Real Estate advice needed

[halocline]

To my knowledge, Mexican law prohibits foreign private ownership of land within a certain distance from the coast, and that would include all land on Cozumel and on the Mayan Riviera. I believe you have to form a partnership with a Mexican national (probably a Mexican bank) and then you lease the land for an extended period, like 100 years, then can renew the lease. Probably you already know this, and I have very little specific understanding of the law.

Since there are lots of ex-pats than live in coastal areas of Mexico, this is a really common type of transaction and I'm certain any decent real estate agent could explain it in detail.

 

[Jim Baldwin]

To my knowledge, Mexican law prohibits foreign private ownership of land within a certain distance from the coast, and that would include all land on Cozumel and on the Mayan Riviera. I believe you have to form a partnership with a Mexican national (probably a Mexican bank) and then you lease the land for an extended period, like 100 years, then can renew the lease. Probably you already know this, and I have very little specific understanding of the law.

Since there are lots of ex-pats than live in coastal areas of Mexico, this is a really common type of transaction and I'm certain any decent real estate agent could explain it in detail.

In the early 90's, maybe 1994, NAFTA was passed and as part of this act, foreigners were allowed to own property within 25 miles of the border, ocean, etc. which includes Cozumel.

As part of this arrangement you have to establish a fidecomisco, title of ownership, and go through a bank trust. The fideo is generally done for 50 years and can be passed on through your family as you outline in your fideo. And it can be renewed without all the paperwork and fees that a new fideo entails.

You pay taxes, and can do what you want with the property. Each year you pay the bank a fee for maintaining your trust. Ours is due March of each year.

 

[Christi]

In the early 90's, maybe 1994, NAFTA was passed and as part of this act, foreigners were allowed to own property within 25 miles of the border, ocean, etc. which includes Cozumel.

As part of this arrangement you have to establish a fidecomisco, title of ownership, and go through a bank trust. The fideo is generally done for 50 years and can be passed on through your family as you outline in your fideo. And it can be renewed without all the paperwork and fees that a new fideo entails.

You pay taxes, and can do what you want with the property. Each year you pay the bank a fee for maintaining your trust. Ours is due March of each year.

Actually Jim, the Fidecomiso is a trust...it is not "ownership" in the full sense of the word. However, it does allow you most ownership rights such as transferring, selling, passed on, etc. The main difference is that you do have to pay the trust up front which is expensive, pay the annual trust fee (mine is about $500 per year), and if you sell, you have HUGE, HUGE capital gains taxes that have to be paid.

Full ownership in the traditional sense doesn't require the annual trust fees, the initial trust payment, and upon selling the property, capital gains are minimal if anything...depending on how long you've owned the property.

No foreigner can purchase land or property in Cozumel without a Fidecomiso or without forming a Mexican Corporation (SA de CV) which purchases the land/improvements. In this case, the land/improvements become an asset of that corporation and are subject to corporate taxes, etc. If you plan to rent the property out as a vacation rental, or even do a long term lease, you have to form a corporation...if not, and you get caught...kiss your property goodbye or be prepared to pay HUGE attorney fees and be willing to fight a long legal batttle which you probably won't win.

Hope that clarifies and helps.

 

[OSUcowboyinSPFD]

Christi,

Thanks...With this particular client, they want to acquire some real estate in either Tulum/Akumel or near Costa Maya. They do intend to lease it out as a vacation rental, although they claim it will be to family and friends. I recall you telling me that taxes in Mexico are nothing to mess around with, so I also told them they would most likely have to form a corporation in Mexico for the business of managing the property. At this point, I have pointed them towards a real estate agent that was referred to me by another poster. If they find the property they like and are able to acquire it, then I may need to refer them to an accountant and an attorney in Mexico (or the equivelant thereof) for the business aspect.

Thanks,
Jeff

 

[Christi]

Christi,

Thanks...With this particular client, they want to acquire some real estate in either Tulum/Akumel or near Costa Maya. They do intend to lease it out as a vacation rental, although they claim it will be to family and friends. I recall you telling me that taxes in Mexico are nothing to mess around with, so I also told them they would most likely have to form a corporation in Mexico for the business of managing the property. At this point, I have pointed them towards a real estate agent that was referred to me by another poster. If they find the property they like and are able to acquire it, then I may need to refer them to an accountant and an attorney in Mexico (or the equivelant thereof) for the business aspect.

Thanks,
Jeff

Yes, if it's within 25 miles of the shoreline then they have only two options for purchasing.

• Form a Mexican Corporation which will purchase the property
• Form a Fidecomiso

If they are planning to rent it out as vacation property, then it has to be a corporation. And if they advertise the rental anywhere, including on the internet...then it is considered a commercial rental...not a family/friends rental.

The past two years, in Cozumel at least...there was a dedicated team in "city hall" that combed the internet finding all of the vacation rentals in Cozumel. I know of at least two people that had to pay some pretty big fines and/or back taxes as well as either take their house off the rental market or form a corporation to keep it. Big Brother is watching.

 

[Gaviota]

The Costa Maya area is very popular for real estate investments. Land prices are still very 'reasonable' for ocean front property. The diving is great. Chinchorro Banks is just a short trip for really excellent diving. Xcalak Mahahual Placer Uvero property - costa maya beach - beach front property has a number of listings. While I have not work with them, I know a number of people who were very happy with them.

Best advice - as was stated before - get a good attorney (and an accountant).

 

[Jim Baldwin]

Actually Jim, the Fidecomiso is a trust...it is not "ownership" in the full sense of the word. However, it does allow you most ownership rights such as transferring, selling, passed on, etc. The main difference is that you do have to pay the trust up front which is expensive, pay the annual trust fee (mine is about $500 per year), and if you sell, you have HUGE, HUGE capital gains taxes that have to be paid.

Full ownership in the traditional sense doesn't require the annual trust fees, the initial trust payment, and upon selling the property, capital gains are minimal if anything...depending on how long you've owned the property.

No foreigner can purchase land or property in Cozumel without a Fidecomiso or without forming a Mexican Corporation (SA de CV) which purchases the land/improvements. In this case, the land/improvements become an asset of that corporation and are subject to corporate taxes, etc. If you plan to rent the property out as a vacation rental, or even do a long term lease, you have to form a corporation...if not, and you get caught...kiss your property goodbye or be prepared to pay HUGE attorney fees and be willing to fight a long legal batttle which you probably won't win.

Hope that clarifies and helps.

I agree with you about the ownership. We paid our property taxes and garbage bill in December for the upcoming year and since we paid before the end of the year we got a nice discount of about 25 percent. Too bad the trust fees aren't as low as the property taxes. I'm like you I hate turning a loose of that money.

 

[Christi]

I agree with you about the ownership. We paid our property taxes and garbage bill in December for the upcoming year and since we paid before the end of the year we got a nice discount of about 25 percent. Too bad the trust fees aren't as low as the property taxes. I'm like you I hate turning a loose of that money.

I didn't say anything about hating to turn loose the trust fees. To me, it's a reprieve from what I used to pay for home ownership!

My property taxes for my home in Austin were close to $8000 USD (Eight thousand dollars) per year...so I'm not complaining at all about the $4000 it cost to set up the trust, the $500 per year for the trust, and the less than $200 USD per year in property taxes. It's not a bad trade off, especially considering that I have virtually the same rights as true ownership.

 

[firstdive2005]

I didn't say anything about hating to turn loose the trust fees. To me, it's a reprieve from what I used to pay for home ownership!

My property taxes for my home in Austin were close to $8000 USD (Eight thousand dollars) per year...so I'm not complaining at all about the $4000 it cost to set up the trust, the $500 per year for the trust, and the less than $200 USD per year in property taxes. It's not a bad trade off, especially considering that I have virtually the same rights as true ownership.

Thanks Christi for posting this last remark, it seemed to take an edge off of my deciscion to buy on the island. I was in fear from all the stigma and corruption there.(Mexico, not just Cozumel). I know of several people that are very happy with there new homes but I had not asked them any financial questions, so yours about comparison in US taxes vs Coz was great to read. We will live there 6mos of the year and then come home to Canada. We dont want to loose our healthcare. kev