Nick Fong of Ronival Real Estate, located in Los Cabos, decided to answer some important questions that get asked regularly. Melissa Murphy, one of Nick’s newer agents, forwarded a list of questions for Nick to answer, since they were asked so often. There are many misunderstandings out there, so Nick answers these questions to set the record straight. Now, continue reading to see what people are asking and to see what the real answers are, first hand.
Question one: How do you pass your property on to your kids?
The person asking the question stated that they “know” there is a 99 year lease, and asked how to pass that on to there kids. Nick answers that property purchased by a foreigner in Mexico is not leased, it’s purchased. There is an actual deed called an escritura in Spanish that is purchased by the buyer in a real estate transaction in Mexico.
Mexican bank trust – fideicomiso
Article 27 of the Mexican constitution requires that any foreigner buying residential property in the restricted zone (50km from the coastlines and 100km from the border) must acquire the property rights through a Mexican bank trust, known as a fideicomiso. This type of bank trust is good for 50 years. And, it’s renewable thereafter by you or your heirs. The average cost is about $2000 and $500 each year to maintain it. It is very safe and secure.
Your bank trust can be renewed every 50 years. Also, your heirs can be listed within the trust, so no will is required. The transfer process is simple.
Question two: If we sell, who handles transactions and how does money transfer to the US?
There are closing companies in Mexico, like the escrow company and title company in the US. The closing company handles all the paperwork and the transaction. To be specific, they liaison between the notary, attorney, and the real estate agent. Money is held in an escrow account while the details are being handled. After completion of the transaction, after closing, the money gets wired to the seller’s bank account.
Question three: Are there any tax consequences in Mexico to deal with?
The answer is “yes, you are responsible for property real estate taxes. Those taxes are paid every year in January. When you pay your full tax bill in full, in January, you get a 20% discount. One of the great advantages of real estate taxes in Mexico, as compared to the US and Canada, are very low. To be specific, one tenth of one percent of the property value, every year, which is much less than what you’re probably used to.
Capitol gains taxes, which you must pay when you sell, is 35% of the gain in Mexican Pesos. Your cost basis is determined at closing when you buy. The price you pay is converted to Pesos when money is transferred. Then, the value in Pesos is calculated when you sell and the 35% is calculated from the difference, when the value goes up and when the value of the Peso changes, when calculated against the Dollar amount paid for your property.
There are deductions, like for home improvements, as well. Now watch the video to see more details from Nick Fong.
Work With Ronival Real Estate
Ronival Real Estate has helped thousands of buyers and sellers across Los Cabos since 2010. If you’re interested in Cabo Real Estate, our team can assist with everything from showings and negotiations to closing and property management. Have questions? Contact us here or call +52 (624) 227 5766.