA so there would be dire consequences to Mexico and the Mexicans if they decide to go that route. the Mexican economy is heavily dependent on foreign investment. Also, Mexicans have seen what happened to Venezuela so I don't think they'd like their country transformed that way. Based on that, I think that thee use of the expression "it's hardly likely" was appropriate and it reflects my opinion, which you might not share, which is your best right.

You have responded previously to many posts in the international forum so you seem interested in doing that and you mentioned you have been considering in buying in Mexico. From what I understand, you might not have pulled the trigger yet but you're doing the right think by educating yourself and interacting on the forum. It seems to me that you might not have pulled the trigger because you're a pretty risk averse person, at least when it comes to international investing. This is understandable and people anyway have different levels of risk tolerance.

When people are looking at investing overseas, it's great having you pinpointing the potential risks to them on the one hand and I do that too. On the other hand though BiggerPockets is about taking action and only mentioning the negative doesn't help anyone acquiring the property of their dreams or making any money.

Having a Mexican wife, you have a bit of an advantage when it comes to buying property in Mexico. The risks that you see, whether real or perceived, aren't probably going to disappear tomorrow. Can't you however find solace in the thousands and thousands of fellow Americans who have bought property in Mexico through a fideicomiso or in their own name and haven't had any issue with them?

Buying property has risks. Investing in real estate has risks. But people are successful because they take calculated risks. And, at the end of the day, wouldn't you be happier buying a property in Mexico and enjoying it over the years rather than sit and wait and never see your fears materialize and having regrets that you didn't take action afterwards?

Originally posted by @Bruce Lynn :

@Mike Lambert     You think governments and rules never change and everything is always safe?   That's irresponsible and maybe even fraudulent if you are telling your investors that.  Things do change.   Ask all the UK citizens who bought in Spain and are now no longer EU citizens.  What's the demand in Spain for UK citizens now and why has that dropped so much?   

Your first sentence says there are no restrictions for foreigners to buy in Mexico, but there clearly are restrictions, thus the 
Fideicomiso. It is specifically constructed to "get around" the restriction. So all you have to get is an Alexandria Ocasio-Cortez elected to Congress in Mexico and that whole system could fall apart. How big is that risk, who knows, could be small, but we don't know, but it is there. It is risky to do things anywhere where your intention is to "get around" the law and the intent of the law. Ask all the people who bought STR only to have cities come back in and prohibit STR around the world.

I have never purchased property in Mexico, but I have considered it many times, and still considering it.  I'm lucky my wife is Mexican/American so we don't have to use Fideicomiso, but there is risk to it.

 I am not sure why you would call fideicomisos a way around the law. The way I understand, the Mexican government specifically created it as a way for foreigners to invest in Mexico. It is actually more of a way to work within the law. You could argue it is risky to buy property anywhere under the logic that politicians could change the rules. It seems the trend over time is for Mexico to loosen restrictions and encourage foreign investment, not the other way around. 

I would argue the insecurity of Mexico from a criminal standpoint and corruption is a greater risk to anyone owning property in Mexico. 

@Joe Splitrock

I totally agree with you when it comes to the fideicomiso and the loosening of restrictions although, of course things can always reverse course.

You bring a good point with the violence because you might think that it could be a problem when it comes to property ownership.

It would become a problem if it would affect the enjoyment of your property by you or your prospective renters. The fact is that the increase in violence in Mexico hasn't deterred tourists from coming and coming back to the country in ever greater numbers. Why? Because the victims of the violence are gang-and drug-related and it normally happens when tourists don't go. So, visitors are fine and they keep coming back and retirees keep moving to Mexico.

One thing to understand is that the drug cartels have no interest whatsoever in killing the golden goose of tourism, which would decrease their drug sales. And, it wouldn't be surprising if a large part of the drug money is recycled in the profitable tourism industry.

Yet, the Mexican government isn't sitting on its hands in preventing trouble because of the strategic importance of the tourism industry (by the way one of the many reasons why they would probably never confiscate foreign property). On top of the federal, state and city polices, they've created the tourist police as well.

Now, the last thing I want to do it to paint an overly rosy picture of the situation in the country. Mexico has its problems and it knows it. There is corruption (as in many other places) and there is a violence issue. However, at the end, it hasn't preventing foreigners enjoying their Mexican properties for decades.

Originally posted by @Mike Lambert :

@Joe Splitrock

I totally agree with you when it comes to the fideicomiso and the loosening of restrictions although, of course things can always reverse course.

You bring a good point with the violence because you might think that it could be a problem when it comes to property ownership.

It would become a problem if it would affect the enjoyment of your property by you or your prospective renters. The fact is that the increase in violence in Mexico hasn't deterred tourists from coming and coming back to the country in ever greater numbers. Why? Because the victims of the violence are gang-and drug-related and it normally happens when tourists don't go. So, visitors are fine and they keep coming back and retirees keep moving to Mexico.

One thing to understand is that the drug cartels have no interest whatsoever in killing the golden goose of tourism, which would decrease their drug sales. And, it wouldn't be surprising if a large part of the drug money is recycled in the profitable tourism industry.

Yet, the Mexican government isn't sitting on its hands in preventing trouble because of the strategic importance of the tourism industry (by the way one of the many reasons why they would probably never confiscate foreign property). On top of the federal, state and city polices, they've created the tourist police as well.

Now, the last thing I want to do it to paint an overly rosy picture of the situation in the country. Mexico has its problems and it knows it. There is corruption (as in many other places) and there is a violence issue. However, at the end, it hasn't preventing foreigners enjoying their Mexican properties for decades.

 I agree tourist areas are safer. The Mexican government cares about the golden goose and they have positioned extra military and police to protect vacation areas. Criminals stay away due to military presence and the reality that killing international visitors attracts unwanted attention. Cartels only care because the Mexican government cares. Their drug profits come from exports more than tourists.

All I meant is that instability is a risk, so people need to be aware and take precautions. I have been to Mexico many times and will go back again. 

@Joe Splitrock

Absolutely! As real estate investors, we need to look at the good and the bad and at risks as well as opportunities.

Mind you, I think that few people aren't aware of the violence issue in Mexico as the media is often all over it when something happens. What they fail to tell you though is that the murder rate of New York City and Los Angeles is higher than that of Cancun.

Also, when I see the random shootings in the US, I sometimes wonder whether my probably to get shot is higher when I vacation in Mexico or when I go buy groceries in the US.