Buying in Los Cabos and torn between a bank trust and a Mexican company? You are not alone. The right structure affects your closing timeline, costs, taxes and how you operate the property. In this guide, you will learn when a fideicomiso makes sense, when a Mexican corporation fits, and what to expect in Cabo. Let’s dive in.
The restricted zone basics
Foreigners cannot hold direct title to property within Mexico’s “restricted zone,” which covers most of Los Cabos. Instead, you use a permitted structure. The Secretaría de Relaciones Exteriores (SRE) outlines how foreign buyers acquire rights through a bank trust known as a fideicomiso or how Mexican companies notify acquisitions for certain non-residential uses inside the zone. See SRE guidance on the restricted-zone fideicomiso permit and rules for corporate notices for non-residential acquisitions.
- Learn the permit framework for restricted-zone trusts on the SRE site: SRE fideicomiso permit guidance
- See SRE’s notice rules for Mexican companies buying for non-residential use: SRE corporate acquisition notice
Fideicomiso: the residential standard
A fideicomiso is a Mexican bank trust that holds title to the property while you hold the beneficial rights. You can use, lease, sell, or pass your interest to heirs through successor beneficiaries. This is the standard path for foreign individuals buying homes or condos in Los Cabos.
How it works
You choose a Mexican bank to act as trustee. The bank appears on title and must follow your written instructions as beneficiary. You keep practical ownership rights, including the ability to occupy, rent, sell, and finance your trust interest. The trust is created with an SRE permit and recorded by a Notario.
Term and renewal
Residential fideicomisos are typically granted for 50 years and can be renewed under the SRE permit regime. Review the official process on the SRE fideicomiso permit page.
Timeline and costs in Cabo
- Setup timeline: Trust permitting and closing usually add time compared with a domestic purchase. Real-world closings in Los Cabos often run several weeks, commonly in the 8 to 12 week range depending on bank and Notario timing. See a practical overview of timelines with local FAQs.
- Closing costs: Foreign-buyer closing costs in Los Cabos often land around 4 to 7 percent of the purchase price, including taxes, Notario and registration. Local guidance outlines these typical ranges in Baja California Sur. See a breakdown of common items in this Los Cabos closing-cost overview.
- Bank fees: Expect one-time trust setup costs plus an annual administration fee set by your chosen bank. Ask for the bank’s fee schedule in writing before you open the trust.
Pros and cons
- Pros: Widely used, simpler than running a company, clear personal control, succession via named beneficiaries, familiar to local lenders and brokers.
- Cons: Initial setup plus annual bank fees; title is held by a trustee bank even though you control the trust rights.
Financing a trust property
Many lenders can finance trust-held properties in Mexico. Ask prospective lenders early about their requirements. See a local financing overview on lending and trust collateral.
Mexican corporation: for non-residential uses
A Mexican company can buy in the restricted zone when the property will be used for non-residential, commercial purposes, subject to notice requirements with SRE. For personal residential use in the restricted zone, the standard path remains a fideicomiso.
When it fits
Consider a company if you are purchasing commercial real estate or operating an active rental or hospitality business with multiple properties and business obligations. See SRE’s non-residential rules for company acquisitions in the restricted zone: SRE corporate acquisition notice.
Administration and ongoing costs
Companies require incorporation, accounting, annual tax filings, and additional compliance. Plan for recurring bookkeeping and professional fees. A legal overview of foreign investment and corporate obligations is summarized here: Mexican corporate and foreign-investment considerations.
Pros and cons
- Pros: Direct company-held title for commercial uses, business deductions, and centralized management of multiple properties.
- Cons: Higher administrative burden and recurring costs, more complex cross-border reporting for U.S. owners, and limits on residential use inside the restricted zone.
Quick decision guide
Use this to frame your choice, then confirm with legal and tax advisors.
- Personal residence or vacation home in Cabo: Choose a fideicomiso. It is the standard for foreign individuals buying residential property.
- Building a rental or hospitality business with multiple units: Consider a Mexican corporation for non-residential use and business operations.
- Prefer simple ongoing administration: Fideicomiso.
- Need corporate deductions and a formal operating structure: Corporation.
Taxes and cross-border reporting
U.S. taxpayers report worldwide income. If you earn Mexican rental income or sell a property, you report it to the IRS and can often use the Foreign Tax Credit to reduce double taxation. Learn the mechanics in the IRS guide to the Foreign Tax Credit.
If you hold foreign accounts or interests, you may have FBAR and other reporting obligations, especially if you use a Mexican company or maintain local bank accounts. See the IRS summary on reporting foreign bank and financial accounts.
Practical next steps in Los Cabos
- Confirm the property sits in the restricted zone and decide intended use.
- Engage a reputable Notario and a bilingual real estate attorney familiar with fideicomisos and SRE procedures.
- If using a trust, select your bank, get the full fee schedule, and confirm the SRE permit timeline in writing.
- If forming a company, model incorporation, accounting and notice requirements against your projected income and expenses.
- Build your closing calendar with an 8 to 12 week window for trust setups, subject to bank and Notario timing.
- Coordinate Mexican and U.S. tax advice early so your ownership structure, rental plans, and reporting are aligned.
Ready to map your best path in Cabo? Connect with Cory Baglien for tailored guidance on structure, timelines and a property strategy that fits your goals.
FAQs
What is a fideicomiso in Los Cabos?
- It is a Mexican bank trust that holds title while you keep beneficial rights to use, lease, sell, finance, and name heirs for a residential property in the restricted zone.
How long does a fideicomiso last in Cabo?
- Residential trusts are typically granted for 50 years and can be renewed through the SRE permit process.
Can my Mexican company buy a Cabo home for my personal use?
- Not typically. A company can acquire restricted-zone property for non-residential uses; personal residential use generally calls for a fideicomiso.
How long does closing take with a fideicomiso?
- Many Los Cabos closings run several weeks and often land around 8 to 12 weeks, depending on bank and Notario timing.
How much are closing costs for foreign buyers in Cabo?
- A common range is about 4 to 7 percent of the purchase price, including taxes, Notario and registration, with variations by municipality and transaction.
Can I get a mortgage on a trust-held property in Mexico?
- Yes. Several lenders accept fideicomisos as collateral; ask your lender and trustee bank about their requirements early.
Will I owe U.S. taxes on Cabo rental income?
- Yes. U.S. taxpayers report worldwide income and may use the Foreign Tax Credit to offset Mexican taxes, along with foreign account reporting when required.
