Want a basic rundown of what you need to know before even thinking about buying a property in Mexico?
This is a condensed version and all you need to know before you take the first step – this information will help you determine whether buying property in Mexico is right for you and which specific areas of Riviera Maya you'll want to focus on.
(It's also great info for out of town realtors who would like to offer foreign properties to their clients...)
I hope this information will help you avoid some common mistakes and save you some time in your search. When I first became a foreign investor I had no idea how the process worked and it was quite different from the way things were done in my home country. I now have 5 years as an investor, Airbnb business operator and real estate sales advisor in Latin America. In those 5 years I have learned by a combination of trial and error, mentorship and formal education and can now confidently give my own advice to those who are thinking of following the same path.
Here's a brief cheatsheet to get you started:
Cash market - although it is done, it is not recommended for foreign buyers to seek financing in Mexico for their purchase. The most cost-effective way to homeownership in Mexico is through a HELOC (home equity loan or line of credit) back in their home country. Mexican banks and 3rd party lending programs are very costly. Rates are currently at 11% so this is not an ideal solution. If a client really needs financing, there is a large developer that offers 50% in house financing with 20% down and 30% monthly during the build. Their rate is 5% and they will extend the credit for up to 9 years.
Bank trust - any foreigner can purchase property in Mexico however there are areas called restricted zones. These are 50 km’s from any border and 100 km’s from any coast. You can google the history for a better understanding of why it’s done this way but in a nutshell, to protect against colonization, it was written into the Mexican constitution that foreigners cannot own land here. Later in the early 70’s that was amended as the Mexican government realized the benefit of allowing foreign dollars into the country. The loophole they created is called a fideocomiso. This is a bank trust, not to be confused with a land lease, it is very similar to purchasing through corporation. It gives the buyer the same rights and responsibilities as a direct owner and even protects against personal asset seizure much the same way a corporation would. It also makes passing your property on to a beneficiary extremely easy as well without the need for any bureaucracy. Transfers are automatic. This trust costs approximately $2,000 to set up and $500/year for administrative costs
Closing costs are approximately 6% on average but can fluctuate depending on the price of the purchase as some costs, such as the fideiocomiso are fixed
Property taxes - in Mexico, you will be pleasantly surprised to hear that property taxes are .1% annually
Capital gains - capital gains tax is a very complex subject here and should be discussed with an accountant or a tax lawyer well versed in foreign ownership. In most examples, I have seen fairly favourable tax rules but I recommend speaking to a professional
Rental revenue - this is also something I recommend discussing with a professional, both in Mexico and your home country. In my personal experience as an Airbnb host in Mexico, the platform deducts and forwards the tax automatically. I don’t need to do anything more but in terms of your personal situation please ask an accountant how this type of revenue impacts your tax reporting
Market pricing - Riviera Maya is comparable to Cabo in terms of prices. You can expect American pricing on many items and homes in hot areas like Tulum are no different. If you’re looking for a modestly priced home, they can be found but not in luxury developments. To give you an example of the current market, studios range from $100k- $200k on average, 1 bedroom from $200k-$300k and so on. Of course you can always find budget options on the lower end and luxury properties that are much higher priced. The location is a factor.
Location - Tulum is a hotspot for celebrities, vegan hippies, and wellness gurus of all kinds while Playa Del Carmen is more of a fun area for over 30’s, families and retirees. Cancun in a bustling metropolis, perfect for business people who need quick access to the airport and aren’t as concerned about living close to the beach. There are smaller towns such as Puerto Morelo, Akumal and Puerto Aventuras that each have their own vibe. Puerto Morelos is surprisingly touristic for it’s small size. The beach or port side of town is rife with cute Airbnb’s and trinket vendors. Akumal is quaint, not as touristy and has decent real estate prices. Puerto Aventuras is a more affluent, gated community centred around a marina for the boaters. Then we have a handful of really small, lesser known towns that are like the hidden gems of Riviera Maya. These include Chemuyil, Francisco Uh May and numerous other authentic small Mexican towns and Mayan villages. Other areas of Riviera Maya worth mentioning are Mahahual and Bacalar. Mahahual is a very small village about 2 hours south of Tulum. They have a beautiful boardwalk and host cruise ships daily. Due to the high number of tourists there is a somewhat obnoxious number of souvenir vendors lining the boardwalk, sometimes detracting from the experience. Mahahual is breathtakingly beautiful and definitely worth considering if you’re looking for a longer term investment or perhaps early pricing on beachfront property. You can still get a residential beachfront building lot down there for around $125k. There is none of that left in the more developed areas I mentioned first. Bacalar is another very small town with not much going on besides the restaurants and shops in the tourist area but there is huge potential for long term investment. Many tourists and investors are shying away from beach towns now due to the pesky sargassum that shows up seasonally. Bacalar being an inland freshwater lagoon solves that problem and offers gorgeous waterfront properties with private piers, generally between $500k - $1m. They also have some nice modern condo developments coming up with very reasonable prices. due to the slow but steady development, I do expect to see at least a supermarket in the town in the near future. Another option for those who don’t care for sargassum is Cozumel. This island is very popular with Canadians and scuba divers from around the world. The west side of the island offers protection from the seaweed on most days as it comes from the east
I hope this gives you something to chew on. If you would like to see some listings from any of these areas, send me a message on WhatsApp +52-984-268-2428 or email firstname.lastname@example.org