Real Estate Ownership Options in Mexico

[Mexico Luxury Properties]

In previous articles we reviewed some of the
history of the bank trust mechanism that enables non-Mexicans to
purchase real estate along Mexico's coasts, as well as the importance
of working with a reputable real estate brokerage and United States
accredited attorney to consummate your purchase. We have also addressed
the importance of proper and thorough title verification and
processing, as well as the peace of mind that quality title insurance
provides.

In this article we will discuss your ownership options for the bank trust
that will hold deed to your coastal real estate. These option are:
ownership through a United States LLC; ownership as an individual; or
ownership through a Mexican corporation. Each of these mechanisms has
advantages and disadvantages:

OWNERSHIP THROUGH A UNITED STATES LLC: Forming a United States LLC for the purpose of acquiring Mexican
coastal real estate is the most widely used mechanism, and for a number
of good reasons. At our firm we process several LLC's a day for this
just this purpose.

Advantages:

1) Properly structured, the rules and covenants within a United States LLC
are highly adaptable to the specific needs of the purchaser or
purchasers.

2) As an estate planning instrument, a LLC has great desirability because
the LLC is a United States entity and United States law governs it.

3) For fractional ownership -- when the fractional owners are United
States residents -- a LLC is the most desirable and cost-effective
instrument, as the LLC operating agreement will work as the internal
rules for the members of the LLC.

4) For all owners – single, or fractional -- the most useful part of
forming an LLC is that by selling the membership of the LLC the
interest in the Mexican Bank Trust is transferred to the new member (or
members), which is very cost effective and takes very little time
compared with the assignment of rights on an existing bank trust, or
the organization of a new one.

Disadvantages:

1) This scenario does not work for people looking for financing at this
time, unless the lender is willing to take as collateral the LLC
membership, something which is very unusual unless you are dealing with
a private lender.

2) On the tax side a LLC does not offer specific benefits anymore, because
now the member who sells his/her membership will need to pay capital
gain taxes to Hacienda, Mexico's taxation authority. The good news is
that -- having obtained proper documentation of your tax payment in
Mexico -- you will receive credit for that payment on your United
States tax filing because of a United States-Mexico treaty that
prohibits double taxation.

OWNERSHIP AS AN INDIVIDUAL: An option that suits a number of buyers, especially those seeking financing for their Mexican property.


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