This guide gives you a comprehensive overview of the key facts and considerations you need to take into account on the journey as you buy and sell your property in Mexico.

Property in Mexico

This introductory guide assumes that you are considering the purchase of land or property in Mexico. If you are looking for advice solely on property rentals in Mexico, then connect to the page on Renting.

Buying property in Mexico, whether it’s land, a serviced apartment or a house, can offer good value for money in comparison to prices in the US and Europe, although prices in some areas have risen dramatically in recent years and care should be taken in assessing a property’s true value.

Mexico’s land costs can be lower, building and maintenance is cheaper, cost of ownership (taxes, utilities) is very low, and although there are ‘horror stories’ associated with buying property here (as in every country in the world), the overwhelming majority of all real estate deals go through legally and smoothly.

The reasons to buy property in Mexico come down to a personal choice, and depend on your individual circumstances. Perhaps you will be living in Mexico for some years and you see long term rental as ‘wasted’ money, or perhaps you’re looking for an overseas property investment that will surrender a rental income, while providing you with a place to stay on holiday when you visit.

Property values in Mexico tend to increase over the long term, as they do in most places, but in many places (with notable exceptions in popular cities and coastal areas) not as significantly as prices have risen in the US and Europe in the last few years. The relative value and appeal of land and property in Mexico comes down to the three key factors: location, local infrastructure (roads, airports, services) and local amenities.

Another important factor to consider in Mexico when buying property is the developed state of local and surrounding infrastructure in the location you’re looking at. Not all areas are well developed, and property prices will be cheaper in those that are not. However if, for example, a high speed road is built connecting a previously ‘remote’ location to other, better developed places, you may see a property investment in that area increase substantially. Mexico is a vast country —at nearly 2 million square kilometers—and not all of it is easily accessible. Road infrastructure is improving every year, with most major places now adequately connected, and work continues to connect the more remote areas, but this will take time.

If you’re considering the purchase of property in Mexico, you will need to undertake extensive research, choose your location and property with care, ensure that you hire the right professionals, and that the letter of the law is followed in relation the legal transfer of ownership.

Tens of thousands of foreigners have successfully purchased land and property in Mexico. With the right approach and plenty of homework, there is no reason why you should not become one of them if you want to.

Mexican Law: Property Ownership

Mexican Law provides for private ownership of land by foreigners, and its law is very specific about the way in which land rights should be transferred from seller to buyer, and also what type of lands are not eligible for public ownership. A Notary Public (see below) will guide you through the details of these, but generally:

Property may be purchased and owned outright for residential use by foreign nationals outside of the 100km restricted land border zone, or outside of the 50km coastal zone;

Inside of the restricted border/coastal zones, foreign nationals may own land through a fidecomiso (a trust) which is set up through a bank and provides for ownership of the land and property in all but name.

The Mexican Constitution previously banned foreign nationals from owning property that was within the restricted border zones. This old law was intended to protect Mexican soil from foreign invasion.

Fideicomiso: Land Trusts

Because the Constitution cannot be altered in this respect, the Government introduced a system of land trusts, so that foreign nationals could invest in property inside of the ‘restricted’ zones. So now, if you as a foreigner want to buy a dream home with a Pacific beach view, you can, except that it will be by means of a trust, set up through one of the main banks in Mexico.

The trust holds the deeds to the property, and you and/or other named persons which you specify are sole beneficiaries to the trust (and therefore, the property). You have full rights to do whatever you like with your property: it can be developed (in accordance with local planning regulations), rented, leased, sold, or given away. In other words, you own the property in all but name.

The trust enables you to name a beneficiary upon your death, and you do not need to have a Mexican Will in order for your wishes in regard to the trust to be executed. You do not have to be resident in Mexico to own property here, so there is no need to qualify for resident status under immigration laws in order to have a property investment in Mexico.

Mexican Law on property ownership is comprehensive and provides protection for the seller and the buyer in all property transactions, provided that the law is followed, and you ensure that all necessary documentation is present and that the procedures are adhered to. Your Notary Public in Mexico is an important person in this process, and he/she will guide you.

Financing Mexican Real Estate

It’s important to think carefully beforehand about how you are going to finance your property in Mexico. A Realty Agent in Mexico may be able to advise you, and some even have connections with financial institutions (e.g. banks, mortgage brokers) who may proffer financial solutions, depending on your personal circumstances, to help you complete your property investment in Mexico.

Historically, the overwhelming number of real-estate deals in Mexico have been settled in cash. However, Mexican banks are now beginning to offer mortgage products for the purchase of real-estate in Mexico, although significant deposits are required and interest rates are not as low as those typically offered in the US and Canada.

Financing is also available from some specialist US-based mortgage companies which offer Dollar-denominated finance products for the purchase of real estate in Mexico. We’ve a detailed guide which explains the various financing options including peso-based mortgages, dollar-based mortgages, charges, and financial considerations to take into account. Read the guide about Financing Real Estate in Mexico for more details.

Real Estate Developments in Mexico

One of the easiest ways to invest in Mexican real estate is through a Real Estate Development project. Real Estate Developments are managed by companies who buy large parcels of land, obtain all of the necessary permits, connect up principal utilities such as water, electric, and telephone and sell either plots of land and/or houses, condos, etc.

Property developments in Mexico are modeled on property developments in other countries: developers acquire a large tract of land and the necessary permissions to build on it. Then they create a residential community, often incorporating local amenities and leisure facilities into the design.

We publish a comprehensive guide to buying real in Mexico through a property development. The guide includes details about the considerations you need to take into account when buying property from a real estate developer in Mexico and also discusses purchasing property ‘off plan’ in Mexico. Read the detailed guide to Real Estate Developments in Mexico for full details.

Timeshare Properties in Mexico

Due to its climate and extensive choice of vacation resorts, there is a buoyant market of timeshare properties in Mexico. When you buy a timeshare property, you are not investing in physical real estate—you are purchasing the right to occupy a property (or properties within a specific portfolio) for several weeks of the year over a defined period. Timeshare contracts are most often offered in condo buildings situated in desirable Mexican resort towns and cities with the properties close to, or overlooking, the ocean.

Timeshare contracts come in various forms and with different terms, ranging from fixed weeks at a specific property, contracts with floating dates, and some timeshare contracts offer occupancy across a predefined group of properties managed by the timeshare company.

Timeshare is different to fractional ownership whereby the investors in the property own a percentage of the physical asset, usually through a legal arrangement managed by the distribution of shares. It is also different to legal title and legal possession which we have discussed in a related article; and timeshare is different again to property rental.

Advantages of Timeshare: People who purchase timeshare are attracted to the concept of having access to a property without the responsibilities of physically owning and managing it, although timeshare contracts do make you liable for annual fees which cover the collective costs of maintenance and property management, and these fees tend to rise annually. Some families who enjoy vacationing at the same resort every year use timeshare to avoid the costs of staying at resort hotels and being able to access a self-catering stay in a property with full kitchens, multiple bedrooms and bathrooms, living and dining areas, and private balconies. Some timeshare properties might also offer other amenities on-site like swimming pools and gyms.

Disadvantages of Timeshare: Unlike buying a physical property in Mexico, timeshare does not give you legal title or possession, nor a share of a physical property as fractional ownership does: as the name suggests, you are buying a share of time, which is an intangible object. Some timeshare contracts are restrictive about how you can sell or pass-on your timeshare arrangement; exit fees are not uncommon. Timeshare companies are notoriously hard-sellers, often offering potential customers artificially-low priced vacations in exchange for attending a timeshare sales seminar, where high-pressure sales teams descend upon attendees with the sole intention of getting them to commit to a timeshare contract during the visit—and thus legally committing them to the purchase, and the annual fees which accompany it.

Tips for Buying Timeshare: If you decide that a timeshare property contract will suit your lifestyle circumstances, we recommend you are familiar with the location you intend to purchase a timeshare in, and you do comprehensive background research on the company offering you the timeshare contract, as well as the specific name of the property being offered to you. If the contract has legal jurisdiction in Mexico, we recommend that you contract the services of a Mexican Notary Public to revise the contractual terms before you commit. If the contract has legal jurisdiction elsewhere then you should contract a lawyer in that jurisdiction to review the paperwork and offer you advice. If you attend a timeshare sales seminar in Mexico, we recommend you take someone with you who is not emotionally or financially involved in the potential purchase, regulate your alcohol intake at the event, and tell the sales team you want to refer the contract to your legal counsel before signing anything. A popular way to buy a Mexico timeshare and avoid the sales pitch is to buy one online from the second-hand timeshare market on sites like SellMyTimeshareNow.com. Once you have signed a timeshare contract, you are legally obliged to pay the purchase costs and the ongoing maintenance/management fees associated with it.

Tips for Selling Timeshare: Circumstances change, and people holding timeshare contracts sometimes want to sell before its natural expiry date. There are several ways to sell your contract, but before you can sell your timeshare, you should check the small print of your current arrangement. Some contracts are restrictive about how you can sell your timeshare; for example, you might have to offer your contract back to the company you purchased it from in some circumstances, and/or pay exit fees. Whatever means you use to sell your contract, you can expect to pay some fees and/or sales commissions to dispose of the timeshare if you decide to exit before it expires. Some sellers attempt to market their timeshare personally, although using an online brokerage that specializes in the sales of timeshare contracts on the secondary market to present your listing to potential buyers will give you access to a range of services like professional marketing and legal transfer facilities in exchange for the sales commissions you pay when your contract is sold.

Fractional Ownership of Property in Mexico

Mexican law provides a legally secure way for property investors to purchase a property through a fractional ownership arrangement.

Fractional ownership is different to time share because, unlike time share contracts, the buyers each own a percentage share (a fraction) of the physical property. For example, a property with a sales price of $5 million pesos might be purchased by 10 people at a cost of $500,000 pesos each. The property is divided into 10 shares, with each owner holding 1 share (a 10% fraction) of the physical property. The owners are jointly and severally responsible for the maintenance and management costs of the property as well for taxes and other costs associated with property ownership.

Owners in a fractional ownership arrangement are usually free to sell or transfer their share as they would any other asset. (Check the associated covenants for rules about this.) These arrangements can be formed privately between individuals or can be brokered by agents or firms specializing in this market.

We recommend that all matters related to fractional property ownership are undertaken through a Mexican Notary Public to ensure that the contracts, and their associated covenants, are legally sound and valid.

Title Insurance in Mexico

When you buy real estate in Mexico, you would do well to consider taking out Title Insurance on the property. Title Insurance covers you should the property you buy subsequently turn out to have liens associated with it.

This is especially relevant if the property you are buying has been privatized, having previously been classified as being “ejido” lands (see next section), but even if this is not the case, Title Insurance will protect you if any other previously unforeseen lien or charge is brought against the property before you took possession of the Title Deed.

Rates for Title Insurance are around US$5-US$5.50 per US$1,000 of the property’s value; payable once only at the point of purchase. Consult a realty agent or other legal or consulting professional in regard to matters relating to Title Insurance. There are a number if insurance companies which now offer Title Insurance for Mexican property and, as the number of providers increase, rates should become increasingly competitive.

Property Insurance

Insuring your property in Mexico is an essential service you need to consider as part of your budget planning. Covering your house, personal property, and any watercraft your own will mitigate your risks in the event of unforeseen circumstances. For a further information, connect to Insuring Your Property in Mexico, our complete guide about insuring your house and property in Mexico.

Ejido (Agricultural) Lands in Mexico

Ejido (Agricultural) Lands have a long history in how they came into being. Essentially, they are similar to “commons land”.

After the 1910 revolution, communities and peasants were handed strips of land, in the main, to grow crops on, and they are called “ejidos“. The ejidos are usually owned by a community of local people and the land is passed down from generation to generation within the communities which own the parcels.

You CAN buy ejido land, but the sale requires the agreement of the whole community that ‘owns’ it. The process takes time and particular expertise in the field, and there are firms which specialize in this area of property law and have a good track record of transferring land from “commons” into private ownership.

For example, many of the big beach resorts which are present today , were once on ejido lands and are now in private ownership; although smaller parcels of land, too, may be successfully and legally transferred into private hands provided the correct legal procedures and conditions are fulfilled.

Some big property developers may negotiate to buy a big plot of ejido land with a view to “fractionalizing” it (usually introducing mains water, sewerage and electric to the land as well), to develop property and/or to sell off the individual plots to small property investors. Under these schemes, the land is often re-classified and made available for private ownership.

The process is usually undertaken by professionals who understand Mexican property law intimately and the procedures can go on from a year to several years. There was a time when ejido lands were best avoided by private investors, but times have changed. There now exist law firms who can assist small, private investors to secure ejido land for private purchase.

If you choose to purchase ejido land, you will need to factor the additional legal and consulting fees, as well as adjust your time-scale expectations, as the negotiations and procedures to secure ejido land are longer and more complex than passing the title of land already in private ownership.

We recommend that you seek appropriate legal counsel when considering the purchase of land that is (or might be) ejido land— whether or not a physical building exists presently on the land. Part of a Notary Public’s duty is to check for proper title of the land, and if it was ejido land, the Notary Public should ensure that the correct procedures have been followed so that private title ownership is assured.

If the Notary Public tells you that the land is (or was) ejido land, then you may also wish to seek professional legal counsel to establish the legal position of the property, independently of the Notary.

Note: It is advisable to purchase Title Insurance if the property you are purchasing is ex-ejido land (although regardless of the type of property, Title Insurance is a shrewd investment). Read more about Title Insurance in this guide.

See Also: Legal Title of Mexican Property

The Role of the Notary Public in Mexico

The Notary Public is the most important legal person you will deal with when you make a property investment in Mexico. Do not confuse the role of the Notary Public in the US with its counterpart in Mexico: they are quite different. In the US for example, almost anyone can become a Notary Public. Not so in Mexico, where the role is appointed directly by the state Governor.

The Mexican Notary Public has the power to witness and certify important business and civil documents which require absolute authenticity. The appointment also holds responsibility for the management and secure storage of original records. A Notary Public must be a Mexican Citizen of at least 35 years in age, he or she must hold a law degree, have at least three years’ work experience at a Notary Public office, and pass a stringent exam. Those who qualify and pass, in time, are appointed as Notary Public by the office of the state Governor.

Under Mexican Law, the deed to the property must be prepared by a Notary Public. As a buyer, it is your right to choose the Notary Public, and it should be your first port of call after you have agreed in principle to purchase a property in Mexico. The Notary Public will ensure that all documentation and permits are in order so that the transaction can proceed.

Important! Everything official to do with your transaction should be done via the Notary Public: Do not take anyone’s word about documentation (like property deeds) being valid —take copies to the Notary Public for official verification.

For more details, see: Finding a Notary Public in Mexico

Common Checks That Should Be Made

The Notary Public and/or your lawyer will do a series of checks on the property and ensure that the property has a clean history, and that there are no liens on the land (i.e. an old unpaid mortgage). Under Mexican Law, liens are passed on with title of the land – BEWARE!

Your Notary Public should also check that all land taxes have been paid during the last five years (if applicable) and that utilities (electric, gas, water and phone) have also been paid during the last two years. By law, you are not liable to debts after these times.

Other items to be checked include: checking all buildings are on tax registers and have the required building permits; utilities were legally installed and payments are up-to-date; the property is not jointly owned, or if it is, that both (or all) owners agree to the sale; and that the seller(s) has the right to sell.

The Notary Public is legally responsible to ensure that all documents are in order and that all legal procedures have been adhered to. He or she will do a thorough check and will not destroy his reputation by hiding any problems, or potential problems from you. Read the Outline Process below for more information about the role of Notary Public.

Outline of Property Purchase Procedure in Mexico

If you have hired a lawyer (which is recommended but not compulsory) then he/she will likely act as an intermediary between you and the Notary Public / Seller. The exact process will vary in each case, but you (or your lawyer) will follow a process that goes along these lines:

Find a property you like; agree a price verbally;

An agreement with detailed costs, inclusions and exclusions, as well as deadlines, is drawn-up using an initial “Convenio de Compra/Venta” (provisional sale agreement), at which point a deposit (typically 5-10%) is paid by the buyer with cancellation penalties set (usually equal to the deposit) if either party pulls-out;

If the property is inside the 50/100km coastal/border zone, you will need to set up a property trust; if the property is not within this zone, no trust is required (but remains optional for buyers who wish to use one);

Next, you seek permission from the Foreign Secretary’s office (a formality) to buy land. You will be asked to sign the “Calvo Clause,” which states that you will not seek foreign jurisdiction in dealings with your property transaction;

If you are buying from a real estate developer, advise the Notary Public who will ensure the developer’s permits are in order;

Get a copy of the Land / Property Deeds from the seller. The Notary Public will check these out. Ask the Notary Public to check that the land is not ejido land, as discussed earlier in this guide;

An official appraisal of the Land (Avaluo) needs to be carried out; your Notary Public can arrange this;

Your Notary Public (or lawyer) will ask for official documents that can include (but are not limited to): Photo ID (passport), Birth Certificates, Marriage Certificates (if appropriate), and your visa, which could be a Tourist Permit, (you do not have to be resident in Mexico to purchase real estate here) to prove that your stay in Mexico is legal;

The seller will need to present to the Notary Public documents including (but not limited to): original property deed, up-to-date tax receipts for the property, public utilities bills (shown as paid), plus up-to-date details of land-service fees (shown as paid);

Capital Gains Tax is paid by the seller, unless you have agreed to pay CGT as part of the buying agreement. The Notary Public will calculate the sum and state how much this is;

Payment is made (see note below) at the time when the deed is signed over to you, and this is done at the Notary Public’s office;

The Notary Public and lawyer’s (if applicable) fees are paid at this time as well, as well as other taxes associated with land purchase (see Taxes, below).

Payment: Whether you are paying with cash or via some kind of financing, you (or your lawyer representing you) will need to have the agreed funds available for hand-over at the Notary Public’s office on the date the deeds are signed across to you.

Money Transfer Declaration: If you carry cash or monetary instruments (of any kind) with a value of or exceeding USD$10,000 must be declared when you cross the border into Mexico (and the enter/exit the USA – even if you are in transit to Mexico from elsewhere via the US). There are no limits on how much you can transfer in or out of either country, but sums over the US$10K limit must be declared on a special form as you pass through Customs at the border. If you are wiring money from a bank abroad to a Mexican bank this declaration is not necessary.

Choosing the Right Location

As with any property purchase in any country, location is critical. Make sure that you are familiar with the location and the area of the location you are planning to buy in. Also ask yourself how marketable the property is in its current condition and location, especially if you are planning to rent it, or should you want to sell it at a later date. A good Estate Agent will guide you in this respect.

Do your homework – don’t just buy in an area based on how it looks. You may want to rent something nearby to start with, and get a feel for the place. Once you’re living locally you can assess things like the atmosphere, the neighborhood in general, and talk with the locals about what it’s like to live there.

Buy, Build or “Fixer-Upper”?

Buying land and commissioning a house on it will provide you with much better value for your money. The price of land and construction will be less than an equivalent house bought built.

The downside of this, of course, is that you have the additional time, effort and expense of project managing a build. You would do well to be in Mexico for the duration, or have someone reliable and trustworthy situated locally overseeing the project. Architectural firms can be hired who will design, build, and finish your house for you. They usually work on a multi-stage payment basis, and guarantee that the price they have quoted you is the price you’ll pay, or within a percentage, e.g. 10%.

The choice of whether to buy or build will again be a personal one, and probably also based on what you are looking for and what is available— you may need to build in order to get what you want, for example.

When you do the math, you’ll probably find that you’ll get more for your money building or renovating than by buying something built; but keep in mind the additional effort you’ll need to invest; for convenience, it may be better to buy something already built, especially if you can’t be in Mexico for the duration of the building period to keep on top of events.

See Also: Buy, Build or Improve Your Home in Mexico

A Special Note About Buying Land

Be sure, if you buy land, that it served by a reliable water source. Ideally, your plot should have a mains feed, but if not, it could include a well, or water from a neighboring plot; if it does, make certain that this arrangement is in writing and that the additional costs, if any, are clearly stated. Land without a consistent and reliable water source has very little value.

See Also: Beware Land Without Water

The “Fixer Upper” (an American English term, now used as “Spanglish” in Mexican Realty Agent parlance) is a shell house in need of serious maintenance or repair. These enable you to buy the property at the ‘shell’ value, and create a home, almost from scratch.

Some “Fixer Uppers” include old colonial buildings that can polish up into magnificent homes— if you have the time and resources to dedicate to them. At one time, these types of properties could be bought for a song, but more recently the people who own these ‘shell’ homes do not underestimate the value of the property once it is renovated. They have learned from others’ previous experience—so unless the seller is desperate to sell, you may not be able to buy your ‘shell’ property as inexpensively as you may think or hope! Shop around and think carefully about the costs when embarking on this kind of project—it almost always takes more time, effort and money to renovate a property than initial estimates, even detailed estimates, suggest.

Building Regulations and Standards in Mexico

There are no official “builders’ guild marks” or similar standards for buildings and property in Mexico. If you are buying a property that’s built, then you should hire a good surveyor to check the place out thoroughly before agreeing to buy or handing over any money.

If you are having your house built, ask the architects to show you examples of their previous work, and go to the places to see them— don’t just look at the photographs. Once again, a professional survey to assess the quality and state of the architect’s previous buildings would be a shrewd move on your part.

In areas near to the coast, and in regions containing a large proportion of volcanic rock, a soil survey may also be a good investment, especially if you are buying land to build on. Your architect may provide assistance in this area.

See Also: House Maintenance in Mexico

Realty Agents and other ways to get to market

There are a huge number of Realty Agents in Mexico—you can find out more about their services on our guide to Mexico Realty Agents

Property in Mexico is often ‘marketed’ by word of mouth in Mexico—and you may find some terrific deals by talking with people locally about properties available for sale. Mexican people are very friendly, and they are brilliant “net-workers”;they enjoy undertaking their business transaction by means of knowing people who know people.

Caution should be exercised and no agreements should be made or monies handed over before the proper agreements in place, but as a means of introduction, it’s a great way to find out about properties that may never be advertised on web sites, local newspapers, etc.

Good Mexican Realty Agents are expert net-workers, and you really want to find one who has been operating locally for a considerable time and who therefore knows the terrain and has a deep and extensive network of contacts locally.

In recent years, Mexico’s estate agency networks have evolved considerably into professional organizations offering full-service agency facilities, including some with regional connections to find opportunities beyond their immediate markets. This said, real estate agency remains very much a “local” business in Mexico, and making contact with a good, experienced, and local realty agent can make all the difference in your search for your ideal property.

Remember that estate agents are either private individuals operating on a self-employment basis, and almost all estate agencies are privately-owned franchise businesses—even big name brands are operated at a local level by what is essentially a small or medium-sized business. As ever, it it not so much the brand-name that you should be attracted to, but the individual with whom you are dealing with. Every area has varying standards of agencies (big brand names and others) and every agency has varying standards of representatives. Your aim is to find a local agent with whom you may build a rapport and even a long term relationship as, one day, you may want to rent out or sell your property—or help friends or family to buy locally—and having made a good contact, you can enjoy a solid anchor that will serve you well in years to come.

See Also: Guide to Real Estate Agents in Mexico

Valuation of Property in Mexico

Valuing a Property for Tax Purposes

If you own a house in the USA, Canada or Europe, you are required to pay tax to the government, usually based on a rate-able value of the property. In Mexico, the rate-able value is known at the Catastro, and is set by an officer of county; no onsite inspection is required.

The Catastro

The Catastro value will vary depending on the area in which you intend to buy, and can be a fraction of the commercial value of the property. This Catastro is used by the Notary Public to assess the value of the annual equivalent of the “Local Property Tax,” known in Mexico as the Predial. Although the Catastro is an essential number for working out tax liabilities, in practice it serves of no use in assessing the commercial value of a property.

The Predial

The Predial is payable annually, on January 1st or soon after. In some areas, bills are dispatched to house owners; in some other areas you don’t get a bill; you just know you have to pay it in January, and you show up at the Municipal building in town to do so each year. You will find the Predial is very low (and could border on insignificant) when compared to say, property taxes (even at the lowest rates) in Europe, Council Tax in the UK, or the annual rental value of the property. This is one of the reasons why cost of property ownership is low in Mexico.

Commercial Valuation

House prices in Mexico are very localized, and if you live in some countries like the UK, may be used to valuations of a property based on the number of bedrooms and whether the property is terraced, semi or detached, etc., not the square footage being bought. In Mexico, values are not determined or measured on number of bedrooms; as a measure of value people instead look at a price per square meter of land and then per square meter of construction on that land as they do in the USA, Canada and Continental Europe. For example, you could have a 300 square meter plot with 500 square meters of construction. The garden is likely to be small, or even, just a patio, in this scenario. “Construction” is usually based on outer measurements, wall-to-wall and includes garage, covered patios and out-houses or other buildings, not just the main living areas. There is no standard for how the “construction” figure is measured; for example, some measurements includes patios, others don’t—so be sure to ask what it includes. Once you know the measurements you can make comparative values between properties based on land size and construction, including construction which is “traditional” living space, and construction which is “outdoor” living space (patios, terraces, out-houses, etc).

Some Common Valuation Models

Investment Value

This is deduced by determining how much the property would fetch monthly from a rental (based on similar rentals in the neighborhood / area) and multiplying by a factor. This factor is usually calculated by taking into account the cost of house maintenance and applicable property taxes. If you wanted to see a return in, say, six years then your formula would be: Monthly Rental x 12 + Annual Maintenance (Including Service Fees and Taxes) multiplied by Years (6).

Annual Rental Yield

By checking the level of local rents for similar properties (including location, area, condition and appeal), you can work out the rental yield of a property based on its price. This yield provides a comparative return on other investments, e.g. leaving your money in the bank or investing in shares.

For example, if local rents indicate that you could rent the property for US$500 a month, and the cash purchase price of the property (including closing costs) is US$200,000, the annual rental yield would be 3%. This is worked out by dividing the annual yield ($6,000) by the purchase price ($200,000) and multiplying by 100 to convert the decimal into its percentage value.

In our example: ((6,000 / 200,000) * 100) = 3% If local rents indicated that you could rent the property for US$1,000 a month, and the cash purchase price of the property (including closing costs) is $100,000, the annual rental yield would be: ((12,000 / 100,000) * 100) = 12%

Similar Recent Sales

If you are buying in a neighborhood where houses / land plots are similar, then you may be able to get an indicative commercial value from prices paid for similar size and type properties in the area during the last 12 months. A realty agent would be able to guide you in this respect.

Replacement Value

Another way of determining the commercial value of a property is to take the commercial value of the plot (land), and add to it the cost of construction, should you build it today (this is usually expressed in cost per square meter of construction) and depreciate this value according to the age of the house. You would then add on the value of any special features.

Features that Can Add Value

Values of property can escalate when the following features exist on or near the property (remember that features attached to the property are subject to depreciation factor, mentioned above):

Property is well served by local infrastructure (e.g. good roads, airport);

The property is near a body of water; river, lake ocean (but watch out for rising water levels!);

The property has good panoramic views of the area;

Property is in good condition and requires little or no immediate maintenance;

Property has a swimming pool / whirlpool, landscaping, driveways, garage, water pressure system, parabolic satellite system;

Any furniture: Homes in Mexico are often sold fully furnished, but not always – check;

Local security – for example in gated areas – where all residents in the community pay an annual fee to a security management company for 24×7 vigilance;

Any features which make the property unique and added to the cost of construction and / or take up additional land; e.g. a large ornamental fountain.

Negotiating / Bargaining

Try to find out (from the realty agent if you are using one) what the history of the property is: who owns it, for how long and why are they selling? Are they in a hurry? Do they need cash fast? How far would they be willing to negotiate or bargain, especially if you can close quickly.

How much discount you can negotiate will depend on each individual situation. However, you should not offer the asking price; be prepared to walk away (and show that you will even at the risk of losing the house) if you cannot get a deal that you think represents value. Even in Mexico, some people are sitting on property they paid too much for—make a cold, accurate, assessment and, if necessary politely say “no, gracias.”

Open Market

Ultimately, the value of real estate in Mexico, like the value of anything, is an equation between what the buyer is willing to pay and the seller is willing to accept.

If you fall in love with a particular plot or house, you may be willing to pay extra for it. If you can, keep emotion out of the equation, and if you can’t, certainly make sure that you don’t show any emotion as it will be immediately sensed and will erode your negotiating position.

There is no “formal” sales price market in Mexico, as access to historical and trend data to ‘tell’ sellers what to ask for and buyers what to expect to pay is difficult to come by. This is one reason why market prices are extremely localized. As a result, one could say that property values in Mexico are more ‘real’ than in markets where reams of data ‘demand’ certain price levels by postal code based on historical precedent.

The flip-side of this situation is that sellers in Mexico may often be quite specific about how much they want to be paid for a property they own, regardless of whether it is in line with similar properties, recent sales, rental yield equations or any other formula—or even reasonable!

Property Negotiation in the Open Market

Being prepared to keep emotions out of your buying decisions and, importantly, being absolutely prepared to walk away and let go—even if it may appear to be your “dream house”—are essential skills if you are going to invest successfully in Mexico.

The “Open Market” in Mexico is an opportunity for those who have a clear idea about what a property is worth to them and can negotiate well, and a danger for those who walk into the market without having done their homework and research.

See Also: Negotiation and Bargaining

A good Mexico Realty Agent will be able to advise you, but remember that it is your responsibility as a buyer to understand the value of the transaction.

Costs and Taxes of Mexican Property

When you buy property in your home country, you are usually faced with the associated costs like agent fees and taxes. Mexico is no different, although the net value of these costs as a percentage of the property values may be lower overall, but this is not guaranteed as professional fees have risen recently too.

See Also: Total Cost of Property Ownership

Costs and Taxes when BUYING Mexican Property

Acquisition Tax: This tax is paid on the sale value of the property and is equivalent to about 2-4% depending on the State in which you buy. This tax is paid whether the property is sold, transferred, donated, placed into trust, split-off or merged.

VAT (Sales Tax): No Value Added Tax (Sales Tax) is payable on residential property. Commercial Property transactions are liable to VAT at the current rate in addition to the Acquisitions Tax.

Appraisal Tax: The Tax Authority may choose to perform a commercial appraisal of the property after you purchase it. If the appraisal value is greater than 10% of the price you paid for it, you will be asked to pay 20% tax on the difference between the two amounts. This sum is due within 15 days of the date of the appraisal report.

Registry Fee: In order to have the Public Records updated and the Deed (re)issued, a fee (based on the value of the transaction) is paid by the buyer. Rates vary by State – budget for 2-4% of the sales value.

Public Notary Fees: Buyers are required to pay fees to the Notary Public for services provided to transact the legal matters related to the sale. Notary fees are based on the transaction value, and vary by State. The buyer gets to choose which Notary Public to use, so it makes sense to check several Notaries locally for their current rates — and if you are working with a realty agent ask them for their recommendations locally too. Typically rates are around 4-7% of the sales value but it’s important to ‘shop around’ locally.

Bank Trust: If you purchase property within the 50km/100km ‘restricted’ zones near coasts and land borders, you will need a bank to set up and manage a trust for you. Shop around, as prices vary from bank to bank. Set-up fees can cost around US$1,000, with annual service charges between US$1,000-$2,000. The annual service fee will cover legal obligations (e.g. the filing of necessary documents annually) by the bank on your behalf.

Lawyer / Attorney Fees: If you hire a lawyer / attorney, you will also need to pay him/her with fees for services they undertake on your behalf. These should be negotiated in advance.

Land / Building Surveys: If you need to undertake any land or building surveys, these will have to be paid for separately. Cost will depend on type, extent and complexity of surveys undertaken.

Foreign Office Permit: Your permit from the Mexican foreign office will cost around US$150.

Service Fees: If you are buying a house in a gated community, or an apartment, be sure to check on the annual service fees, and have these put in writing. Service fees can range from US$100 a year to US$1,000 or more a year, depending on location, number of houses or apartments in the enclosure, and amenities offered. Keep in mind that service fees tend to rise, especially as developments get older and more maintenance is required.

Title Insurance: When you buy property in Mexico, you might consider purchasing Title Insurance. Rates are based on the sale value of the property and are charged at around US$5-US$5.50 per US$1,000 of the value. More Information about Title Insurance.

Costs and Taxes when Selling a Mexican Property

When you sell a property in Mexico, you will be subject to the fees of any professional services you contract, plus the following taxes and fees.

For more details see also: The Costs and Taxes of Selling Property in Mexico

Agent Fees: If you employ an agent, expect charges of around 4-8% of the value of the sale as a fee, but you may want to negotiate on this beforehand. You will also need to pay IVA (Mexican Sales Tax) on agent commissions. For example, if you pay 8% commission on a $100,000 sale ($8,000), you will need to pay IVA on $8,000. As IVA is relatively high in Mexico, you should take this into consideration as part of your budgeting.

Mexican Tax on Property Gains (Capital Gains Tax): Mexico recently reformed its property tax laws to make it clearer for property owners who are selling their assets when and how much they need to pay in Capital Gains Tax. Exemptions can be applied before taxes are calculated, but these are dependent upon your residency status, how long you have owned the property, and whether the home was your primary residence for at least two years. A good realty agent, Notary Public, or accountant will be able to advise you.

Foreign Tax on Property Gains: Depending on your nationality, your ‘home’ government may require you to pay taxes on any gains you realize from your Mexican property. Whether you have to pay, and how much depends on your country’s tax policies, your residency status, and whether your home country has a tax-agreement in place with Mexico (if it does, then usually any taxes you pay to the Mexican government can be deducted from any additional taxes owed to your home government). You should contact your accountant or other tax professional as every situation is unique and tax law is complex.

Time Scales

Whether you are buying or selling land or property in Mexico, you need to manage your expectations in regard to time scales. Mexico’s real estate markets are very regionalized and, in most cases, localized. The location where you intend to buy/sell will have an enormous influence on how long it takes for a property to sell. Property transaction volumes will be much higher in big cities and major resort areas than in smaller towns, villages and islands and this transaction rate will determine, to a greater or lesser degree, how long it takes to match a buyer with a seller.

Buying a Home

When you are in the market to buy a home, you may find the buying process frustrated by the seller—especially if it is a private sale. This might sound strange, as you might think that the seller will be keen to close the transaction.

However, many factors come into play with Mexican property transactions; sellers may have to negotiate with family members, other ‘interested’ parties (e.g. distant relatives who may or may not be associated with the deeds), as well grapple with nuances of Mexican cultural behaviors in regards to ‘letting go’ of things—like long-held heirlooms.

Some transactions may go through very quickly: for example, when the seller is in need of fast-cash, or a developer is selling you a brand-new property. Whatever the final time-scales end up being, expect the buying process to be different to what you may be used to in the USA, Canada, and Europe—and realize that you may have to be patient if you found your ‘dream home’ and think you can move-in quickly; in some cases you can, in other cases, you won’t be able to. Patience and flexibility are key negotiating tools in Mexico.

Selling Your Home

When you come to sell your Mexican home, you will realize that the location of your property will not only affect its sale price, but also the time it takes to sell the property.

Some properties can remain on the market for years before they sell; this is particularly true of homes situated in remote or rural areas.

Conversely, some homes can sell almost as soon as they come to the market—these tend to be properties in larger cities (especially trendy neighborhoods of Mexico City) as well as popular resorts.

Most of Mexico’s realty markets are not as “mature” as property markets in the USA or UK, for example, and transaction volumes are, generally speaking, lower. As a rule of thumb: land and property in rural and remote places, as well as those in areas with less well-developed amenities and local services will take considerably longer to sell—perhaps a year or more—than properties situated in larger towns and cities, and the most popular resorts: places which offer nearby local services and amenities (shops, schools, community centers, clinics, hospitals etc.).

Closing Time-Scales

Once a buyer and a seller have agreed to proceed in earnest, the paperwork can take anything from a few weeks to several months to reach a close. If you are buying, you should not rush your Notary Public or lawyer as they carry out the necessary checks as part of their due diligence. If any untoward matters arise, these may add delays, but addressing them helps to protect the buyer and the seller.

Most real estate transactions in Mexico go through without major delays, and with all the necessary paperwork and title deeds completed to legal norms.

The solidity of the legal procedures involved in Mexican real estate transactions has enabled US insurance companies to provide secure title insurance. It’s important, however, that both buyers and sellers exercise patience and understanding. Mexico’s legal system is bureaucratic; managing your own expectations (and your practical plans) to suit will save a lot of unnecessary stress as you purchase or sell your Mexican home.

CREDITS: https://www.mexperience.com/realestate/buying-selling-real-estate-in-mexico/