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La Ventana Real Estate, Baja Mexico

Property Acquisition in Baja   ~   Real Estate Purchasing and Visa Requirements Baja Mexico   ~   List Your Property With LVX  ~   Helpfull Mexico Info

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Real Estate Acquisition in Baja Mexico

We feel privileged to have the opportunity to assist you in your Real Estate Aquisition in Baja California Sur Mexico.

Purchase Baja Mexico Real Estate - Risky Business?

Real Estate transactions in Baja Mexico are very similar to those found in North America, but there are a few deviations and important factors to consider. Some people believe or have heard that purchasing Real Estate in Baja, or Mexico in general, is a risky proposition but this is not correct. If one looks at the number of individuals that hold Real Estate happily, compared to the number of individuals who have had a negative experience, one need not look much further. Most Real Estate, if not all Real Estate ownership disputes, have derived from documentation short comings accepted or overlooked initially by the purchaser. When all necessary documentation is obtained, and the proper steps are followed through the sound legal system that is in place for acquiring property within Baja Mexico, one will not only enjoy the immediate pleasures of owning property in this beautiful and culturally rich country, but will also have a secure investment, holding its value and with great appreciation potential.

Foreign Ownership Consideration

A foreigner can purchase and own land outright if the real estate acquired is more then 100 km from the Mexican Border and also more then 50 km from a coastline.

The Mexican land law limits foreigners from owning land outright within 100 km of a Mexican Border and within 50 km from a coastline. Due to growing real estate interest the Mexican government created a system in 1973 referred to as the Fideicomiso, which allows "foreign purchase" of real estate within the above mentioned area(s). The Fideicomiso has proven over the last 37 years, to be a very sound concept.

Explanation of Fideicomiso

The Fideicomiso is a real estate trust, the trustee is a Mexican bank (whom you choose) and you are the beneficiary. Through title held in a Fideicomiso, one has all the same property rights as if one is the owner. Besides residing on the property, you may also sell it, modify it, rent it, and also have it passed on to your beneficiaries. The trust is a 30 to 50 year instrument, and is renewable perpetually. Real estate purchased through a Fideicomiso is generaly limited in size to 2000 square meters (approx. half an acre). Larger properties can be held in a Fedeicomiso, in these cases there is a developement clause that then needs to be fulfilled. The trust places legal title in the name of a Mexican Bank under a permit from the Ministry of Foreign Affairs Mexico, the "Secretaria de Relaciones Exteriores" and the bank administrates the property on behalf of the buyer/beneficiary, who then enjoys the same rights of ownership as compared to a Mexican National. A Fideicomiso is ones Trust and not the property or asset of the the bank or the Mexican Government. Also, should the bank ever fail, then the Fideicomiso is simply transferred to another authorized Bank. One may hold more than one property in/or through separate Fideicomisos.

If Purchasing a property held in an existing Fideicomiso, then that Fideicomiso is transferable, through an assignment of rights. When considering a Fideicomiso assignment, one should reflect on the remaining term of the existing trust, when it is due for renewal and what the existing annual bank fees are. Should the existing Fideicomiso have an unexpired term of less than a certain number of years and/or if the bank administration fees needing to be paid are more than a current fee found lesser, then it may make sense to move forward by creating a new trust/Fideicomiso.

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Closing Duration, Assistance and Costs - Fideicomiso

Closing duration for ones required signatures and final payment through a Fideicomiso can be as quick as 3 weeks. Once all has been signed it can take a few more months for the property to be registered and to receive the final Fideicomiso documentation, which includes all important property related certificates, is very well organized and all bound, in form of a booklet. Costs to complete the purchase process can range from 5% to 25% of the total initial property cost.

Costs for a property purchase will include, closing coordination by a local company offering real estate closing services, or you may decide to have closing coordinated by a Mexican Attorney, general bank fees, transfer taxes, notary fees, government permits and possible Title Insurance. Title Insurance Companies also offer closing coordination services. More detail on closing costs can be found on our information page, Real Estate Purchasing Steps & Visa Requierements Baja Mexico - Budget For Real Estate Closing Costs - Baja Mexico

While La Ventana Xperience is very familiar with the closing procedures, our position is to help you find the correct property and to negotiate the general terms of purchase. The technicalities of transfer of title, registrations, permits, and so on, are best held within the hands of a closing coordinator or Attorney of your choice, whom we can refer one to.

Annual Bank Administration Fee - Fideicomiso

There is an annual administration fee for the continuation of your Fideicomiso. This fee is percentage based, and close to an average of 1 to 1.5 percent, and needs to be paid to the Financial Institute administrating the trust. You may want to consider having a company take responsibility (at a very small cost) for the annual fee payment, should you possibly not to be in Baja to make this remittance.

Another Purchase Option - Purchase Through Forming a Mexican Corporation

Foreigners have the option to form a Mexican Corporation, the process is straight forward and there are many such Mexican entities in effect. Taxes on utilities etc. are higher if you purchase through a/your mexican corporation and he re-sale of ones real estate will also then be subject to 16% sales tax. This type of property holding allows one to purchase real estate in size of more then 2000 square meters, and the Mexican Corporation owns the land outright, but it is imperative that the corporation is a viable active business entity having commercial/income generating interest, and not meerley used for residential purpose. If one is interested in this type of ownership, we can assist you with the formation of a Mexican Corporation.

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Title Search, Insurance

Title search and Insurance is always a worthwhile investment. There are reputable title insurance companies offering policies within in the Cape region of Baja Sur. The cost of real estate title insurance is very reasonable and in the event there is a problem with title, the insurer is obligated to defend the owner's rights and/or indemnify the owner against financial loss. Title insurance issued when registering the new title will, guarantee the marketability of your real estate and is a standard requirement, when interested in financing by most Financial Institutes.

Financing Your Property

There are Banks and mortgage companies available in the Cape Region of Baja California which offer long-term financing.

Property Taxes

Property Taxes are very reasonable in Baja Mexico (approx. 0.3%) Re-evaluations are made every few years and at the time of a purchase/sale. Property taxes must be current and paid up to date, prior to a transfer of title.

Capital Gains Tax

Foreigner's who sell property in Mexico are subject to the payment of the I.S.I.R. ~ Impuesto Sobre la Renta ~ the Mexican Capital Gains Tax. Cost for this can vary from 25% of the declared value of a sale or 33% of the net profit, after taking expenses for property aquisition, improvements etc. into consideration. The formula for both is always calculated by a Notario Publico, who will record the documents and submit payment. The payment of CGT is the selling parties responsibility. Capital Gains Taxes may be lowered since the seller may qualify for exemptions. Exemptions may apply to foreigners whose primary income, residence and immigration status satisfy the interpretation of the law by a Notario Publico. It is the choice of the purchaser or their representitive which Notario to choose for the Real Estate transaction. However, should the seller be elidgble for capital gains exemptions then they should elect to include within the Purchase and Sales Agreement that the acceptance of the offer is subject to the Notario's approval of the exemption clauses and final CGT calculation provided.

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Our real estate information/details are provided to the best of our knowledge but its accuracy is not guaranteed.

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