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Mexico has become a popular destination for international real estate investors, from beachfront villas in Los Cabos to condos in Cancun. A common question is whether foreigners can own real estate in Mexico – the answer is yes, absolutely. Not only is it possible, it’s also quite popular in tourist areas like the Riviera Maya, Puerto Vallarta, and Baja California.
However, foreign buyers must follow specific legal structures. Mexico’s Constitution historically prohibited non-citizens from directly owning land in certain areas, so the country created a special trust mechanism, known as a fideicomiso, to facilitate foreign investment without violating those laws.
In this article, we’ll explain what a fideicomiso is, why it exists, how it works, and what investors should know about using one to securely own property in Mexico.
What is Fideicomiso?
Fideicomiso is the Spanish word for a trust. In Mexican real estate, a fideicomiso refers to a long-term bank trust used to hold title to property on behalf of a foreign buyer. Simply put, it’s an irrevocable trust agreement in which a Mexican bank (authorized as a trustee) holds the legal title to the property, and the foreign investor is the beneficiary who enjoys all ownership rights. This means that while the bank’s name is on the title as trustee, you as the buyer have the exclusive right to use, rent, improve, sell or bequeath the property as you wish.
In essence, the fideicomiso is the legal vehicle that allows non-Mexicans to own residential property in areas where direct ownership is restricted, while giving the foreign owner the bundle of rights equivalent to direct ownership.
Why is Fideicomiso Necessary?
The fideicomiso system exists because of restrictions enshrined in the Mexican Constitution. Under Article 27 of the Constitution (enacted in 1917), foreigners are prohibited from acquiring direct title to land in the “restricted zone” – defined as land within 100 kilometers (62 miles) of any international border, or within 50 kilometers (31 miles) of the coastline. These areas were considered strategic and were reserved to prevent foreign control of border and coastal land.
In the mid-20th century, as Mexico sought to encourage foreign investment (especially in its coastal areas), a workaround was devised. In 1973, the Mexican government passed the Foreign Investment Law, enabling the fideicomiso trust structure as a legal loophole to allow foreign investment in the restricted zone without changing the constitution.
Essentially, by having a Mexican bank hold the title in trust, the transaction doesn’t count as “direct” ownership by a foreigner, thereby satisfying the constitutional requirement while still granting effective ownership to the foreign buyer. If a property lies outside the restricted zone, no fideicomiso is needed – foreigners can hold the title outright just like any Mexican citizen.
By using the fideicomiso trust, Mexico found a way to open up these restricted zones to foreign buyers. This has greatly benefited tourist and resort regions – for instance, it allowed the development of hubs like Cancun, Los Cabos, and Puerto Vallarta by attracting international buyers and investors.
How Fideicomiso Works
How does the fideicomiso process actually work in practice? Below is a step-by-step look at how a foreign investor would acquire property using a fideicomiso:
- Offer and agreement: First, you identify the property you want to purchase (often in the restricted zone) and agree on terms with the seller. At this stage, you’ll also choose a Mexican bank to act as the trustee for your fideicomiso. The bank you select should be authorized to handle trusts (many major Mexican banks offer fideicomiso services).
- Permit from Foreign Affairs: The bank (or your closing notary) will apply for a permit from the Mexican Ministry of Foreign Affairs (Secretaría de Relaciones Exteriores, SRE) to establish the trust in your name. This permit is a legal requirement for any foreigner buying in the restricted zone. Once the permit is issued, you have the green light to set up the fideicomiso.
- Trust deed formation: A Mexican notary public (a government-authorized attorney who formalizes real estate transactions) will draft the fideicomiso deed. The deed names the bank as the trustee, you (the foreign buyer) as the trust beneficiary, and it describes the property and purchase price. The deed outlines that the bank is holding title for your benefit for a 50-year term, and lists any substitute beneficiaries you designate (such as your spouse or children, who would inherit the trust rights). This trust deed is prepared in Spanish and is formalized in a deed signing in front of the notary, the seller, and the bank’s representative. At this closing, the property title is transferred from the seller to the bank as trustee on your behalf. You’ll pay the purchase price to the seller, and the bank effectively “takes title” for the trust.
- Registration and finalization: The notary will register the new deed with the Public Registry of Property, showing the bank as trustee for your fideicomiso. You, as the beneficiary, now have equitable ownership rights to the property. The bank cannot do anything with the property unless you (as beneficiary) instruct it in writing. In other words, you hold all the keys – you can live in the home, rent it out, remodel it, or sell it. The bank’s role is administrative: holding the title and obeying your lawful instructions regarding the property. The fideicomiso is your asset – any increase in property value accrues to you, and if the property is sold, the proceeds (after any taxes) go to you, not the bank.
- Ongoing management: After setup, the fideicomiso functions in the background. You’ll typically pay an annual trust fee to the bank for serving as trustee.
- Selling or transferring: If you decide to sell the property, it’s a straightforward process. A foreign buyer can take over your existing trust (by having the beneficial rights assigned to them), or they may have a new fideicomiso created for them as part of the sale – the notary will handle the paperwork either way. If the buyer is a Mexican citizen, the trust can be terminated at closing and the title transferred directly to the buyer’s name.
- Renewal: The fideicomiso is granted for an initial term of 50 years. This term is renewable for another 50-year period indefinitely. When the trust is nearing expiration (many decades from now), the current owner (beneficiary) would apply for a renewal permit to extend the trust for another term. The law allows unlimited renewals, so in practice the property can remain in your family or portfolio for generations through successive trust terms. It’s wise for investors to mark their calendars far in the future or inform heirs about the renewal, but it’s not something that requires frequent attention after purchase.
In summary, the fideicomiso process involves setting up a bank trust to hold the property, but once it’s in place, you as an investor have full control and enjoy the same benefits as any property owner.
Legal Requirements and Costs
Buying property via fideicomiso does come with some additional paperwork and fees compared to a domestic purchase. Here are the key legal requirements and costs an investor should anticipate:
- Permit from Secretaría de Relaciones Exteriores (SRE): As noted, a permit from the Mexican Ministry of Foreign Affairs is required to establish the fideicomiso in a restricted zone. There is a one-time fee of $19,950 MXN or $1,000 USD, to issue the permit: SRE fees
- Bank Trust Setup and Annual Fees: The bank (trustee) charges a one-time setup fee to create the fideicomiso. This covers establishing the trust account and legal paperwork with the bank. Trust fees for opening a new fideicomiso (detailed costs at Banco del Bajío):
- $400 USD + VAT for signing the contract.
- $450 USD + VAT for the first annual fee.
- $400 USD + VAT in case of granting a mortgage guarantee.
- Closing Costs: In addition to the above, standard closing costs will apply. Closing costs when buying a property in Tulum typically range from 6% to 7% of the property's purchase price. These costs encompass various fees, including notary fees, property transfer tax, legal fees and administrative fees.
- Trust Term and Renewal: The fideicomiso is valid for 50 years. As the end of that term approaches, you (or your heirs) would apply for a renewal permit to extend the trust for another 50 years. Renewal is a relatively simple process – essentially a paperwork application with the SRE to issue a new permit for another term. There will be a fee for the renewal (comparable to the original permit fee) and possibly a minor bank fee for processing the extension.
In terms of timeline, setting up a fideicomiso does add a bit of time to the closing process. Obtaining the foreign affairs permit and getting the bank trust ready can take a few weeks. In practice, many transactions in resort areas allow 4–6 weeks for closing to accommodate the trust setup.
Benefits for Investors
Using a fideicomiso offers several advantages for foreign investors looking to buy property in Mexico’s prime locations. Here are some key benefits:
Access to Prime Real Estate: First and foremost, a fideicomiso allows you to legally purchase desirable coastal and border properties that you otherwise could not own directly as a foreigner. This opens up investment opportunities in popular markets like beachfront homes, resort condos, and other high-demand real estate.
Secure Ownership Rights: Even though the title is held by a bank trustee, you maintain all the rights of an owner. You have the legal right to occupy the property, rent it out for income, make improvements, and sell the property at any time. The bank cannot sell or do anything with the property without your authorization.
Estate Planning (Inheritance): Fideicomisos have a built-in advantage for estate planning. When you set up the trust, you can designate substitute beneficiaries (such as your spouse, children, or anyone you choose). In the event of your death, those beneficiaries seamlessly assume your rights to the property without needing to go through a Mexican probate process. The property does not get frozen; it simply transfers to the named substitute beneficiary by operation of the trust. This is a significant benefit, as it makes passing the property to heirs much easier.
Flexibility to Sell or Exit: The fideicomiso does not lock you in or restrict your exit options. If you choose to sell the property, it’s straightforward to do so.
Long-Term Assurance and Renewable Tenure: With a 50-year term that’s renewable for another 50 years (and so on), the fideicomiso gives effectively perpetual rights to the property.
Potential Tax Advantages: While not a feature of the trust per se, if you rent out the property, you can often deduct the trust fees and other expenses when calculating taxable rental income in Mexico. And because you are considered the beneficial owner, if you later sell, you may be eligible for certain capital gains tax exemptions or allowances (for example, some longer-term foreign owners qualify for partial exemptions similar to residents). It’s best to consult a tax advisor on this, but holding property through a fideicomiso does not disqualify you from tax benefits - it simply requires proper reporting.
Well-Established Mechanism: The fideicomiso system has been in place for over five decades, with thousands of foreign investors using it. Major banks in Mexico (Banamex/Citi, BBVA, Santander, Banco del Bajio etc.) act as trustees.
In short, a fideicomiso trust gives you the best of both worlds: the ability to own and profit from Mexican real estate, combined with legal protection and flexibility. You can enjoy your investment property or rental income, secure in the knowledge that your ownership is recognized and protected under Mexican law.
Risks and Limitations
While the fideicomiso is a very effective system, it’s important to be aware of its costs and limitations. Here are some potential downsides or considerations for investors:
Additional Costs: The most obvious drawback is the extra cost. Between the trust setup fee and ongoing annual fees, a fideicomiso adds to the expense of owning the property.
Administrative Formality: Because the property is held in a trust, certain actions require an extra step of administration. If you want to modify the title (say, add your spouse or change your beneficiary), you must go through the bank and notary to update the trust. Essentially, any major transaction involves the bank trustee’s sign-off.
Trust Term Awareness: The 50-year term, while renewable, is something to keep in mind. It’s a long time, but not infinite. If you plan to hold the property very long-term or keep it in the family, someone will need to handle the renewal when the time comes.
Slightly Longer Closing Process: As mentioned, setting up the fideicomiso can add a few weeks to the closing timeline. Compared to a normal transaction that a Mexican buyer might complete more quickly, a foreign buyer using a trust may need to wait for the SRE permit approval and trust creation. Typically this isn’t a major issue, but if you’re in a hurry, it’s a factor. Working with experienced professionals can speed things up, but some bureaucracy is unavoidable. Patience and understanding of the process are necessary to avoid frustration.
Alternative Ownership Structures
While the fideicomiso is the standard method for foreign individuals buying residential property in the restricted zone, investors should be aware of alternative structures:
Mexican Corporation (Sociedad): Instead of using a trust, a foreign investor can form a Mexican corporation (a company, which can be 100% foreign-owned) and purchase property through that corporation. A Mexican corporation is considered a Mexican entity, so it can directly own property anywhere in Mexico, including the restricted zone, without a fideicomiso. This approach is often used by investors who plan to buy multiple properties or engage in business activities. For example, if you want to buy several rental condos or a combination of residential and commercial properties, a corporation can hold them all (there is no limit to how many properties a Mexican company can own). The corporation can also deduct many expenses related to the properties (maintenance, improvements, property management costs) from its taxable income.
Direct Ownership in Non-Restricted Zone: It’s worth noting again that if the property is outside the restricted zone, you do not need a trust or a special vehicle at all. You can buy property in your own name (foreign name) anywhere more than 50 km from the coast or 100 km from borders. In these cases, the process is simpler – you still use a notary to handle the deed transfer, but no bank trust or permit is required. Many foreigners own homes in places like San Miguel de Allende or Mexico City directly.
Final Thoughts
For investors interested in Mexican real estate, the fideicomiso is the gateway to owning some of the most beautiful properties the country has to offer. It might seem a bit complex at first, but in practice it’s a streamlined and secure process that thousands of foreigners navigate every year.
The key takeaways are: yes, you can own property in Mexico as a foreigner, and the fideicomiso trust is the main vehicle to do so in restricted areas. It provides the necessary legal structure to satisfy Mexican law while giving you the beneficial ownership and control you need.
If you are wondering how to buy property in Mexico, our team is here to guide you through the process, introduce you to our new condos for sale in Tulum, and help you find a property perfectly tailored to your needs.
