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MEXLAW > Uncategorized  > Foreigners Investing in Puerto Vallarta & Riviera Nayarit’s Restricted Zones

Foreigners Investing in Puerto Vallarta & Riviera Nayarit’s Restricted Zones

If you are looking for affordable oceanside property in Mexico, check out Puerto Vallarta & Riviera Nayarit, situated on the Pacific Ocean’s Bahía de Banderas. This area of Mexico is attractive to foreign buyers because of its affordability, continuous growth in real estate sales and a steady increase of visitors creating a high demand for rental properties.

Did you know a non-Mexican may buy property in Mexico without residency? There is no requirement for foreigners to apply for residency status prior to purchasing real estate. As a tourist, you may invest in Mexican real estate and enjoy the same protection of the law regarding real estate transactions as  Mexican citizens.

It is imperative you hire a local lawyer to represent you through the purchasing process and ensure you receive Title of your property.

The Mexican Constitution had previously banned foreigners from owning property in certain areas referred to as the “restricted zone.” which is any property within 50 kilometers from the coast and 100 kilometers from the border. The most desirable properties are typically located within the “restricted zone.”

Acquiring Restricted Zone Property Through Fideicomiso

There are ways around this restriction, which allows foreigners to purchase real estate in Puerto Vallarta & Riviera Nayarit. Luckily the Mexican Foreign Investment Law provides one solution in the form of a fideicomiso (pronounced Fee-deh-com-ee-so) a trust allowing foreigners to buy within the restricted zone. Even beachfront real estate can legally be yours, with a few restrictions.

The fideicomiso or trust is held by a bank, with the foreigner owner as the beneficiary. The property is not classified as part of the bank’s assets and cannot be attached to the bank’s debt. The fideicomiso gives you full rights and privileges of a homeowner, with the right to, mortgage, rent, renovate in accordance with zoning and permits, sell and include in your estate. The fideicomiso is similar to a living trust in Canada or the US.

There is a misconception among foreigners that a fideicomiso is similar to a lease or that it only belongs to you for 50 years, this is not true. This is not a lease, and the trust does not expire.  Foreign Investment Law allows the fideicomiso to be established in 50 year terms and may be renewed at any time until you sell the property.

Buying through a fideicomiso offers added security from the bank by checking actual ownership of the property and making sure there are no encumbrances on the property. The bank charges a service fee to set up the fideicomiso, plus an annual fee applies, the fees depend on the bank and the property.

The title of the property may be transferred to a direct title if the foreign beneficiary becomes legally entitled to have a direct title of the property, such as becoming a Mexican citizen or creating a Mexican corporation.

Although the fideicomiso includes a substitute beneficiary in the event of death, it is important to have a Mexican Will to protect your beneficiaries as there is no Right of Survivorship in Mexico. Having a Will helps to avoid delays during the transfer of ownership. Without a Will, the Mexican government may make decisions regarding your estate.

Acquiring Property in the Restricted Zone Through a Mexican Corporation

Another method which allows foreigners to own property in the restricted zone is by creating a Mexican Corporation. A Mexican Corporation may be owned 100% by foreigners; it is not necessary to have a Mexican partner and provides the company some perks regarding property ownership. A Mexican corporation can purchase any real estate in Mexico outright, including property located in the restricted zone, eliminating the fideicomiso and the trust fees.

Through the corporation, investors may buy real estate with the intent of using the property as a business, vacation rental, investment or development of the property. Buyers may legally rent out the property and generate an attractive income from a prime beach condo in Puerto Vallarta or the Riviera Nayarit, and there is no limit to how many properties the corporation may buy. Owning property through a corporation eliminates the need of informing the bank of any changes to the property, for instance, renting out the home, renovations or selling.

To set up a Corporation in Mexico, hire a full-service Law Firm who will walk you through the steps of incorporation, advising you on the best solutions for your investment. The attorneys at MEXLAW will determine the best corporate entity, accounting and tax structures for your business.

Consult with MEXLAW, in Nuevo Vallarta regarding the pros and cons of purchasing Mexican real estate through a fideicomiso versus forming a Mexican Corporation, find out the best option for your situation.