When talking about owning and investing in real estate in Mexico, people always ask me the same question, “Can’t they take away your land, or do you have one of those 99 year things going on?” Well, I can understand the concern and misconception, but basically, neither of those concerns are true.
Fortunately, ownership policy of Mexico real estate has evolved. Mexico now embraces foreign investors and second-home owners who want to acquire Mexican real estate. But those who set out to purchase real estate in Mexico, very quickly are confronted with different types of land to purchase. And many international buyers wish they would have done a bit more research before giving up a deposit.
The four major types of land in Mexico are the Federal Maritime Land Zone, the Restricted Zone, the Unrestricted Zone, and Ejido land.
The Federal Zone is a strip of land that hugs the ocean and the international borders. No one can own this land, not even Mexicans. This includes land along the Pacific Ocean, Sea of Cortez, and Gulf of Mexico, from the mean high tide line to 66 feet up the beach. This 66 feet of coastal land is a buffer from the ocean to the first row of homes or businesses.
Some big hotels, Mexican land owners, large developments, and marinas apply for special permits to rent this land from the government. Some international and Mexican home owners with significant beach front real estate are also now applying for concessions to lease this land from the Mexican Government.
The Restricted Zone is the prime land that most international buyers are after. This is land that is more than 66 feet away from the mean high tide line and up to 32 miles away from the major oceans, and 64 miles from international borders. U.S. citizens, and other non-Mexican nationals, are buying this land using an instrument called a “fideicomiso,” also known as a Mexico bank trust.
This Mexican bank trust is a dream come true for international buyers of Mexican real estate. It gives the non-Mexican national owner of Mexican real estate the power they need to control their land purchase, very similar to the way a USA citizen would enjoy owning real estate in the USA. For example, using a fideicomiso, you would be able to will the land or home to your children, rent it, subdivide it, lease-option it, enjoy it, sell it, improve it, or do anything that can be done with real estate.
This bank trust costs about $2,000 to set up, and about $500 a year to maintain, depending on the size of the land. If you decide to sell your property the bank trust is easily transferable making your property very sellable.
Mexican nationals don’t use fideicomisos to buy land, as the restricted zone is not restricted to them. They buy land using a deed called an “escritura publica.” So when looking to buy Mexican real estate, you will be buying from someone that has either a fideicomiso, or an escritura publica. A word of caution is that if someone quotes you a lot size of beach front land, make sure that no portion of that lot size is Federal Land.
The Unrestricted Zone is the inland part of Mexico that is over 32 miles away from the oceans, and over 64 miles away from the international borders. If you’re a U.S. citizen you don’t need to pay the fideicomiso set-up fee to purchase this land. The Unrestricted Zone allows foreigners to own land using an escritura publica just like a Mexican citizen. The colonial cities of Taxco, San Miguel de Allende, Guanajuato, and Oaxaca are within this zone. All these cities are the Spanish colonial gems of the Americas, and much of their city centers are national parks.
The Ejido land is communal land. Don’t buy this unless you are a Mexican real estate pro and really understand the details. This land is less desirable because clear title is difficult to get, and sometimes never comes. Ejido land is many times offered for sale from developers making promises that at some time in the future, 3 to 8 years, the land will be regularized for clear title. Regularization of Ejido land is a lengthy legal process that is not always achieved. Not only that, banks don’t offer fideicomisos on Ejido land. So the only way to control Ejido land for a non-Mexican national is by setting up a Mexican corporation.