Investing in Manzanillo
you think that Manzanillo may be the perfect place to retire? Thinking of buying a
vacation home for you and your family? If you do much of your business by computer,
wouldn't you like to spend your winters in a warm, agreeable place like our friendly port?
Are you looking for a secure investment? Are you simply dreaming about a better quality of
home...the phrase represents security
and comfort. Unfortunately, the word home, when used in conjunction with the purchase of a
property in Mexico creates stress, worry, and at times, is associated with financial loss.
None of it needs to happen. Purchasing a home
in Manzanillo is very similar to buying a home in the states of Canada. If you ask the same
questions, you should get answers. While it is not difficult to find
apartments for rent, home
ownership offers more security.
Foreigners may own property in Mexico, but it
is through the use of a bank trust, naming the foreigner as a beneficiary. A beneficiary
has all the rights of an owner, in that he can develop and improve the property, and can
sell at any time.
The Mexican Constitution prohibits direct
ownership of real property by foreigners in the "restricted zone," the area of
land along the coast about 30 miles wide. This is the reason the Mexican government
created the "Fideicomiso," or real estate trust. It follows the
guidelines of Mexican law while protecting foreign investment. In essence, a Mexican bank
will hold title to the property, and the foreign owner is named the beneficiary.
There is another way to purchase
real estate in
Mexico. A Mexican Corporation can be set up with foreign investment capital. The
corporation then names the foreigner as administrator of the corporation. The
administrator can then apply to the Ministry of Foreign Affairs to secure a permit under
his own name. The Ministry then has 15 days to act, following the filing of the petition.
If the maximum period passes and the Ministry takes no action, the trust permit and/or
registration are automatically authorized.
You've fallen in love with Manzanillo. Now, how
do you begin to make the right purchasing decision? Everyone wants a home on the beach or
with a view, and undoubtedly, Manzanillo's beaches and views are spectacular. However,
don't let your eyes replace your common sense. Check out the
neighborhoods. Approximate age? Scheduled improvements? What will it look like in ten
years? Talk to the residents. Stop in at the area's local restaurants. Where are the
schools? Shopping districts? Are the homeowner's association dues or maintenance fees paid
and up to date? If the utilities are shut off, what was the final bill? You'll have to pay
it if your realtor doesn't state otherwise in the contract. This includes, phone, electricity and water. Does the building and property have a
clear title? Are there any liens against it? What building restrictions are there? Ask
questions of everyone you meet!
The seller must have a registered title to the property. Then your purchase of
property must be recorded, and it must be recorded correctly. Make sure you get a copy
of the entire seller's documents before any money exchanges hands. There have been cases
of sellers never acquiring a legitimate title to the property they are selling.
Fortunately, in Manzanillo, there have been so many new foreign buyers
purchasing property here that our notaries--most of them anyway--know just
what to do to complete a transaction.
Don't let your love of Mexico, and the smooth
talk of the seller cloud your common sense. To find a competent notary, talk to
foreigners who have already purchased a home here. Ask for recommendations. Don't trust too much, and take
some time to do research on your own.
Pay a little extra money to get all your legal
documents translated into English. If in doubt, consult a third party and check their
A word about Mexican notaries: Notaries here
have a much more important status than American notaries do. Their responsibilities in a
real estate transaction include: drafting the deed, calculation of the seller's capital
gains taxes and buyer's acquisition taxes, and affirm the validity of the signatures.
Because responsibility and actions of a Mexican notary are considerably higher than those
of notaries in the U.S. and Canada, the fees will be substantially higher. These fees
are based on a rate schedule by the College of Notaries Public, and are tied to the amount
declared in the property transfer.
A federal tax (IVA) of 16% is charged on all
services. These taxes must be paid on notary services, appraiser services, and other
professionals. The will also be annual bank administration fees for the bank trust. The
banks don't usually send statements when this payment is due, so you must request one in
writing approximately 3 months prior to the trust anniversary. Now, some
banks simply debit your credit card.
A title search is a good idea. Similar to the
process in the U.S. and Canada, this search confirms the actual owner, the chain of title,
and will indicate liens, if any, against the property. Title insurance is issued when the
new deed is registered, and guarantees the marketability of the property. In
the Manzanillo area, the notary usually takes care of this.
Property taxes must be brought current prior to
transfer of title, based on the assessed valuation. There is also an acquisition, or
transfer tax, generally paid by the buyer. It is currently 2% of the declared value of the
property. A foreigner who sells property in Mexico is liable for capital gains. It can be
from 25-35%, depending on length of time property is held, the improvements made,
commissions paid, and other allowable expenses by law. The formula is complicated, and is
usually confirmed by a notary who handles the transaction. there are also
variances on this law, so once again, check with the Notary.
As you can see, there is much to consider when
making a purchase. Spend some time in Manzanillo, and get to know the area and its people. As with anything else, if a deal
sounds too good to be true, it probably is. With property values increasing
in Manzanillo by up to 30%/year, depending on the area, now is a good time
to get in on the ground floor.
For specific information, please contact us at;