Patty Pérez, Merida real estate agent with Kuali Bienes Raíces, interviews Alfonso Barrera, partner of bilingual law firm Easy Legal Mexico, about “How to buy property in Yucatán if you are not Mexican.” This is originally from Patty’s YouTube show, Smart Investors.
The full transcript is below. Patty is also on Instagram at @pattyperezmx. Thank you, Patty, for taking the time to interview Alfonso!
Patti Perez, Kuali Bienes Raices
Hello, everyone. Welcome to Smart Investors. This is a new show for you. I’m Patti Perez. I’m here with Alfonso Barrera (Partner in Easy Legal Mexico). We want to talk to you about the legal side of moving to Merida. Alfonso has a very long experience in this. So thank you. Thank you, Alfonso for being here. OK. So in case you don’t know, we have a big foreign community in Yucatan, we have Canadians, Americans, Europeans. I mean people from every place in the world seems to find Yucatan.
So and many of them, once they’re here, they fall in love with Merida. They want to move, they want to invest, they want to spend so much time here. So throughout my experience in real estate in Yucatan, I’ve been able to work with people from different countries and they seem to have the same concerns, the same questions. So today, what we are going to do is try to answer them all with the help of Alfonso. So again, Alfonso, thank you so much for being here with me and help me answer the most common questions of all those people who are interested in Yucatan. I usually get clients that I insist are on vacation.
They fall in love with the, the city, the life, the people, everything. So they want to buy. So one of my first questions for you would be can foreigners buy property as a tourist?
Alfonso Barrera, Easy Legal Mexico
Yes. Yes, they can, they can buy as a tourist. They don’t need to be residents or Mexicans.
Patti Perez Ok. And can they, I mean, in order to buy a house, they need a bank account.
Alfonso Barrera
So it’s preferable. It’s not, it’s not mandatory, but it’s preferable. Ok. But as tourists, the problem they’re gonna have is that there’s only one bank who will accept them as tourist to open that bank account. I mean it’s possible there’s that one bank but other than that one bank, there’s no other bank who will open them an account as a tourist.
Patti Perez
Ok, so they can only with one bank but they can do it. Ok. So something you need to know, it’s that foreigners can’t buy property 50 kilometers from any beach in Mexico. So that means that if you want to buy property in Merida, you need either need a bank trust or a corporation. So can you explain to us please, the difference between the bank trust and the corporation?
Alfonso Barrera
Of course. First, I’m gonna explain a little bit what the bank trust is. So we can understand a bit better the difference, the main difference between that and the corporation. A bank trust is basically a contract in which a bank or a trust institution lend you their name to buy property, you know, to bypass that prohibition from our constitution to for foreigners to acquire 50 kilometers from the beach. So it’s a contract just like it will be a trust fund or a real estate trust in the United States is something of that matter where the trust institution will have the ownership, but you as trustee will have, they use the benefits, the obligations and pretty much everything as a, an owner, as a, as a physical person, a corporation. Well, is formed by two or more people. And well, there’s one corporation who formed with one people person, but it has too many limitations. So is from two people and on two persons and on and technically it for commercial purposes, foreigners have been using it to acquire property that is residential, but it has many it, it presents many challenges. So the main difference first is the type of contract. One is a moral person that you form is a new person, is a Mexican person that you’re forming. And the other one is a contract that you do with the trust institution.
The main difference is that the corporation will can buy many other properties without having to form a new corporation. Same corporation can buy many other properties and the commission, you have to form one each time you wanna buy a property. And another big, pretty big difference is that when you sell the properties with the corporation, you have to keep the receipts, tax, fiscal receipts and pretty much everything trying to use them as write offs to lower the amount of tax that you’re gonna pay for the profit that represents the sale of a property. While with the trust. If you become a resident, you can avoid the capital gains taxes like a Mexican. So that’s a big difference. And the other thing is that once you sell the property with the fideicomiso, the fideicomiso cease to exist for you at least.
And with the corporation, if you sell the property, the corporation still remains there. Unless you sell the share stuff of the corporation, the corporation will stay there and to cancel the corporation will cost almost twice as much as to form it, so that those are the main differences.
Patti Perez
And I hear this question a lot. I mean, when it goes to trust who owns the property?
Alfonso Barrera
Legally, the bank is established as owner. But on during the whole, the fideicomiso who has like 34 pages, it established that yes, although the bank is the owner, its only right is to receive its yearly fee. Yearly fees of banks go from 450 to 550, $450 to $550, approximately a year. That’s its only right. All the other rights and that’s the only obligation of the, of the trustee with the bank. All the other rights are from the trustee. Nobody can enter the house. They are the only ones who can sell it. They are the only ones who can get a profit. They, I mean, pretty much if they don’t pay the utilities, nobody will.
I mean, pretty much is this like if they were the owners, the only difference is that on the deed and on the castrato cedular, the owner will appear the, and the owner part will show the banks.
Patti Perez
Ok, so what I’m hearing from you, tell me if I’m wrong, it’s if you want to come to Merida buy and live here, maybe the best choice for you is the trust.
Alfonso Barrera
if the property is less than 2000 square meters because that’s the limit of the fideicomiso and if what you want is a residential property. Yes, the fideicomiso. The even if you wanna rent the property you wanna get for rent or an air BNB, the fideicomiso is perfect. If you wanna buy a property, a big property to put a business like a hotel or restaurant or something like that or do you wanna flip properties or buy multiple properties at once? Then the corporation will be it.
Patti Perez
Ok. You, you were talking about costs. So it, which one? It’s expensive or…?
Alfonso Barrera
Actually in the early stages, it costs the same, I mean to form the fideicomiso (as) to form the corporation, pretty much costs the same. The difference is like I said that you only form one corporation to buy multiple properties and with the fideicomiso, you have to form one each time. If we talk numbers, let’s say approximately $2500 approximately more or less for the corporation or for this is what the bank charges. And this is the cost of a corporation from the beginning to the final part of the formation. And like in the corporate, like in the, the fideicomiso, you pay your yearly fee of, let’s put $500 a year. With the corporation. You have to pay an accountant, which pretty much is gonna be around that.
Patti Perez
OK. And what about timing? Which one is faster?
Alfonso Barrera
It’s pretty much takes the same amount of time, but it’s easier and it could be faster to form a, than a corporation because a corporation, you have to inscribe it in the public register of commerce. You have to get the tax id number that require an appointment in the, in the Mexican IRS which you know, right now are quite difficult to get. Then you have to get the electronic signature of the corporation. And finally, you have to open a bank account for the corporation, which corporate bank accounts right now are taking 2 to 3 weeks to be formed. So corporation can definitely take longer than the fideicomiso although for special cases or the document. So the property are not in place. It can take pretty much the same three months approximately, but yeah, the corporation definitely is longer. Ok.
Patti Perez
So let me tell you all about this last story that Alfonso and I have with these clients. so you can get to know what you can do and what is happening in Yucatan. I had a couple, they came on vacation, they came from Miami. They were only going to be here for two weeks. They fell in love with Centro, with downtown Merida. So they asked me, they contact me, they asked me to find a house and they wanted to buy. So I contact Alfonso and he helped me with they went to the bank, this one bank, they got an account, they transfer money from the US and they have a house. Now, we, we made everything but I want to explain to you that for example, they made a down payment when they were in the US. They signed the papers, right, and they send it to us and now they have to come right, right, to sign the final papers.
Alfonso Barrera
They have two options. They can either come which they choose to come and sign the final papers or they can sign a power of attorney from the United States and send it to us. It’s, it’s up to them, this particular clients decide that they wanna come for closing. So they’re coming here.
Patti Perez
So, they can buy houses in Yucatan without being in Yucatan.
Alfonso Barrera
Yes, many. We have clients who have never actually seeing the place that actually looked online. They love it and they decided they wanna buy it and everything. They did it from from the price where, where they live. United States can or Canada or pretty much anywhere in the world and they did it through powers of a attorney. We have an account so we we can receive the money and make the payments on their behalf. So it’s, it’s pretty much because you don’t need to be a resident to buy and you can buy as tourist. It’s quite simple to do it. You don’t actually need to do anything to buy other than to form the fideicomiso and you don’t need to be here to do it.
Patti Perez
Ok. So that, that, that’s big and probably you’re asking why would I want to buy a property in Yucatan? We have several reasons. One it’s, there are people making money here. I mean, prices are growing around 20 to 30% a year if we’re talking about downtown Merida or the beach and north of Merida. And second, we have people that love to be in Merida to retire in Merida. So that’s why you would want to buy in Merida. And as you can hear, you don’t have to be here. So, OK, so that answers the next question that I had, which was do you need a residence to buy? So you said no, you can buy as tourists. and we will have to talk about the cost of corporation. And one other question I have, is, do you need a Mexican in order to have a Mexican corporation like a partner in the, in the corporation?
Alfonso Barrera
That, no, that’s, that’s a big myth and, and that, that goes around social media and on websites that, and many people ask us that because they have read it somewhere. Somebody told them that you need a Mexican as partner to form a Mexican corporation. And that’s something that some dishonest people used to use to enter a corporation. You don’t need a Mexican partner. You can form a corporation with the two foreigners as partners. The only thing is that if you as a partner, if you’re not a resident to form a corporation, you’re gonna need either a Mexican proxy or a foreign proxy with a resident card. So you need a Mexican or a resident as a proxy. So that proxy can inscribe the corporation in a Mexican address, can get the electronic signature of the corporation and eventually open the bank account because some banks won’t allow you to sign on behalf of the corporation if you’re not a resident, some would, but some will not.
So that’s why you need a proxy. Big difference between needing a Mexican partner owning shares of stock as part of the corporation. As opposed to a proxy because a proxy you can cancel at any time, change him at any time or her at any time while with a partner is,
Patti Perez
You could get in trouble.
Alfonso Barrera
Exactly. And it’s like if they were putting money, or have any interest in the corporation when they don’t. So yeah, definitely you don’t need a Mexican partner. If anything, you will need a proxy, that again doesn’t have to be Mexican, you can also be a resident.
Patti Perez
I would like to have this information clear. So as you said, it takes about two months to have a corporation maybe?
Alfonso Barrera
For a corporation, I would dare to say 3 to 4.
Patti Perez
OK. So in the meantime, can they buy properties?
Alfonso Barrera
Yes, in the early stages of forming a corporation. I mean, they don’t have to wait, the perfect, in a perfect world, you will buy the property once the corporate bank account is open. But that takes, like we said, it can take up to four months. So you as soon as the corporation is formed and inscribed in the Mexican in the Public Registry of Commerce. And with the tax ID number, the corporation can appear in legal documents because it already exists. It has a personality so it can appear in legal documents to buy property. Ok, of course, there’s a series of contracts that we’re gonna have to do later on between partners and corporation to justify the way it’s going to be paid because the money to buy that property is going to come from the account of the partners and not from the bank account of the corporation. It can definitely be done but it, there’s a legal plan that goes along with it, but it is doable.
Patti Perez
Ok. So that gets me to another question because I’ve seen it. I mean, those these foreign people can sign I don’t know the translation of a promesa de comproventa, can they do that as foreigners or it’s that legal, or illegal or?
Alfonso Barrera
It’s perfectly legal. It’s a promissory contract of sale. Ok. Well, it’s a promissory contract of forming a fideicomiso basically and that’s why they can do it. What they cannot sign or what it will be not illegal, but what it will be a contradiction to sign is a promise of sale, in Spanish, promesa de comproventa. Why? Because a compraventa or a sale, it’s not something that it can do as foreigners. So there has to be a promise, a promissory contract to form a fideicomiso over a property. And instead of calling a promissory buyer, promissory seller is promissory trustee and promissory trust giver. So it’s, it has different names but which is, which are the legal titles that they will have, but they can definitely sign as foreigners and as tourists, a promissory contract of sale.
Patti Perez
Ok, because I’ve seen it. So please be careful, please contact Alfonso. I mean, we’re going to have his information. He’s been working with foreign people forever. So he knows the way to work with you. I mean, it’s so different the way we work in Mexico. But Alfonso and his team understand how to do it for you guys. So please contact him. OK, but what about the people that want to move to Merida? I mean, the first question that I can think of is how long can they have to be living in, in how long can they live in Merida (as) a tourist?
Alfonso Barrera
Well, the law has a limit of 180 days but immigration, agents can decide how much to give you. That’s why they ask you, what are you coming? Why are you coming to the country, et cetera? So they can give you any amount of days that they can decide. Usually most common is 180 days and the maximum is 180 days. But, once they realize and this is happening lately that you’re going back and forth, they start to give you less and less dates. Sometimes they only give you seven days, sometimes they will give you 10 days because what they want you is that if you’re coming so often that you file for residency to, stop just getting in and out once they know, once they know that they realize they see the stamps that you’re going back and forth very often, but that technically, or the longer the law allows is 180 days.
Patti Perez
Ok. And when it’s the time for, I mean, they have to apply next to that situation to a temporary visa and then
Alfonso Barrera
it’s in, well, the residency is, there’s two types of residencies, temporary and permanent. The difference is that the temporary you have to renew every year. And after the fourth year, you can go to permanent. And it’s based on income and the decision if it’s temporary residents or permanent is being taken in the Mexican Consulate when they apply. The law doesn’t say that there’s not an age thing or any kind of requirement other than income. Technically, just with income, you should be able to qualify for permanent. But consulate has this inner protocols which by the way, each consulate has its own, makes its own decisions. It’s not like one general thing. And they have made this decision or this rule which is implied because it’s nowhere to be seen that if you are not, you don’t have an advanced age or are retired, they will not give you the permanent residency, they give you the temporary.
Alfonso Barrera
So, so you file for residency it as like I said, it’s based on income, the processes you file in the Mexican consulate where you live, you present your, your, you show your income by presenting your bank statements or your savings account or even the documents. If you own already own property here, you can use that to show what you used that money for. And then once it’s approved, they put a sticker on your passport and from there you have six months to come to Mexico to exchange a sticker for your card. And once you get into the country, you have 30 days to start the process of exchanging that sticker for your card. So here in Mexico, in immigration offices, depending on what you, if you already have a property, depending on where you buy the beach or you have, you can exchange to the, how is it, the canje, is that how the process is called from the sticker to your card? Usually takes like in Mexico it can, it takes a week, a week and a half right now.
But we have time from the year where it can take up to 3 to 4 weeks depending on how busy immigration is and that they have enough plastic to print cards because sometimes they run out of plastic, believe it or not. And so that’s the process and there’s a program that is right now in place, but we don’t know when it’s going to be over. So be very careful check before because last year was in place and they take it away and then they put it back again where if you’re here and your tourist visa expired, you can apply from here directly for the visa. But that was done for because of COVID. So if you were here and cannot leave because of if you’re flying COVID and everything, you could apply. But that, that’s a temporary program. I don’t know how long will be in place right now. It is available but I don’t know for how long.
Patti Perez
it is. It is it expensive to all this?
Alfonso Barrera
No, I don’t think it’s expensive. But you know, I mean, I don’t think it’s expensive. the process in the Mexican consulate costs like $120. The cost here in terms of how much you have to pay in immigration. It’s around 6 to 7000 pesos and a fee for a representative is around 6000 pesos. So I think all in all you’ll be talking about 15, 16,000 pesos. So I don’t, I don’t think that to become a resident of a country that can be considered expensive. I can’t, I cannot even begin to tell you how much it will cost to become a resident of the United States or Canada in terms of legal costs and everything. So, yeah, I don’t think, I don’t think it can be considered expensive.
Patti Perez
So, I would like you to please tell everybody what can you do for them? I mean, what does you and your team can do for them in all these subjects you have been working?
Alfonso Barrera
Well, Easy Legal Mexico, which is the company that I formed with a partner, Francisco. And what have I been doing? We have dedicated separately for over 20 years to work with foreigners and customers from other countries to help them form fideicomisos, form the corporations, help them to file for the immigration, rent contracts, wills, living wills, pretty much everything that is related to the legal services that the foreign community can require. We have offices in Merida, we have a brand-new office in Campeche. We have offices in Quintana and in Los Cabos that so we have in all those places, people and offices and the tools to help you buy the property or rent the property or to form a corporation to start a business. Our team is full with people that is bilingual English speaking that has been around the same business that we have our staff for quite a while. And we are pretty up to date in what’s going on in the new laws, because every year it changes, every year has new things and can tell you from the get go, the challenges that will represent what you wanna do in the country and especially when you wanna buy, when you, when you’re going to buy a property, because it’s very, very important to review the documents of the property and the background of the property and to make sure that you’re not buying something that you’re gonna regret later. So, that’s what we’ve been doing and that’s what we do right now and we’re here to help them.
Patti Perez
OK, so thank you so much for being here with me, for helping me do this. And thank you guys for watching this. Please follow me on social media and if you want for me to talk about something special, please contact me. Thank you so much and bye-bye.