Why Buy a Vacation Home in Mexico?
Mexico is a place of exceptional rare beauty, defined by sun-kissed beaches, dramatic coastlines, sparkling clear water and a vibrant, welcoming culture. It has earned a reputation for its luxurious amenities, with famous destinations like Los Cabos, which feature backdrops of dramatic deserts and pristine beaches.
Mexico’s proximity to U.S. airports and similar time zones makes it a convenient vacation destination. Visitors and vacation homeowners can unwind and escape the hectic stresses of home without incurring long, costly flights and lengthy jet lag. Mexico’s relaxed pace of life offers a welcome respite, yet visitors will find plenty of leisurely and adventurous activities to enjoy. Another benefit is that Mexico’s cost of living tends to be lower than that of many other vacation destinations. It’s no wonder that so many have found their dream vacation homes here!
(Already planning your trip to Los Cabos? We can tell you the best way to spend your time with our guide, Three Perfect Days in Los Cabos!)
Mexico Real Estate Snapshot: Best Neighborhoods
Mexico has been steadily climbing the ranks for vacation home buyers, and Los Cabos, perched on the southern tip of the Baja peninsula, stands out as a clear frontrunner. Its appeal lies in the balance it offers: consistent warm weather, high-end infrastructure, fine dining, festive nightlife, luxury spas, and world-class golf, along with a diverse selection of property types ranging from oceanfront villas to properties based within golf resorts, condos and private luxury houses within gated communities. Some of the most popular vacation home neighborhoods are along the San Jose Corridor, which runs from Cabo San Lucas north to San Jose del Cabo. Top communities along here include Playa Palmilla, Cabo del Sol, Chileno Bay, Costas Palmas and Puerto Los Cabos.
Few places capture the magic of a vacation home quite like Mexico, and Los Cabos is leading the way. It’s a destination that balances natural wonder with refined living, making it a top choice for those looking to buy a vacation home in Mexico.
How to Buy a Vacation Home in Mexico
As exciting and appealing as buying a second home in a foreign country is, it is often more complex and trickier than buying in the U.S., and Mexico is no exception. Beginning in 1973, the Mexican Constitution forbade foreigners from purchasing real estate in a designated Restricted Zone: within 50 kilometers (31 miles) of the Mexican coast and 100 kilometers (62 miles) from the U.S. border. However, the Mexican government also understood the financial benefits of allowing foreigners to invest in real estate, so it created a legal method for ownership in the Restricted Zone called the fideicomiso.
What Is the Fideicomiso?
In a nutshell, the fideicomiso is a long-term bank trust, meaning a Mexican bank holds a property’s legal title in trust and the foreign purchaser is the trust’s beneficiary. The purchaser, aka beneficiary, has the same rights of usage as a U.S.-owned property, including the right to live, sell, rent, improve and pass along to heirs. The initial trust lasts 50 years and can be renewed indefinitely in additional 50-year increments. Purchasers/beneficiaries, not the bank, gain or lose equity in the property as markets fluctuate, just like with outright ownership. In addition to the setup fees, which range from $2,000-$3,000, purchasers pay annual fees ranging from $550 to $1,000. The fideicomiso should not be confused with a land lease, and it is not required for purchasing homes outside of a Restricted Zone.
Steps to Buying a Vacation Home in Mexico
As with any foreign real estate investment, you’ll want to work with trusted local partners who understand Mexico’s processes, fees and legal considerations. Unless you’re completely fluent in Spanish, you’ll also want to work with bilingual local partners. Here’s an overview of buying property in Mexico:
- Find a reputable real estate agency: Ask friends or family who have purchased Mexican properties or check ex-pat forums for recommendations. Be sure to work with agents who are members of AMPI, Mexico’s professional real estate association, and carefully read reviews and testimonials. Keep in mind that some parts of Mexico do not have a centralized Multiple Listing Service (MLS) to show all of the homes for sale in that market. So it’s important that you find a reputable agent who is willing to show you listings outside of the ones offered by their firm.
- Make an offer and hire a notary: Your agent can help you make a competitive offer once you’ve found your ideal residence. You’ll also need to work with a notary, known as a notario. A notary in Mexico is a neutral government-appointed legal expert who will oversee the property sale. They will handle the contracts, verify the required documents and make sure the sale is legal and properly registered to formalize the transaction.
- Hire a local attorney: A knowledgeable local attorney will conduct due diligence, verify the title status, investigate existing or future zoning regulations, identify covenants and restrictions, and help you understand public utility access and infrastructure. It’s wise to arrange for a home inspection as well. The whole due diligence process in Mexico usually takes around three to six weeks, though this depends on the property’s complexity and how quickly documents are provided.
- Pay closing costs, fideicomiso and property registration: Work with a reputable Mexican bank such as Scotiabank, Santander, HSBC or BBVA to set up the fideicomiso. Closing costs will include a variety of taxes, property registration, notary services and the fideicomiso, and typically range from 5% to 10% of the purchase price.
Mexican Vacation Home Ongoing Ownership Costs & Management Considerations
Owning a vacation home in Mexico comes with ongoing costs and some hidden responsibilities that you’ll need to consider:
- Taxes and insurance: Besides the annual fideicomiso fees, you’ll also need to cover property taxes and insurance.
- Utilities: You’ll need to pay for gas, water, electricity, and WiFi, even when you’re not using the home.
- HOA fees: Most planned communities and condos charge HOA fees that cover maintenance, landscaping and security around the property.
- Property management fees: Even in a planned community with HOA fees, you will need to hire property management to help with maintenance and housekeeping within your home. It’s also essential to have a plan in place for seasonal maintenance and potential repairs, especially in areas prone to hurricanes or severe weather.
- Local permits and tourism registry fees: If you rent your home, be aware of short-term rental restrictions and be prepared to pay for local permits and taxes.
These hidden costs and duties can catch new owners off guard, so it’s smart to plan ahead. For examples of beautiful, luxury homes in well-managed communities with these services already in place, see one of our Puerto Los Cabos residences or Playa Palmilla residences.
Vacation Home Ownership vs. Flexibility: Which Matters More?
When considering buying a home in Mexico, it’s worth asking the question: Are you really after full ownership, or do you simply want to enjoy the vacation home lifestyle? For many buyers, the goal isn’t financial return but creating lasting memories and enjoying time with family in a beautiful place.
Full ownership has its perks; it offers a deep sense of connection to one location. You can personalize the space, come and go as you please, and potentially build equity over time. However, it also ties you to one destination, comes with ongoing maintenance costs, and often ends up underused, even by the most enthusiastic buyers.
Modern solutions like Equity Estates offer a different kind of freedom.
Instead of managing one high-end property full-time, you can gain access to a collection of luxury homes around the world. With Equity Estates, you may also gain access to higher-end, more upscale villas and estates beyond what you could afford to buy on your own.
Why Equity Estates May Be a Better Fit for Vacation Home Ownership
Mexico is a beautiful destination to own a vacation home, but traditional ownership can be a complex, costly and lengthy process. With Equity Estates, you can discover luxury Mexican vacation homes without these burdens. This means no fideicomiso trust and no stress over currency fluctuations or local bureaucracy.
Equity Estates Fund offers a fully managed luxury real estate fund alternative at a fraction of the cost of traditional second-home ownership. Instead of being tied to one property, fund members enjoy an investment in a diversified portfolio and experience global travel (with personal concierge services and daily housekeeping) without the burden of property upkeep. And when the homes are sold ten years later, investors get their money back plus appreciation, assuming the market continues to increase in value.
From skiing in Aspen to exploring museums in Paris, wine-tasting in Tuscany, golfing in Scottsdale, snorkeling in Hawaii and sportfishing in Los Cabos, you can enjoy second-home ownership benefits without the headaches.
Equity Estate Fund investors enjoy:
- Access to 65+ stunning residences in the world’s most sought-after destinations, including Playa Palmilla and Puerto Los Cabos
- No property management responsibilities, including no landscaping, pool/spa upkeep, housekeeping, snow clearing, repairs or other maintenance concerns. The Fund manages it all seamlessly
- Designated residence managers who provide resort-style concierge services
- Flexible travel options, including bringing family or friends along
- Investment returns when homes are sold
Choosing Equity Estates Fund over second home ownership is ideal if you want to experience luxurious vacation homes like an owner without being tied down to a single location or dealing with the associated hassles.
