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Some Considerations for Purchasing Mazatlan Resort Real Estate for Canadians

As published in the Canadian Real Estate Magazine, here are some guidelines and stats regarding real estate investments in Mazatlan Mexico. There are only 2,000 condo units in Mazatlan versus 8000 in Puerto Vallarta and Mazatlan beachfront properties have yielded as much as 30 to 40% return, and rarely less than 15% over two years according to recent statistics. In addition, examples of Mazatlan real estate condo investors buying condominiums converted from a former hotel for $70,000 and reselling them 1.5 years later for $150,000 to $200,000 after some renovations and professional property management companies are easy to come by in this resort city. In addition, the average age of Mazatlan residents and investors is between the late 50’s to early 60’s which is retirement age, making Mazatlan very profitable and interesting for the Canadian retirement community. Also, there is a good potential for cash flow from rental income and there are plentiful beachfront properties for sale with a large contingent of ‘Snowbirds.’

Canadians Purchasing Retirement Homes in Mexico Should Be Aware of Property Laws and Regulations

Canadians Purchasing Retirement Homes in Mexico Should Be Aware of Property Laws and Regulations

Requirements for Ownership of Mexico Property and Real Estate

According to the Canadian Real Estate Magazine, there are two important factors to look out for when considering purchasing Mexico resort real estate and property that includes the Special Mexican Corporation and Fideicomiso. The Special Mexican Corporation: Here, foreigners are allowed to control and own, and it may be used to hold title, instead of a Fideicomiso. Corporations for Mexico real estate purchase are being used more frequently because there are fewer restrictions then a Fideicomiso, they are less expensive to form (between $2000 to $3000 US with annual costs of only $400 to $1200 USD), and they may own multiple properties or oneo f more than 2000 square metres of living space. The Mexican Corporations can carry on any type of business including renting properties, operating B&Bs or dive shops and buying and selling properties. There must be at least two shareholders and they have to obtain an FM3 visa from Mexico, which generally costs between $150 to $300 per person maximum to setup your Mexican Corporation for real estate purchase. For Canadians who do acquire property in Mexico real estate market, it is recommended that you obtain an FM3 visa which allows you to live in Mexico full time or part time without obtaining tourist cards. In addition, to being required to use a corporation in Mexico real estate purchase, it allows you to ship your household goods via overland or sea carrier to any Mexican destination legally without being taxed and to import your automobile with fewer problems. This FM3 visa does not imply residency for income tax purposes, which is still determined by the Canada Mexico Tax Treaty. The Fideicomiso Mexico Trust: This is a trust agreement which holds the title of the property in which you purchase in Mexico real estate in an irrevocable trust, with a Mexican Bank trustee for the benefit of the purchaser or beneficiary. There are admin and bank fees to be paid as well as notary public fees relating to the costs of formation, which range from $3500 to $7000 USD with annual filling fees of $300 to possibly $750 USD. The Fideicomiso Mexico Trust has a life of 50 years and can be renewed upon application for an additional 50 years. The beneficiary may be changed for example to an owner’s children or to others if desired to dispose of the property. A Mexican Fideicomiso may only own one property, restricted generally to less than 2,000 sq m and predominantly for personal use only. The property can be occasionally rented; however, this creates additional complexities as the property owners should register the business in Mexico, prepare monthly tax filings for the Haciendas (Mexican Tax Authorities), and file Mexican tax returns as well as Canadian returns to report the income or loss for income tax purposes. This can be done but it’s fairly complex. Key Facts and Figures of the Mexican property market: The rental rates are between $500 to $1500 per week in resort areas and no estate taxes but taxes are subject to income and capital gains in Mexico real estate. Also, mortgages are sometimes allowed on newer Mexican real estate developments, but most likely not on older condos and beachfront homes. Property taxes are generally 0.25 of 1% value, and insurance for costs is very reasonable. Ocean front lots in Mexico are between $50,000 to $300,000 and up and the cost of construction is manageable at $65 to $120 per square foot in most instances.

Canadians Should Be Aware When Buying Mexican Real Estate

5. Infrastructure varies greatly from area to area, so investigate the state of real estate infrastructure development of the area in which you are interested (water, drainage, transportation and services). 4. Realtors are not required to have licences (although some sort of formalization of accreditation is now in process in Mexico real estate board), so choose a reputable realtor who is registered with the national association of realtors (AMPI) and check their references for due diligence. Many real estate developers in mexico contract licensed realtors in target markets such as Canada for sales and marketing. 3. Notaries transact all the Mexico real estate closings and transfer of land in the country and are government appointed lawyers who specialize in this field. 2. Foreigners as individuals are now allowed to purchase land within 50 kilometres of the coastline, and must do so through a Mexican trust called a Fideicomiso. 1. Understand that different types of property regimes exist in Mexico real estate – for example, regular versus ejido (reserve land), which affects the titling status.

 

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