 |
|
|
Real Estate in Cabo San Lucas and Los Cabos
|
||||||||||||||||||||||||
Real Estate: Trust is Everthing
|
| The creation of wealth is never without risk - nor is the pursuit of pleasure. Whether your chosen investment vehicle is real estate or the stock market risks will always be involved. The successful investor researches and mitigates those risks. Los Cabos is no exception. Cabo San Lucas, San Jose del Cabo, the Tourist Corridor and the East Cape make up the Municipality of Los Cabos, in Baja California Sur, Mexico. In Los Cabos, foreigners (US and Canadian citizens as well as all others) can buy property as long as they own it in a trust known as a Fideicomiso. This trust, similar to a living trust, exists to hold title to one piece of property. If your property is located within 50 Km from a sea coast or 100 Km from an international border this is the only way in which you can take title. In Los Cabos that pretty much defines all of our real estate. But we're not complaining because not only is the Fideicomiso system safe it offers tax and estate planning advantages. What you need to know are the terms of the trust. When Bob & I got our first trust we were so excited we immediately got the trust translated from Spanish to English. The trust stated that for the purposes of this piece of paradise the government of the United Mexican States hereby granted us all the rights and benefits of Mexican citizens. In return we agreed to consider ourselves Mexican and not to seek redress with any foreign government. In other words: the Alamo is NOT going to happen again. Your trust will be the same. In very simple terms the bank holds the property in trust for you. You have the rights to buy, sell, rent, improve, build upon, or pass the property to your heirs without probate. All you have to do is maintain the trust with a Mexican bank and renew it every fifty years. Backing up the trust is your title insurance policy. Three companies offer the same policies you‚re familiar with in the States and Canada. The company that covers your primary home will provide identical coverage on your vacation home here in Mexico. Unlike the US, where title insurance is often mandatory, here in Mexico it is an option. However the wise investor would never pass on it. When you put in your offer you'll select a closing agent, the person who will work on your behalf to make the deal happen and help your realtor look out for your best interests. In some cases this will be the developer, in most it will be an independent third party. Among other things this person will apply to the Ministry of Foreign Affairs for your trust permit and work with a Mexican bank to set up a new trust or transfer an existing one. If you‚re buying a property already in a trust you may elect to assume the existing trust or create a new one in your name. Either may be a fine option. If the trust is relatively new and with a "good" bank you may save a few thousand dollars in closing costs by assuming the trust. In essence the original trust still owns the property and you purchase it. You will still need permits from the federal government to do so but as there is less paperwork involved there is also less cost. That said, if the trust is older you might be better off to start fresh. When foreigners began buying property in Los Cabos the length of the trust was not fifty years. There are a number of trusts already in need of renewal or which will expire in only a few years. Rather than assume them you are money ahead to create a new trust which will run for the full term. The bank administering the trust will also be a consideration. The trust departments of our banks range from moderately helpful to downright impossible to deal with; the fees they charge to accept and administrate trusts vary greatly. Your real estate agent and closing agent will advise you whether or not assuming an existing trust is in your best interests. Your closing agent will also arrange the title search and obtain a certificate of no liens. If there are liens they will arrange to have them settled from escrow and removed from your title so you won't inherit someone else's problems. From your offer to purchase until they hand over your completed fideicomiso the closing agent will be slogging through a morass of paperwork on your behalf. Be nice to them! Make Sure It's Right - Right Now Your purchase will be finalized before a notary public, which in Mexico is a government-appointed lawyer. It will take several weeks to record your purchase and provide you with your copy of the trust document. The first thing you should do is read it carefully. Yes, it will be in Spanish. If you're not fluent have it translated. Be sure your name is spelled correctly. My first name is Carol. My middle initial is A. On our first trust my name appeared throughout as "Carola". I suppose it seemed more Mexican that way. Make sure the names of the property owners are correct. Check the names of the secondary beneficiaries (your heirs) just as carefully. Canadians and Americans are familiar with property held in "joint tenancy with right of survivorship"‚ in which a surviving partner or spouse becomes the undisputed sole owner when the other passes away. Here in Mexico we have the same concept with a much much longer name. If you have elected to hold your property in joint tenancy be certain the terms of the trust reflect this. Last and most important be sure the value registered for the sale is actually the price you paid for it! Why? In the future you or your heirs will want to sell this property. At that time you are liable to pay capital gains tax and the value registered on your fideicomiso is the basis the notary will use to compute it. If you find that your fideicomiso is incorrect on any of these points the time to get it straightened out is now. If, as is usually the case, you find that it's perfectly perfect you'll just need to make several copies and stash the original in a safe place. So that's the whole scoop on your trust. Any questions? © 2006 Carol Billups Carol S. Billups Broker/Owner, Realty Executives Los Cabos Cabo San Lucas, BCS, Mexico E-mail: carolbillups@hotmail.com cell from states: 011-52-624-147-7541 |
|
|
|
|
|
||||||||||||||||
|
