Baja California has been so popular lately in the foreign real estate market. While in San Diego, the average price for a mid class house during 2004 was around $500,000, in Baja California you can get a bigger house, for the same price, and beachfront.

Foreigners can own property in Mexico. The property referred to as the “Prohibited Zone” runs along Mexico’s coasts and borders is a restricted area, which was established under the Mexican Constitution and extends 100 kilometers (about 62 miles) deep along the coasts. This means that virtually all of Baja California is included in the “Prohibited Zone”. The Rosarito Beach-Ensenada-Cabo San Lucas type areas require a Mexican Bank Trust for a Foreigner to enjoy owning a home in Baja California.

Four Ways to Hold Property in Mexico:

1-Mexican Bank Trust (Fideicomiso)
2-Mexican Land Lease
3- Commercial Property
4- Federal Zone

1- The Mexican Bank Trust:

The Mexican Bank Trust was created in the early 70’s to promote tourist and retirement investments along popular coastlines by Mexican President Echeverriua, which authorized the 30-year Bank Trust program. This is the most secure method to hold real estate in Baja California.

Your Bank Trust must be established at an authorized Mexican Bank in their Trust Department. In 1989 President Salinas mandated the 30 year Trust be extended for an additional 30 years. Then, December 27, 1993, President Salinas extended the Trusts from 30+30 year arrangement to the new 50+50 year time period. The property you hold in a Bank Trust is yours to improve, build, sell, leave to your estate, etc. You’ll enjoy all the same rights you have in your U.S. fee simple real estate via the Bank Trust. Your Family Trust in the USA can also be the owner of the Bank Trust if you so desire.

There are several Subdivisions in the area that were set up as a Master Bank Trust by the developers 30 years ago. Two of those subdivisions were San Antonio Del Mar and Las Gaviotas. They both had the original 30-year Trusts, which expired March 2003. All the owners requested their new 50 + 50 Year Bank Trusts and those new Trusts have now been issued. When you decide to sell your home, in all probability, another foreign person will be purchasing your Bank Trust Rights. You will write a letter of instruction to the Bank that will include your new Buyer’s name and beneficiaries. The new Buyer can assume the remaining years of the Bank Trust or they can apply for a new 50 + 50 year Bank Trust. It is the Buyer’s choice.

If you sell your Trust Rights to a Mexican National, he has the option to take title in his name in the Trust or remove the property from the Trust and take title in “Escritura” (Mexican National form of Ownership). Sometimes the Mexican National will opt to pay the annual Trust fee and stay within the Trust, especially, if his most likely buyer would be another foreigner.

A Land Lease for More than 10 years is not Legal and never has been !

2-The Mexican Land Lease

Nearly every day clients ask, “Can I get a 99 year land lease?” A land lease for more than 10 years is not legal and never has been. Not the 10 + 10 + 10 year arrangement, either. If you enter into a 10 + 10 + 10 agreement with a Mexican landowner and at the end of the first 10 years the landowner decides he does not want to recognize that second ten-year lease you thought you had, he does not have to do so. You have no recourse, because you entered into that agreement which was designed to circumvent Mexican Law, thereby giving you no legal status to use the Mexican Court System. If you lease land, the lease should be 9 years and 11 months to stay with in the lease land laws. It is possible and perfectly legal for the Mexican land owner to give you a new 9 year 11 month lease at the end of your first 9 year 11 months and so on. I only suggest Lease Land arrangement if you are #1. Limiting your second home investment to a smaller total purchase amount rather than a Bank Trust purchase and #2. Only if you can obtain a 9 year 11 month lease. Just be sure the total investment you are willing to pay for the structure on lease land is an amount you can average over a 10-year period and be willing to “walk away” from at the end of your first lease period of 9 years 11 months. That may not be the case, but know it could be the case in the future. 

Lease Land Fees

Land lease rents run about $150.00 to as much as $600.00 per month. Most leases have a “cost of living adjustment” at the end of your lease for the next lease term. Usually there’s 3 to 10 % fee when you sell your structure that goes to the landowner and your buyer will probably have a nominal increase in the rent as well. Usually a 10% increase.

3-Commercial Property

Commercial property like the Ford, Sony, Zenith, Toyota and Sharp facilities are allowed to own their commercial piece of property as fee simple. This exemption was made to encourage the large investment for these type facilities that employ so many Mexican Nationals. You, as a foreigner, can also own a piece of land/building and business such as a restaurant, hotel, store, etc. You no longer need a Mexican National to own the Mexican corporation or your commercial property. You then obtain a Work Permit Visa, as a foreigner, to operate the business and provide jobs for the Mexican people. For a Mexican corporation you need 2 shareholders & they can be from any country.

4-Federal Zone

The land within 20 meters of the average high tide of the ocean is federal property.This land is called the "Zona Federal Maritimo Terrestre" (Federal Maritime Land Zone), commonly called "federal zone".

To obtain a concession, individuals or corporations must apply to the General Administration of the Federal Maritime Terrestrial Zone and Coastal Environment, presenting identification documents, such as birth certificates, stating what use they intend to make of the property, and in some cases presenting an environmental impact statement.

A fee is charged for use of the federal zone, depending on the geographic region and intended use. So, land for a hotel near a city will have a high fee, and land for a trailer in a remote area will have a low fee. You can think of this like "rent".

Many of the Buyers these last few years are Mexican American persons that are residing in the USA. If they have one or both parents with their Mexican birth certificate, the children have a window of opportunity to obtain their Mexican Birth Certificate, which would allow them to OWN their property fee simple as a Mexican Citizen. This opportunity is only good for one generation. This is a real benefit that eliminates the Annual Bank Trust fees, which costs about $330 to $550.00 per year; depending upon the Bank you select and the permit from the Foreign Relations office in Mexico would not be required which is a little over $1,000.00.

The annual property taxes are so low that when we tell buyers that a home with a value of $350,000 is $200.00 a year, they think we’re nuts! It’s true. There is a one-time tax that is paid at closing that is an acquisition tax. Your annual fees on a $300,000 home would look something like this: Annual Bank Trust fee @ $550.00, Property Tax @ $200.00, Homeowners insurance @ $350.00, and HOA maintenance fees at an average $150.00 a month for an annual expense of $2,850 FOR THE YEAR!

How does a Mexican Property Purchase Closing Work?

The laws in Mexico provide very well for Foreign Buyers. The system is clear and there are a lot of checks and balances that are in place to protect your real estate investment. When an offer is made and accepted by all the parties, then we set about to obtain the survey, current appraisal, Letter of Instruction from the Seller to the Bank that holds the Trust to place in the new Buyer’s names, which includes naming their beneficiaries. We open the file with a Notary. A lien waiver certificate is required at closing, a letter from the bank stating the Bank trust fees are current, the property tax receipt for the current year and a letter from the Home Owner’s Association that all fees are current and there are no pending assessments either with the Association or the Federal Zone. The Notary verifies the “Chain of title” and will not sign the document until all the required documents are in order and are within the required dates of no longer than 6 months old for the appraisal and survey.

The number of foreigners arriving to live in Baja is increasing every day. They are coming for short and long periods of time. Some are vacationing others just to feel the area.

It is easy for us to consider them just as residents or immigrants. However, for the National Institute of Immigration (INAMI) they have not any of those characteristics, they are renters-visitors (Visitantes Rentistas).

When a foreigner (which over here are mainly Northamericans) crosses the border entering into Mexican territory, he is doing it as a tourist, a TOURIST VISITOR, under the document known as FMT. If he decides to remain in Mexico, he has to apply before the INAMI for the change of his migratory status to become a RENTER VISITOR (under the FM 3 document). A Renter Visitor is the foreigner who lives in Mexico from the income he receives from abroad.

The requirements a visitor must fulfill, in order to obtain a FM 3 are the following:

1.- To apply for the change of migratory status, a person needs to indicate his name, citizenship, address, passport number, and occupation in Mexico, if any. All this information must be stated in Spanish in original and two copies.

2.- Current passport which must be valid for at least the next six months, after the filing of his petition.

3.- FMT (TOURIST VISITOR VISA), original and copy.

4.- Proof of address in Mexico. Must show original and copy of the trust or lease contract. If it is a lease, it must be attached to lease contract, a copy of lessor's I.D.

5.- Proof of income.

a) If it is a bank account statement from a Mexican bank, it suffices the original and copy of the last monthly statement.

b) if it is a bank account statement from a foreign country, attach the Apostille from Section of the State Office where bank is located. If this bank is located in San Diego area, the Apostille on said Bank statement must be obtained in the Secretary of State Office in downtown San Diego, duly signed by Mr. Bill Jones,

Secretary of State of California. The telephone number of the office is (619) 525-4113. The bank statement must be translated to Spanish by certified translator authorized by the Immigration office.

c) Proof of income equal to 250 days of the minimum daily salary in the Federal District (minimum salary per day x 250 days = $). An additional amount of (minimum salary x 125 days = $) must be added for each dependent member of the family.

6.- Document FM 1, typed and completed with all the information it requires, and filed without signatures, without pictures and no fingerprints on it (you can obtain this form at the Immigration office).

7.- Fiscal contribution. Original and two copies of the payment of the corresponding fiscal contribution (this amount changes every three months and the payment can be made in any local bank by using the Hacienda form No. 5, that is for sale at the local stationeries).

8.- Fees. Original and two copies of the payment of the corresponding fees for the paperwork, (also, this amount changes every three months and its payment can be made at any local bank, in the same way by separately from the one described above).

9.- Pictures. Three front and two right side pictures, black and white, FM size ("credential" size 1' x 1 1/2' ).

All the above documents must be filed with the local office of the INAMI. The local immigration office shall issue the migratory document FM 3, which shall identify him as a renter visitor. The document must be renewed every year for five years.

The requirements for additional renewals are very simple, and include the presentation of the original and one copy of the current FM 3, the passport and the proof of income.

If the applicant is married, they will need a document, the "Vinculo matrimonial", signed by the spouses and two witnesses, with copy of the spouse's FM 3. If the spouse does not live in Mexico, it shall be expressed in a letter. This procedure shall be repeated every year to renew the FM 3 document until the first five years are completed. At this point the foreiger shall be able to apply for the change of migratory status from no immigrant to immigrant, under the FM2 document. The FM3 document will need to be filed annually for five years for renewal.

If at the end of these two five year filing periods ( FM 3 and FM 2) you choose to remain legally in the Country, you shall be legally declared under the Mexican laws as immigrant, maintaining your original citizenship.

There are several business called “Escritorio Público” where you can obtain more information and also, they’ll help you doing all the paperwork.

As a foreigner, do I need a permit to live in Mexico?

Yes, Foreigners need to fill a special form and present legal papers to the immigration office. Depending on your status, you might need an FM2 or an FM3

Can foreigners rent real estate on the coast?
Yes, Foreigners can rent Mexican properties in almost any place for a small, medium or large period of time as they prefer.

Can foreigners buy real estate on the coast?
Yes, The Mexican Constitution allow foreigners investment in these areas with a"fideicomiso," instrument founded in Mexican law which permits attract foreign capital; This enabled foreigners, as beneficiaries of the trusts, to enjoy unrestricted use of land located in the coast zone.

Who are involved in real estate transactions in Mexico?
1- A seller,
2- Real estate companies (Representative Buyers Agencies )
3- The buyer's lawyer or representative,
4- A bank,
5- A public notary

Who is a Notary in Mexico?

A Notary in Mexico is NOT the same as a Notary in the USA. The Mexican Notaries are held in high esteem and are the only non-government person who has the right to use the Seal of Mexico. All Notaries must be Lawyers and in order to qualify as a Notary. Frequent Continuing Education courses are required for all Notaries by the Mexican Government. There are only about 20 Notaries between Tijuana and Rosarito Beach and they must “sign off” on every marriage, will, real estate transaction, etc. When you close a transaction with a Notary, the fees are paid to his office and after the Buyers and Sellers sign and the Seller is paid, then the recording of your documents are completed by the Notary both in the local municipality and in Mexico City. The Notary pays the acquisition tax in the Buyer’s behalf and when your Trust Deed is finished by the Notary, all the documentation that was required for your closing is bound in a legal size book for your safe keeping including the tax return showing your taxes were paid as required by law.

Can foreigners own real estate properties in México?
Yes. foreigners may obtain direct ownership of property in Mexico.

Is it safe to buy properties from a real estate agency?

Is highly recommended to buy properties through a fully registered Real Estate Agency, there are several associations to check if your Real Estate is legally established, such as API (Professional Real Estate Association) or AMPI ( the Mexican equivalent to the National Association of Realtors).

What happens to my Bank Trust Property if I die?

You list your beneficiaries in the Bank Trust document when the Bank Trust is placed in your name. Should something happen to you, your heirs will need to take an official copy of the USA death certificate and have it translated into Spanish. You will then take those two documents to the Secretary of State from your State and request an Apostle which is an Internationally recognized document that the attached death certificate is authentic and will be recognized by the bank to place the Bank Trust in your heir’s name. This fee is $26.00 in California & in Arizona it is $3.00. You can also have a Mexican Will for other assets.

Am I Going to Lose My Property in Mexico?

If you’re considering making an investment in Mexico, use all the means available to assure your purchase is secure. As real estate professionals, we hear concerns raised by buyers because of the publicity of the 14-year battle in the Punta Banda situation. Those Buyers did not use the LEGAL SYSTEM available in Mexico to acquire their property the legal way. One Buyer at Punta Banda said, “I thought we had a Bank Trust”. My question is, when you buy a piece of property in the USA, do you “Think you have a Deed OR do you KNOW you have a Deed”? Common sense should prevail in any real estate transaction in ANY country.

What is a FM3?

This document, is a requirement by the Mexican Government that every foreigner must have in their possession to own property in Mexico. If you become a permanent resident, like buying a lot, condo or house, whether you live full time down here or not, you must have a FM 3.

What is a FMT?

This is the tourist visa, and does not allow you to live as a full time resident in Baja.