A Notario is a lawyer appointed by the Governor of the State in which he is practicing. He processes and certifies all real estate transactions, including the drawing and review of all real estate documents and closing statements. In connection to all real estate transactions, the Notario collects all the documents that are required by law for the transfer of all real estate.

Those needed documents are:

• A non-lien certificate from the public property registry.
• A statement from the local municipality showing that all property assessments, water bills, and other required taxes are paid in full.
• An appraisal from Catastro (the agency responsible for all property appraisals), which is required for property tax purposes.

In Latin American countries, the Notario has a very different role than the notary in the United States or Canada.

A Notario is an attorney, at least 35 years old, which has practiced in a Notario’s office at least three years, passed a stringent examination, and has been appointed as a Notario by the Governor of the State in which he is practicing. A Notario has the power to witness and certify documents that require absolute authenticity and handles wills and business contracts, as well as real estate matters. In addition, the Notario has the responsibility for the management and storage of original documents.

Although the Notario is a lawyer and is generally chosen and paid for by the buyer, he will not function as your attorney in the real estate transaction. Rather, the Notario is responsible for being neutral and fair to all parties (the buyer and seller), and cannot advise anyone involved in a transaction in which he is acting as a Notario. Accordingly, if you want legal representation in a real estate matter, you will need to hire your own attorney.

Under Mexican law, the deed to the property must be prepared by a Notario, who will ensure that all documentation and permits are in order and that there are no liens or judgments against the property, so that the transaction can proceed. He will also calculate the seller’s capital gains taxes and the buyer’s acquisition taxes. In short, everything official that has to do with your transaction will be done by the Notario.

Because of the duties, responsibilities and potential liabilities the Notario may incur, notary fees are significantly greater in Mexico than those of notaries in the United States and Canada. These fees are based on a rate schedule set by an official commission, are tied to the amount declared in the property transfer, and are about 1.5% of the transaction value. There is also the 15% I.V.A. (Mexican Taxes) to be paid on the services.   

There is financing available for United States and Canadian citizens through some local banks, but the interest rate is high by U.S. standards. An FM2 or FM3 (immigration documents) is required for this type of financing. There are companies that offer financing at reasonable interest rates and terms through U.S. based companies. Currently, rates are in the neighborhood of 8%. Financing is now in the process of becoming available for pre-sales. For this type of financing, your credit scores and financial statements are used by the lender to help secure the loan.

If you purchase a condo in a new development, and will be the first owner, then title insurance is probably not something you need. If you are purchasing a house or condominium where you are not the first owner, or if you are buying land or a lot in a subdivision, you need title insurance to protect yourself.  You may obtain title insurance through one of the title companies in Puerto Vallarta. Call for quotes and information.

The process is essentially the same in both cases, as are the costs. The difference is that in a pre-sale property, you are the first owner of the condo, and the chain of title will start with you. This eliminates the problems that may occur with a resale property, with multiple past owners. 

Closing costs are figured differently in Mexico than in the United States. Typically, the buyer pays the transfer tax and other closing costs, including the Notario’s fees and expenses. The seller pays the capital gains tax and commissions. The total cost to close an escrow for a buyer will vary from area to area, and according to the amount paid for the property. In Puerto Vallarta and Nuevo Vallarta the amount fluctuates with the sale price, the higher the sale price, the lower the percentage paid for closing costs. For property in the $200,000 to $600,000 price range, the percentage will be approximately 5 % to 6 %, which includes the fideicomiso fees.

This is a difficult question to give a totally correct answer to.  I have asked different Notarios and attorneys, and the answer has varied. The consensus is, that if you have an FM2 card, and can show payment of six months utility bills for the property (they must be in your name), and/or, you can show that 50% of your income was derived in Mexico, and/or, your Mexican property was your primary residence (six months per year), you will probably be exempt from capital gains.

Since I do not want to give legal or tax advice on this issue, I will give you the answer that was given to me: “Get yourself a very good accountant, or a Mexican Tax expert”, follow his advice and if you meet the criteria you will be exempt. If you do have to pay capital gains, the Notario will collect the tax through escrow and pay it to the Hacienda (Mexican I.R.S.).

I have been assured by two Notarios that the amount you pay is 29 % of the net gain of the property, or 25 % of the value. It is your choice. The law changes every year, so it would be a wise decision to consult a Notario or an accountant.

In almost all new projects you can rent. In some older projects, there may be some kind of exclusion to renting by the Condominium Association. It would be a good idea to check before you buy if you plan on renting your unit. How successful you are in that endeavor is based upon the type of property you have for rent. Usually, I advise my clients to buy resort type condominiums on beachfront property, because this is what people going on vacation look for. I have written an article on renting your condominium that gives step by step instructions. If you are going to rent, you are supposed to register with the Hacienda (Mexico’s IRS) to be legal in renting.

This is a most asked question, and is probably based upon stories of Ensenada in the 1970’s.  The Mexico of that time and modern day Mexico are completely different. Mexico is a part of the world economy and your tourist and investment dollars are the second largest source of income in Mexico, oil production being the first. There are some developers who do not have the best of reputations, but most are very good. Due diligence is always a good idea before you purchase.

In every project I become involved in, I retain an independent attorney to do a complete study of the project and its owners/developers, their past performance record, and the chain of title.

Some developers will put their property in an irrevocable trust with a Mexican Bank to insure completion. In the event of financial problems, the bank can continue with construction and be repaid out of proceeds of the sale. Sometimes, developers will offer completion bonds to insure the client’s investment.

It is easier to describe what they do not cover. You will have to pay your own electrical, telephone, and cable bills. If you decide to insure the contents in your condominium, this would be an additional cost not covered by the maintenance fee. Lloyd Insurance Services has been in business in Mexico for over 30 years, and can handle all of your insurance needs.

How do I know the maintenance fees will not go up when I take ownership?
As in the United States, the fees will always increase as costs increase. There will be a board of directors elected by the condominium owners, who will be in charge of the budget, and all increases will have to be approved by the owners.

Generally, the two-bedroom is the best rental, then a one-bedroom. These are the units that most people want, and can afford. That does not mean the three-bedroom units don’t rent. However, more people can afford the smaller, less expensive units. Larger and more expensive beachfront three/four bedroom units do not have as much deTmand as the smaller units. But, there are very few large beachfront units available for rent, so that those who have one to rent have very little competition.

I have special articles on renting; please contact me if you do not have a copy.

Good furniture is expensive in Puerto Vallarta. It is also difficult to bring new furniture into the country without having to pay a large import fee. We have made special arrangements with some furniture manufactures and interior designers to supply furniture packages at special prices. Some packages include everything from salt and pepper shakers to sheets, towels, and everything needed.

In most projects, you will have to purchase your own washer, dryer, refrigerator and microwave.

Some of the larger resort condominium projects have full-time ownership, time-share and fractional ownership programs in the same project. Ask about it wherever you are looking.

Puerto Vallarta does not have the hurricane problem that the east coast of Mexico experiences. We are protected by the Sierra Madre Mountains. The last hurricane that hit Puerto Vallarta was in the early 1900’s. In 2002, the wave surge and high wind of a hurricane offshore hit the downtown area and affected parts of the Malecon and some hotels and buildings along the shore.

For the last nine years, Puerto Vallarta and Nuevo Vallarta have had their water systems tested, certifying that the drinking water is pure. The water company here is called Seapal.

There are several ways to do this. The best way would be through the property management company you hire to take care of your condominium. Lloyd Property Management Company can perform any service you need, including airport pickup, grocery shopping, and even chefs who will come to your condominium to cook for you. You should open an account at Lloyds (Operadora de Fondos Lloyd) to pay your monthly bills, and to deposit your rental money. Read my article on renting your condominium for that information.

High speed internet is available through Telmex (Phone Company), as well as through local cable companies.

There are several companies here in Puerto Vallarta that can provide you with what you need to get English speaking programs. In large multi unit projects the answers are more complicated. I have the names of two companies who specialize in satellite T.V. systems.

The best answer is the most expensive one, buy a car here that has Mexican plates. The problem is that cars purchased here can cost up to 30% more than in the United States. But, you will have less hassle with the local law enforcement agencies. If you bring a car from the United States or Canada, you must obtain a temporary import permit at the border. If you want to bring a car from home, bring in a 1996 or older. You will be able to nationalize a 1996 and get Mexican plates, and can sell or trade the car in. If you bring in a car and do not nationalize it, you may not sell it. You can keep it until it falls apart, or take it back out of the country before bringing another one into the country. People who bring in new expensive cars with U.S. plates run the risk of having the car taken away if you violate any of the local laws. (E.g. Exceed the limit of the temporarily importation permit)

As in the United States, medical care can be very good, or very bad! Personally, I have received just as good medical care here as I did in the United States. Just be careful and do some investigation before you do anything. There are three excellent hospitals here in Puerto Vallarta: Cornerstone, San Javier and Ameri-Med. All three are located in the Marina Vallarta area. There is a company from Canada that has a health care plan for Americans under the age of 80, living here in Mexico. The cost is very reasonable. Also, Lloyd Insurance Services has excellent medical insurance available.

Obviously, there are some risks in buying pre-sale or pre-construction, but those risks can be minimized by using proper due diligence. Construction loans are not available in Mexico as they are in the United States and Canada. Developers rely upon pre-sales to sell their projects. Typically, the return on your invested dollar can run as high as 100%, depending upon the phase of the construction when you purchase. With appreciation rates running at 15% in Nuevo Vallarta, it is reasonable to safely expect to double your investment in five years.

In today’s world economy, the type of things that happened in the Mexico of the 70’s belongs to the past. Find a project that has substantial financial backers and a developer/builder who has a good reputation. 

I am sure there are more questions that need answering. If you have one, please send me an e-mail and I will be pleased to give you an answer.

Thank you,

David Crenshaw
President
fundVallarta Investments

Mexico’s Original Partnership Company
Use your IRA to purchase a beachfront condominium in Mexico
Toll free from the US :  877-387-3468
Cell phone in Mexico :  322-779-8657
www.ppvre.com

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Disclaimer
The information contained in this article is provided for informational purposes only and should not be construed as legal advice on any subject matter, nor should it be considered as definitive.  This information herein may change without notice.