Buy or Rent: A Guide to Purchasing (or Renting) Real Estate in Baja
Deciding whether to rent or to buy is always a tough decision, especially when looking in a foreign country. Before you can make a decision that you will feel excited and confident about, it is important to have all of your bases covered. If you are looking to buy or rent in Baja here are some important things to consider before you start your search. Following these important steps will help you to make an informed decision and get you one step closer to owning (or renting) your dream house in Baja.
Step 1: Knowing How to Buy and Rent
The biggest concern is the location. If the land is in the restricted zone, you will need to purchase through a land trust.
Restricted zones are any areas within 50 kilometers of a coast or 100 kilometers of any neighboring border. Foreigners can own property in this zone through a bank trust or by establishing a Mexican corporation.
Option 1: A Bank Trust (Fideicomiso)
The Fideicomiso is an agreement with a bank or trustee where the bank actually owns the property in your name. While you are not actually listed as the owner, you still retain all legal rights to the property. You are still able to remodel, paint, landscape, rent, sell, etc. the property, just as you would with any property in the U.S. that you owned.
The trust is granted for a period of 50 years and is renewable for additional 50-year periods.
The trust can be transferred to another beneficiary who can either wait for the remainder of the 50-year period to come to a close or renew at the time of the transfer.
It only costs $500 to renew a land trust every 50 years.
This is a great option for someone who is just looking to own some property for personal enjoyment.
Option 2: Establish a Mexican Corporation
If you are looking to invest in and develop property in Baja to sell or to rent, you will want to establish a Mexican corporation. Since 1995, foreigners can own and operate a Mexican corporation for the purpose of purchasing and developing land for commercial use with the exceptions of mining, airports, and telecommunications. There are no limits as to where in Mexico you can invest.
The two most common types of corporations are Limited Liability Corporation and Limited Liability Partnerships. Choosing which corporation works best for you depends on tax purposes both in the United States and in Mexico. Once the corporation is formed you are free to purchase property and acquire title insurance.
If you need help establishing a corporation, this resource is helpful for US-based companies.
How to Choose Which is Right for You
When deciding whether to use a Bank Trust or establish a Mexican Corporation, it is best to consult with a reputable lawyer. Your lawyer will discuss the pros-and-cons of each and depending on your personal needs and wishes for your property; you can decide which safe investment method is best for you.
Buying: Knowing all of the steps
It is important for you to understand the steps to the buying process in Mexico so you won’t be taken advantage of. Here is a good step-by-step guide to buying real estate in Mexico to help get you started.
Renting: How to
Renting in Mexico is much less complicated. Just remember that it is important to find a reputable landlord and real estate agent and have leases looked over by a lawyer you know and trust. Here is a great guide for renting in Mexico.
Step 2: Buying vs. Renting: Which is Right for You?
The main things to consider when trying to decide which option is the best for you are:
- Capital and Upfront Costs
- There are many companies that will help you mortgage a property, but it important to look at the long-term value of the home.
- Conduct research and be mindful of value fluctuation. Looks for signs of environmental damage and ask around about future construction.
- Living or Visiting
- How often will you visit? Will you rent out a home if you buy? It is important to map out your “living plan” before you buy so you know how your finances will look throughout the years.
- Make sure you trust the people you work with to purchase (or rent) a home. Like in any country and any business deal, if it is too good to be true, it probably is. Do the proper research and always hire an attorney.
Check out this full pros-and-cons list for more information on renting vs buying a property.
Step 3: Make the Purchase or Rental Agreement and Enjoy!
Once you have taken the time to find a landlord or realtor you can trust, have gone through the necessary steps to rent or own in Baja, and have completed the purchase or rental agreement that you had reviewed by a lawyer, you may relax with peace of mind.
Now, just have fun in your new space and enjoy!
For more information on buying property in Mexico, be sure to check out this buying guide.
Author Bio: Evan Harris is the co-owner of SD Equity Partners and is an expert in property valuation and financial services for real estate. For the last 7+ years, Evan has helped his clients successfully create their dream homes in Southern California.