Purchasing beachfront Mexico real estate through a Corporate Trust can greatly reduce your Closing Costs.
If you do not hold a Mexican passport and plan to purchase property on or near the beach in Mexico you will be purchasing in what is known as the Restricted Zone. This includes all properties within 100 kilometers (62.5 miles) of an international border or 50 kilometers (32 miles) from shore. In order to purchase residential property inside a restricted zone, foreigners must own their property through a Trustee. The Trustee can either be a Mexican Bank or a Mexican Corporation.
When using a bank as Trustee, an irrevocable Trust is set up between the property purchaser and the bank, this is known as a Fideicomiso, in which the bank serves as a trustee that holds the title to the property for a small service fee (about $500 per year).
When using a Mexican corporation as Trustee, an irrevocable Trust is set up between the property purchaser and the Mexican corporation, this is known as a Corporate Trust. The corporation holds the title on behalf of the property purchaser but does not hold the title as an asset to the corporation. A small one-time fee is charged to establish the Corporate Trust.
With either the Bank Trust or Corporate Trust, the property purchaser is beneficiary of the trust and holds exclusive ownership rights to the property. These are the rights to use and improve the property, sell, lease, will or mortgage the property. Upon the death of the owner, the estate then becomes beneficiary of the trust. If the beneficiary has a Mexican will, he or she can name a second beneficiary as well. In order to avoid probate issues, co-owners can be listed on a Fideicomiso.
Closing costs can vary widely between holding the property through a Bank Trust or Corporate Trust.
- Bank Trust purchasers can expect closing costs of 6-10% of the purchase price of the property.
- Corporate Trust purchasers can expect closing costs of approximately $5500 USD.
Learn more about buying property in Mexico, download our free Mexico Real Estate Guide.