- Welcome back Tangerines.
In this video, I'm going to be doing some myth-busting
on real estate in Mexico,
and share some tips with you to help keep you
from getting screwed
on your next Mexico real estate transaction.
About a year ago,
we did a video on why expats leave Mexico.
To start that video off,
we said one of the reasons why expats leave Mexico
is because they got screwed over by property rights
and they had their home stolen from them.
There's a quite a few examples of this
and in rolled the comments
we got literally hundreds of comments
saying one of two things.
One, it's illegal for foreigners to own property in Mexico,
or two, basically you're an idiot
for buying property in a foreign country
and if you wanna live in Mexico to always rent.
So in this video, I'm going to address
these two common misconceptions
as well as many other tips about buying property
here in this country.
So are you an idiot for buying property in Mexico?
I don't think so.
I think there is a lot of good reasons for it.
I think it's great to have international diversification
if you want to diversify some of your wealth,
get some of it out of your home country,
wherever that may be.
It's also a potential future income stream.
At some point in the future,
you could rent it out and create an income stream
into retirement.
And speaking of retirement,
let's say you wanna retire in Mexico.
Owning a property here
is going to lower your cost of retirement
and get rid of that monthly rental payment
that you might otherwise have.
Can buying property here be stupid?
Yes, there's some stupid mistakes you make.
And I hope in this video, I'll educate you a little bit
so you can steer yourself away from making those mistakes
that others have.
Now let's tackle that other super popular comment
on that video.
And there were literally hundreds of Mexicans saying
it's illegal for foreigners to own property here.
It's in our constitution.
And some even went as far to say,
you deserve to have it stolen from you
because you aren't allowed own it anyway?
And while there is a grain of truth to that.
It's a myth.
Foreigners can own property in Mexico,
but there are some things you need to know about this.
There's a restricted zone and the restricted zone is within
50 kilometers of the ocean
or 100 kilometers of the border.
And there's a lot of popular places
that people want to buy property
inside these restricted zones.
Lots of people want a home in Mexico by the beach,
whether that's Puerto Vallarta or
Cancún or Playa Del Carmen or one of many other places.
In reality, the restricted zone
is a pretty small part of the country
that leaves most of the rest of the country.
And as a foreigner, you can own the title outright
in those other parts.
So how can you purchase in the restricted zone
as a foreigner?
Aside from becoming a Mexican citizen,
which is technically an option,
you can either A, buy it through a land trust
or B, buy it through a Mexican corporation.
A land trust has its pros and cons.
The biggest con is the price.
It's gonna run you somewhere between
$300 and $800 dollars a year.
However, it's a trust.
So it's really great for estate planning.
And also if you're ever going to sell the property
in the future, under current Mexican law,
there is a capital gains exemption
for your personal property.
And if you own your property through a land trust
and you sell it, well, then you may be exempt
from much of those capital gains
that you would otherwise owe.
The second popular way to buy a property
in the restricted zone is through a Mexican corporation.
So, you would start a Mexican corporation
and it can be 100% owned by foreigners.
However, one of the big downsides to owning it
through a corporation is, there's corporate records
you have to keep up.
And if it's anything like having a corporation in the U.S.
well, then you have to have your corporate book,
you do your annual meetings, things like that.
One big benefit of owning it through a corporation
is that you don't have to pay that annual fee,
that the land trust has.
Laska, you've got to stop clicking.
If you're gonna be clicking, you gotta make an appearance,
okay, what's next?
Do you want to share the next one?
If you're finding this video helpful,
please subscribe to our channel
because we'll be putting more videos out
like this in the future and stick around until the end,
because I'm going to be sharing some things
that you need to know
if you're interested in buying a place here in Mexico.
If you take only one thing away from this video,
let it be this.
There are a million and one ways
to get screwed over buying property in Mexico.
However, using a lawyer
will help avoid almost every single one of those problems.
When we were looking into buying a condo
in the state of Yucatan,
I asked in some Facebook groups for some recommendations
of an attorney that worked with real estate.
And what people said, the most common answer,
nine out of 10 people said, what you need is a notary.
And while a notary is part of the process.
Get yourself an attorney to advocate for you
in addition to the notary.
Because they're going to be doing the due diligence,
they're going to be looking at the environmental studies,
the construction permits,
everything to do with taxes and liens
and all kinds of stuff
that you would never even think about.
You will probably get the advice, like I did
when I went asking for an attorney, to find a notary.
If nothing else, at least get the consultation
from an attorney so you know what risks you're at.
if you don't end up hiring one.
So what's a lawyer gonna help you with
in a real estate transaction here in Mexico?
Well, there is no such thing as title insurance here.
So, they're gonna be looking for all sorts of red flags.
They're gonna be doing tons of research
into the history of the title,
what the sales processes were like before
when it had been sold in the past.
Are there any red flags there?
If the property you want to buy
is currently under construction or one that's not built yet
they're going to be looking at the public filings of that,
making sure it's legit, that it's not a scam
that they have all of the proper construction permits,
that they've done the environmental studies
that need to be done.
All sorts of things that you would never even think about.
So what else is a lawyer gonna do?
They're gonna make sure that all the taxes are up to date,
that the property taxes have been paid,
that all the bills have been paid,
like the water bill, the electricity bill, and so on.
And speaking of the electricity bill,
they're also gonna be looking for red flags in that.
Is it a house that normally gonna have an electric bill
of 1000 pesos a month,
but their electric bills have been 10,000 pesos a month?
If so that might be a sign that
either, hey, you need some major electrical work
done on this house, or you need to be ready
to pay that extra $450 dollars per electric billing period,
as long as you own the house.
One big thing a lawyer is gonna do for you is
they're going to make sure you're not buying a Ejido land.
What is a Ejido land?
While back to make sure all of the peasants and farmers
could continue living off the land like they had been,
they designated a lot of areas across Mexico as Ejido land.
It's kind of like communal land.
And the members of that area
have the right to operate that land.
And sometimes this Ejido land comes up for sale
and it looks like a really great deal,
but there are so many ways you can get screwed
buying a Ejido land that more often than not
a lawyer will just tell you do not touch it.
If you're like, no, it's too great of a deal
I need to move forward with it,
do not do it without help, without the help of someone
who specializes in transactions like this.
Because there is a way that it can be done,
but the person really, really
has to know what they're doing.
The lawyer is also gonna look at the deed
and make sure it's legit
because something that happens here is people forge deeds.
They are trying to sell property
that they don't actually have the legal authority to sell.
Another one of the million and one examples
of ways you could get screwed over in Mexico
is you're buying a place that was recently built
and the builder of that didn't properly register that
and pay all the necessary employment taxes and whatnot
that could fall on you, the buyer of that house
as much as five years later.
So, let's say you buy a place for $150,000 dollars.
It could be five years later,
you all of a sudden are in a fight with the tax authorities
and they're telling you that you owe 15, 20, $25,000 dollars
because the builder of the property
didn't properly register and pay various taxes.
Something else you need to look out for.
If you're buying it through a trust,
sometimes trust companies has have clauses
in there saying that you can't rent out the properties.
And in that case,
the lawyer's probably gonna recommend another trust company
to go with that doesn't have that clause in there.
I could continue with example after example
of what a lawyer is going to do for you
in a real estate transaction in Mexico
and other examples of how people got screwed over,
how people got their property stolen from them,
but my point is, get a lawyer.
Because 99 out of the 100 problems
you're going to run into buying property in Mexico
could have been avoided. if you had hired a lawyer
to do all this due diligence for you.
Aside from all the legal stuff,
what are some tips that I have for you
as someone who has been living in Mexico
who's rented in a lot of places,
who's seen a lot of what Mexican culture is like
and talked to a lot of people who have built homes,
who have bought homes and things like that.
Well, one thing I would say is if I'm buying a home,
I would be paying attention to what's around there.
Is there open space?
Is there things that are going to be turned into lots
and sold?
Because there aren't a lot of zoning laws in Mexico.
So you might be buying a home
in what you think is a residential area
and then the person who ends up buying the lot next to you
builds a machine shop or a auto repair shop
and then you have all kinds of noise
and not only does it like ruin the place for you,
it also destroys your property value.
So, if I were looking into buying a place,
I'd be trying to buy the land around it too
so that couldn't happen.
Another thing is, while buying land and having a home built
sounds pretty appealing because then I get to choose
exactly what the home is going to look like,
and I can make it just how I like it.
Well, in the conversations I've had with people
who've built homes, it's a total nightmare.
Dealing with contractors is awful in the U.S.
but from what I hear in Mexico it's 10 times worse.
So, I would avoid building my own home at all costs
unless I had the skills to do it myself
and I had the skills to supervise it myself
and was willing to invest the time into doing that.
So those are just a couple tips I have from you
from personal experience.
But I also have some other important things
to share with you some things that you should know.
In this video, I've talked about a notary
and well becoming a notary is a pretty simple process
in the United States.
In Mexico, it's actually quite difficult to become a notary.
Notaries here are lawyers
and they have to be of a certain age
and they have to be something like appointed by the governor
and they have to be Mexican.
So no foreigners can be notaries.
Every real estate transaction is done through a notary.
So, if you go in a Facebook group
and you're talking about buying a home,
people will tell you to get a notary.
Well, you do need a notary.
That's part of the transaction you can not avoid.
But don't think that's a replacement for getting a lawyer
who's going to advocate for you
and do due diligence for you.
And that's another point I wanna drive home.
Again, if you take away one thing from this video,
let it be that if you're going to buy property in Mexico,
don't trust the real estate agent to do everything,
don't trust the notary to do everything,
get a lawyer to do due diligence for you.
There's a good chance that it's gonna save you
major headaches down the line.
Something else you need to know
about buying property in Mexico
is that closing costs are quite high.
The closing costs can be about 5% of the purchase price.
But on the other hand, property taxes here are absurdly low.
If you're buying a property for $100,000 dollars,
your property taxes are probably gonna be
just over $100 dollars a year.
If you're buying a property for $500,000,
your property taxes will probably be somewhere around
$550 a year.
So way, way cheaper than property taxes
anywhere in the U.S.
And something else you should know
about buying property in Mexico
is that most transactions here,
at least those with foreigners are done with cash.
Not a large percentage of real estate transactions
are financed here.
And that's for a few reasons.
It's harder to qualify here.
You need a bigger down payment.
Interest rates are higher.
Also closing costs on the loan
and there's extra fees involved with the loan.
So due to the expense and the difficulty of getting a loan,
people are usually paying cash when they buy a home here.
On the screen here, is that video I mentioned earlier,
why expats leave Mexico.
I highly recommend you watch it if you haven't seen it yet.
Please subscribe to our channel
and stay tuned for Saturday's video,
which is Maddie's first solo video.
But one more thing.
(rings bell)
- Gong that bell
so you get notified the next time we release.
Nope. I release a new video and we'll see you there.