Currently, when investments offer low rates of return and the stock market is unstable, the real estate market distinguishes itself as a safe investment that pays good dividends to investors.

Investment yields on terms of more than a year

The possibility exists of acquiring real estate on credit, which would pay for itself by renting it out, due to the high demand for houses or apartments in zones located on the beach such as Vallarta because it offers the buyer more comfort and privacy.

Real estate can be rented and represent an investment that, using interest rates as a guage, is much better than what a bank pays for a traditional investment. And in case of an emergency liquidation, it can be mortgaged at relatively low cost.

Easy guide to buying property in Vallarta

We all dream of some day owning beach property inasmuch as it, without a doubt, offers a retreat for a weekend, a vacation, or a complete or occasional retirement after long, hard years of labor. Nevertheless, what you want to buy ( a house, an apartment), what your budget is, if financing will be necessary, who will be the assessor, and finally, a number of relevant aspects that must be checked, are important. To acquire property, especially in the case of foreigners, it’s essential to know the laws in order to protect your investment.

For foreign investors

Mexican laws establish that the way to obtain the property rights is via a trusteeship that is drawn up through a national banking institution.

What is a Trusteeship?

It functions as a base in the drawing up of a buy-sell contract, selling a property, making investments, buying real estate or giving guarantees. The effect of a Trusteeship is to protect the rights of the trustor (national or foreigner), to acquire guarantee or administrative property rights. In the case of foreigners, the trusteeship is established because restrictions exist regarding the acquiring direct ownership of land inasmuch as foreigners can’t be direct owners of the property. In addition it guarantees legal security in relation to possession of the real estate. It’s a requirement that the protocol of this contract must be done before a notary licensed by the Secretaria de Relaciones Exteriores.
A Trusteeship has a term of 50 years, a term which can be extended.

Fiscal Aspects of buying-selling of real estate property

When a taxpayer, resident of the country, sells a property it’s subject to income tax (Impuesto Sobre la Renta, I.S.R) according to the profit, which is the difference between the original purchase price and the selling price, a technical mechanism established to determine the correct tax. For the sale of houses used for habitation there exists an extension for payment of this tax, provided it has been designated as a house used for habitation.

Property Title

It’s important to analyze this document, which is the proof that the person selling the house is actually the owner. It also contains the measurements of the lot and the description of the property from the public register.

Construction permit, lot plans and payment of taxes

It’s necessary to ask for the building permit, a lot plan and verify that the payment doesn’t have outstanding tax or service debts of any kind and is free of liens. Properties in the federal maritime land zone with pools, bedrooms, retaining walls, and walkways, should have a concession title that authorizes the construction or proof that the authorization has been obtained from the “procuraduria del medio ambiente”, to avoid fines, closures or demolition.

Steps for acquiring property in Vallarta

Currently, the acquiring of real estate property not only involves taking into account the style of the house but it also involves a crucial decision from a financing and investment perspective.

1.- It’s advisable that not only the seller but the buyer have an assessment done by a licensed lawyer who’s a specialist in real estate.

2.- Consult a real estate professional. Looking for the AMPI seal guarantees a more extensive legal review and saves a lot of headaches, making the transaction a relatively easy step where the time of closing of the sale is fundamental.

3.- Define the suitable type of property, depending on the budget.

4.- Analyze all the financing possibilities. Currently there is short and medium term direct financing available for national and foreign buyers thus U.S. buyers have mortgage credit to acquire or construct vacation homes in Mexico. This type of traditional financing has been available since 1995 through companies like Collateral Mortgage, LTD that grants credit for up to 50% of the value of the real estate, beginning at $400,000 USD, for a term of 20 years to U.S. citizens residing in the U.S. who wish to construct, remodel or acquire vacation property in Mexico. Another way that foreign buyers obtain funds for the purchase of property in our country is by obtaining financing by using property or stocks in their country as collateral. The minimum down payment is 30%, annual interest rates start at 8.75%, the minimum credit amount is $100,000 USD and the maximum is $800,000 USD.

5.- Having Title Insurance, which guarantees the insured (property owner, trustee or mortgage holder) the validity and priority of his rights regarding the property. It’s also an indemnity between the insured and the company issuing the policy. In addition the Title Insurance is a detailed analysis and evaluation of public and private documents, plans, and others relative to the property title.

When a loss or an adverse claim arises against the policy issued by a title company, it is obligated to: A) Indemnify the insured for the loss suffered, when said loss or reduction is not a result of a problem in granting of title that has been expressly excluded by the policy. B) Pay legal defense fees and defend the insured against whatever claim that questions the validity and preference of rights regarding the property. C) Eliminate or correct the defect or lien that affects the title in question.
The company Stewart Title Guaranty Company - Mexico division is the first in Mexico authorized by the government to issue title insurance in this country.

The cost of the process of obtaining title insurance is divided into two parts: the preliminary studies and the property title, and vary according to company, and based on if a previous study of the zone or building where the real estate is located has been done and those terms of the title insurance policy that change the function of the real estate: from 0.4 % for developments and from 1% for low range property.

We wish to thank Lic. Alejandro Flores Von Borstel, Bernardo Aceves and Silvia L. Elías-Pullen for their collaboration on this article. Originally on Homes & Living>>

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