In short? Yes.
This is a question that many people ask when they consider buying Mexican real estate, and while the short answer is “yes”, there are some qualifications. You see, it’s not technically legal to buy goods or property with foreign money in Mexico (the Mexican peso, after all, is the legal currency). However, there are some areas which have a high level of foreign investment or thriving ex-pat communities, place like Los Cabos and Puerto Vallarta, which allow the purchase of high value items like properties with US dollars.
There are advantages and disadvantages to this, of course, and we will discuss these in greater detail below.
So, is the US dollar really King for the Mexican real estate market?
Mexican Pesos for Mexican real estate
As we indicated, it is technically not legal to pay for goods with anything other than pesos, however in areas which have large ex-pat communities and foreign investments it may be possible to make high value purchases with US dollars so long as both parties agree.
However, you must remember that no matter which currency you pay for a home with the price of that home will always be listed in Mexican pesos on the title deed. As such, paying in USD for your Mexican real estate can have pros and cons when it comes to buying property. One con is that any capital gains tax or property taxes will be based on the houses price in pesos.
This may not sound like much of an issue, however it means that any depreciation against the dollar is not taken into account when making these calculations. So, for example, if you bought a house worth 100,000 dollars when the exchange rate was 16 pesos to the dollar the “sale price” on the deed would be 1,600,000 pesos. If the peso is 18 to the dollar by the time you sell, the sale price will be 1,800,000 pesos, and yet still be worth the $100,000 US dollars you paid for it. Thus you will be subject to capital gains tax in Mexico even though you have technically not made any profit in terms of dollars.
US Dollars for Mexican real estate
There are, however, some very real advantages to advertising your Mexican real estate in US dollars, or indeed in buying a property in US dollars. The main one, for obvious reasons, is the stability of this currency and the fact that it is less likely to experience large fluctuations in quick succession.
Selling your Mexican real estate in dollars makes it more attractive to foreign buyers, but may put of some Mexican nationals due to the frequent fluctuation in the pesos to dollars ratio. If you insist that the sale be completed in only dollars, however, you risk losing the sale because of market forces; if you do not accept pesos any local buyer, reliant on a Mexican mortgage (which will be paid out in pesos), will most likely not know the true price of the home until the say they sign. This can cause real issues.
One great way to compromise and attract the widest range of potential buyers for your Mexican real estate is to advertise in US dollars, but make it clear that you will accept proportionate offers in pesos. This will give local buyers a little peace of mind, but still keep your property attractive to foreign investors.
If you take only one fact away from this article we would stress that you remember this; no matter if you pay for the property in US dollars, Pounds Sterling, Mexican pesos, or even magic beans (we wish, right?)… the price on the title deed for Mexican real estate will be recorded in pesos. This is something you must take into account either way!