| Real Estate Questions |
Purchasing Real Estate in San Felipe, Mexico Is it safe to purchase real estate in San Felipe, Mexico?Yes. The 1992 Agrarian Law enabled allows for Mexican Ejidos "the land owner" of record to sell or lease the property to foreigners. Today, thousands of acres are being converted from ejido to private property and being sold or leased, and there are well over 50 million acres of land that will go through this process (whether leased or sold) over the coming years. Two years later, an amendment was made to the Mexican Constitution permitting foreigners to purchase and own real estate in Mexico within 60 miles of a national border and within 30 miles of the Mexican coast (formerly restricted) though a land trust or "Fidecomiso." Under a fidecomiso, the Mexican government issues a permit to a Mexican Bank of the foreign purchaser’s choice, allowing the bank to act as purchaser for the property. The bank acts as the "trustee" for the trust and the owner as the "beneficiary" of the Trust. The "beneficiary" rights are very similar to Living Wills or Estate Trusts in the U.S.
Is there a fee to set up a living trust? Yes. As stated above, you must set up a living trust through a Mexican bank to own property. There are three types of trusts (Administrative Trust, Master Trust and Individual Trust) and the typical set up fee is $4,250 which makes the trust valid for 50 years. It can be renewed on an annual basis by filing the correct paperwork and paying a small filing fee.
What are the Real Estate Taxes in Mexico?Property Tax: Mexican property tax is known as predial. Payable quarterly, it averages 0.1% of the assessed value of the property at the time of sale. Transfer Tax: An acquisition tax is levied on the transfer of real estate. Payable by the buyer, it is currently 2% of the official "assessed" value of the property. Capital Gains: If the foreign owner has lived on his property for six months prior to the sale (this is the general rule but varies state to state) and can prove this with utility receipts, etc., any gain is exempt from tax. Otherwise, capital gains tax is, subject to the discretion of the seller, either 25% of the gross income (sale value) or 32% on the net capital gain. Rental Income Tax: For residents, rental income is taxable at regular income tax rates. Non-residents are subject to a withholding rate of 21%. Is Title Insurance needed when purchasing real estate in San Felipe? Yes. It is essential when buying real estate in Mexico to take out Title Insurance on the property. Title Insurance covers you should the property you buy subsequently turn out to have liens associated with it. Title Insurance will protect you if any other previously unforeseen lien or charge is brought against the property before you took possession of the Title Deed. Rates for Title Insurance typically range between US$5-$5.50 per US$1,000 of the property's value; pay-able once at the point of purchase.
What are the typical lending options or loan rates for real estate purchased in San Felipe?While most investors who purchase property in San Felipe use financing from the United States, there are still options availalbe from Mexcian lenders. Typical rates begin around 13% APR. GE Finance is currently working with El Dorado Ranch, Las Villas and La Ventana del Mar to provide financing for real estate purchases in San Felipe. Information for builder permits from developers? When considering purchase of property in a new development, you should be aware that there are four sets of permits that the developer is required to get from the government before you can be sure that the land is unencumbered and it is safe to purchase. The permits are known as F-1, F-2, F-3 and F-4. Only when the developer has the signed-off F-3 permit can he legally begin to sell. However, you cannot apply for a fideicomiso and you cannot close the sale until the developer has the approved F-4 permit. When you are dealing with the real estate developer or his salesman, it is wise to take a camera with you and get a photo of the approved F-3 or F-4 permit to avoid any misunderstanding before putting down any substantial deposit.
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