Investing in Real Estate in Mexico
Investing in real estate in Mexico is becoming ever so attractive. Real Estate projects are increasing at a rapid pace, especially for foreigners wishing to expand and diversify their portfolio beyond borders. In this post, I will explain why a foreign investor should consider investing in Mexico, where you should look for opportunities, and how you make this happen.
Why Mexico? Five Reasons to Invest in Real Estate.
There are five main reasons as to why you should consider Mexico as an investment destination for real estate projects:
- Real estate is a low-risk investment in the medium and long term. Of course, the returns will depend on where the property is located and the capital gain on the location; however, one can argue about investment returns between 4-12% per year.
- Despite the pandemic, the real estate market in Mexico has developed positively. The market not only resisted changes, but it has expanded. The market’s growth has been such that the forecast for the year 2021 was exceeded, keeping market prices on the rise. In short, this is the ideal moment for the real estate sector.
Juan Pablo García
Lawyer
Mr. García is a real estate lawyer based in Guadalajara, Mexico.
- The legal framework for foreign real estate investment is stable. In recent years, Mexico has not pushed for any reforms that deter or jeopardize real estate investments.
- Real estate for residential purposes is not the only attractive option, there is a wide range, whether for tourism, commercial, service, and industrial purposes.
- In addition to being a good source of income, foreigners find attractive real estate investments because they may live or retire in quieter areas with a pleasant climate.
Where in Mexico?
Mexico is a large country and within its regions, one may find different opportunities to invest in real estate. So, a foreign investor needs to consider what type of project is the most suitable in the given region to ensure a higher capital gain.
Residential and Tourism Projects
Without a doubt, residential and tourism projects in Mexico with the greatest boom are those located near coasts, such as:
- Southeast: Yucatan and Quintana Roo region, including the Riviera Maya, Playa del Carmen, Tulum, and more.
- Northwest: Los Cabos and La Paz in the peninsula of Baja California.
- West: Puerto Vallarta and Nuevo Vallarta, well-known tourist destinations but also known for their real estate values.
Commercial and/or Services Projects
Guadalajara, Mexico City, Queretaro, and Monterrey are the best cities for commercial and/or service purposes in the Mexican real estate market.
Industrial Projects
The northern border and the bajío region are ideal for the real estate-industrial sector.
In many parts of the world, COVID-19 changed consumer habits, such as resorting to e-commerce. Mexico is not the exception and, thus, the demand for storage facilities has been exponential as a result of the e-commerce trends. Considering that e-commerce will continue to be a consumer habit, storage-real estate projects close to large cities are options that will be explored.
How to make a Real Estate Investment in Mexico?
In addition to the financial security that any legal instrument can offer, legal certainty is paramount in real estate operations. Having said that, an investor has to visit an expert (preferably, a trusted attorney) who can certify that the contract or agreement is within the law and that the investment of capital is not at risk.
Furthermore, I can not stress enough that an expert must carry out due diligence on the title of ownership, permits, and licenses of the property.
Foreign Investment in Mexican Real Estate
A foreign individual, foreign company, or Mexican company with “foreign equity” is subject to certain restrictions regarding the ownership of land in Mexico.
The Restricted Zone
In addition to the land regime restrictions, foreigners (individuals or legal entities) are also limited to own real estate in the restricted zone that is located throughout the coast and near the border as follows:
- within 50 kilometers of the beach
- within 100 kilometers of the border strip.
Notwithstanding the above, foreign investors may resort to legal mechanisms, namely a trust, to have access and enjoy from the land located in the restricted zone. In essence, a foreign investor executes a Trust agreement with a financial institution, who will hold the legal ownership while the foreign investor uses and enjoys the land. Needless to say, the Ministry of Foreign Affairs has to approve the trust agreement, which can not exceed 50 years but with the possibility of the term per the request of the investor.
The Unrestricted Zone
In contrast, foreigners may acquire ownership of real estate outside the restricted zones with the sole condition of submitting a notice to the Ministry of Foreign Affairs.
Finally, Mexico has another condition to acquire ownership of the land that is deeply rooted in our history, known as the Calvo clause. Regardless the land is in the restricted zone or not, foreigners must express their willingness to consider themselves as nationals in relation to the ownership of the land, waiving diplomatic protection of their governments.
Need Help For a Real Estate Investment?
The Mexican real estate market is living a once-in-a-lifetime opportunity, offering ideal and prosperous opportunities for foreign investment. Should you need more information, help, or advice, contact me today.