Buy Mexico Real Estate with your IRA | Frank Selden Law

Buy Mexico Real Estate with your IRA

Buying Mexico Real Estate with IRA funds requires several additional steps to buying real estate in the US. I have helped several clients purchase real estate in Mexico and love traveling there.

The First Steps

  • The first few steps are the same as US real estate. We create an IRA account with an IRA custodian that allows investment into a US based LLC. I work with several custodians and can recommend one if you do not have a favorite.
  • We create an LLC in your choice of States. The LLC is a manager managed LLC you manage.
  • The IRA custodian transfers your qualified funds into the LLC.

The Mexico Real Estate Steps

Buy Mexico Real Estate with your IRAOnly Mexico citizens or entities are allowed to own certain restricted lands, such as beach front property. Your US LLC is not allowed to directly own the restricted real estate.

Most of our Mexico real estate clients use a bank trust or fideicomiso. There are three parties that all play a part in the fideicomiso: the buyer / beneficiary, the seller, and the Mexican bank.

The buyer of the Mexican real estate is the beneficiary of the fideicomiso. Your US LLC is the buyer / beneficiary. The Mexican bank serves as the trustee, and has a fiduciary relationship with the buyer, meaning that the Mexican bank is working in good faith for the buyer / beneficiary and in their best interests. The bank holds naked title to the property and carries out duties related to the property that serve the desires of the beneficiary, the buyer. Fideicomisos cost about $1600 to set up, and about $600 a year to maintain. This cost is to the bank. I am not involved in that step.

Retiring on Your Mexico Real Estate

Prohibited transactions still apply. While your IRA – LLC owns the Mexico real estate, disqualified persons are not allowed to stay there. You are not allowed to use your IRA-LLC setup to purchase real estate you own or sell that real estate to yourself. So, why buy the property of your dreams? Two very good reasons.

  • You ARE allowed to distribute real estate to yourself from your IRA. This is a taxable event. However, if someone purchases their retirement property with enough advance time, and rents it out until their retirement, they often have more than enough cash in their IRA to pay all of the taxes and receive their retirement real estate free and clear.
  • Even if you do not want to retire on this property, some people see Mexico real estate as an affordable investment with excellent rate of return cash flow.

If you want to discuss this idea, please set up a no cost or obligation appt here.

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