There’s a term you’re going to be seen throw around often during your investments, restricted zone. That means 62.1 miles from the US/Mexico border and 31.05 miles from the coast. This part of Mexico requires that when you buy real estate property the title must be transferred to a Mexican bank. The bank, in turn, holds it as a trust for you, the foreign buyer, as the beneficiary. That’s the general gist of things, but let’s see what’s really going on inside the Fideicomiso.
What’s a Fideicomiso?
As I mentioned before, it’s pretty much the only way you can purchase property in certain parts of Mexico, but if you need a simpler comparison then here’s how you can picture it: compare the Fideicomiso/bank trust with a deed of trust in the US (loan security). If you buy a home for cash you get that title right away, but most people don’t (for understandable reasons), so in that case people get a deed of trust which gives the buyer an “equitable title”, with the right to use but only a restricted one to sell, once the property is fully paid off.
Until the loan is paid, the title is held by the trustee and in the case of Mexico and Fideicomiso, the bank itself is the trustee and holds the title for you. Yes, you never get this title but so do many homeowners back at the US, because of selling or refinancing before the 30-year term of the loan is complete (you do get a copy though, there’s that).
Why do I need a Fideicomiso?
You already know how tricky Mexican law can get and why you need a Fideicomiso to circumvent the “restricted zone” but let’s not talk about requirements for a moment. Let’s talk benefits. As a beneficiary, you have full rights of ownership; you can buy, sell, lease, use, bequeath, improve, transfer or even encumber the property. It’s all yours! In fact, what used to be a 30-year term increased to 50 during a law change in 1993 and guess what, it’s renewable!
The fideicomiso also an excellent form of ownership because it allows survivability through co-beneficiaries (allows you to probate) and it protects you if someone tries to sue you from your property, being backed by the Mexican Law.
How do I get a Fideicomiso?
The process of acquiring real estate in the restricted zone (with proper assistance like legal representation and a Notario) will lead you up to the fideicomiso naturally since it’s a key requirement. If we’re talking costs however, it ranges from 3500 to 5000 USD, paid in annual fees of anywhere from 600 to 1000 USD. This price covers the government permit fee, bank set-up fee and one year’s fee. A reasonable price that will grant you all the benefits of a summer home and the legal protection and perks that comes with the fideicomiso.
So there you have it. Not so difficult once you get past the word itself isn’t it? Sure, the whole thing might feel cumbersome but the fideicomiso is nothing more than a necessary step and one that will give you amazing benefits either way. If you play by the rules, the rules pay you back.