Buyer’s Q&A
US buyer buying a Mexican fractional share: how the fideicomiso works
Mexican coastal real estate near borders is held through a fideicomiso (bank trust) for foreign owners. Fractional ownership wraps this inside the LLC structure, with the fideicomiso held by the LLC rather than the individual buyer.
The short answer: Mexican coastal real estate within ~50km of the coast or border zones must be held by foreign owners through a fideicomiso — a 50-year renewable bank trust where a Mexican bank legally holds the title for the foreign beneficiary. In fractional ownership, the fideicomiso is held by the property-specific LLC, not by individual buyers. US buyers hold deeded membership interests in the LLC, which in turn holds the fideicomiso. The structure simplifies US reporting versus holding a personal fideicomiso, and works cleanly for popular Mexican fractional markets like Cabo San Lucas and Riviera Maya.
This page describes the structural picture. Mexican fractional purchases by US buyers require a US–Mexico cross-border specialist (typically a CPA + a Mexican notario).
What a fideicomiso is
Under Mexican law, foreign individuals cannot directly own real estate within the "restricted zone" — defined as land within 100km of any border and 50km of any coastline. This covers most popular Mexican vacation-home destinations including Cabo San Lucas, the Riviera Maya, Puerto Vallarta and most of Baja.
The legal workaround for foreign buyers: a fideicomiso — a trust contract where a Mexican bank holds legal title to the property as fiduciary, and the foreign buyer is the trust's beneficiary with all practical ownership rights (use, sale, inheritance). Fideicomisos run for 50-year terms, automatically renewable.
How fractional ownership wraps the fideicomiso
The property-specific LLC holds the fideicomiso, not the individual fractional buyers. The structure:
- Bottom layer: the Mexican property, located in the restricted zone
- Fideicomiso: the bank trust holding legal title, with the LLC as the foreign beneficiary
- Middle layer: the property-specific LLC (typically a US or Cayman LLC), which is the beneficiary of the fideicomiso
- Top layer: the fractional buyers, holding deeded membership interests in the LLC
The US buyer's ownership stake is in the LLC. The LLC's ownership stake is in the fideicomiso. The fideicomiso's title is to the Mexican property. Each layer is documented and enforceable.
Why this is simpler than holding a personal fideicomiso
A US buyer holding a personal fideicomiso of a Mexican property faces:
- Direct fideicomiso annual fees to the Mexican bank (typically $500–$1,500 USD per year)
- US PFIC reporting on the fideicomiso under specific IRS rules
- Direct US Form 3520 reporting (foreign trust)
- Complex deemed-income calculations on any rental
The fractional structure converts this into a single LLC interest with simpler US reporting (Form 8938 / 8865 as relevant) and no direct fideicomiso obligations for the individual buyer. The LLC handles the fideicomiso layer once for all owners.
Where Mexican fractional inventory is strongest
| Destination | Profile | Typical 1/8 share price |
|---|---|---|
| Cabo San Lucas (Baja California Sur) | Largest US-buyer Mexican fractional market; deep inventory | $500k–$900k |
| San José del Cabo | Quieter sibling of Cabo; lower density | $450k–$750k |
| Riviera Maya (Tulum, Playa del Carmen) | Caribbean coast; growing fractional inventory; lower entry | $300k–$600k |
| Puerto Vallarta | Pacific coast; established US-buyer demand | $350k–$650k |
What US buyers should verify before signing
Three Mexico-specific items in addition to the standard fractional due diligence. First, the fideicomiso is held by a major Mexican bank with established track record. Second, the LLC's annual fideicomiso fees and any pass-through costs are itemised in the annual fee, not buried. Third, the renewal mechanics — when the fideicomiso renews for its next 50-year term, who handles the paperwork and who pays.
Tax position
Mexican capital gains tax and ISR (income tax on rentals) apply at the LLC level. US side: Form 8938/8865 as appropriate, US capital gains on disposal, US foreign tax credit for Mexican tax paid. The US–Mexico double-taxation treaty governs the interaction. Estate considerations: US worldwide-estate inclusion, Mexican inheritance handling at the fideicomiso level.
Where to find Mexican fractional listings
Co-Ownership Property's Mexico marketplace includes fractional listings in Cabo San Lucas and other Mexican destinations.