How Can a Foreigner Own Property in Cabo San Lucas?
Mexico welcomes investment by foreigners! Purchasing real estate is among those investments. In Cabo San Lucas, Los Cabos, BCS, a Foreign National can buy, sell, and have full ownership rights to property. The myth that “Foreigners can only lease property” in Baja Sur is just that; a myth.
Back in 1994, the Mexican Constitution was amended to permit foreigners to purchase and own real estate in Mexico located within what’s known as the “restricted zone”. This refers to any land or property within 60 miles of a National border and 30 miles of the Mexican Coastline. The 1994 Law permits ownership through a long-term irrevocable trust. Or what’s locally known as a “Fideicomiso”. The most desired areas in Mexico – such as the beachfronts of Baja California Sur – are labeled “Restricted Zones.”
That law authorizes Mexican banking institutions to act as trustees.
This trust is similar to any Family Trust in the USA or Canada. Through Fideicomiso, the bank holds the title of the property but cedes all property rights to you. You’re given the rights to own, remodel, occupy, or rent out the property. You can even sell it or assign it to an heir if you wish. The house or condo is yours. You must simply uphold the trust with the bank via annual Fiduciary fees and ensure municipal fees, such as annual property taxes and water are maintained as current.
A trustee in this circumstance acts upon instructions only from the Trust Beneficiary (the foreign purchaser).
The Beneficiary listed on the Trust may also sell their rights to said property. Your closing agency attorney will instruct the trustee bank to transfer title to a qualified new owner. Either another foreigner or a Mexican National.
If you are from the USA, Canada, or any other country in the world and want to buy your own house or condo in Cabo, the Fideicomiso is the way to go for several important reasons:
- Your Bank Trust (Fideicomiso will be valid for 30 years). If something happens to you within that 30 year period, your heirs will simply pay a 2% acquisition tax on the property value for title transfer. There will also be a small fee for transferring the title into their name. And they will, of course, pay the annual Trust fees of approximately $450, and annual property tax.
- Your Heir’s names are included on your Fideicomiso registry documents to make that transfer process easier now or in the future.
This transfer of title occurs through the Notario, just as your purchase did.
- Unlike with a Mexican Ownership Escritura, or some instances in the USA, there is no extended time required for a legal hearing or attorneys to transfer your Trust ownership. There will be an acquisition tax applied to the transfer process.
- The liberalization of the foreign investment rules is a clear indication of the very favorable attitude the government has taken towards foreign investment.
- In accordance with NOM 247, prices shown in DOLLARS are to be converted into PESOS within all legal documentation. This is important for Buyers to understand. The offered price found on the MLS is usually in DOLLARS (US Currency), unless the ownership is in Mexican ‘Escritura’. In accordance with article 8 of the monetary law, the final price indicated for title and tax evaluation recording purposes will be in MX PESOS. As you are probably already aware, the exchange rate changes daily (if not several times per day). The final Peso amount listed in your title and tax documentation is derived from the official exchange rate on the date the Gov’t franchised Notario actually finalizes and registers your purchase.