Have you been thinking about buying Mexico real estate, but you aren’t sure which currency you will need to make the purchase? In Mexico, the currency that is official is the peso, but you can still make a real estate transaction in dollars in popular areas that include Cabo San Lucas and Puerto Vallarta. There are pros and cons to paying for your real estate transactions with dollars, which is provided below.
Should you consider paying for real estate in Mexico with US dollars?
Mexico Currency Pesos
In Mexico, it is not legal to use foreign currency to pay for goods and services, but in some areas where there are many expats living. The Mexico real estate is generally quoted in US dollars and other expensive items too. This is why if you are wanting to pay for real estate in Mexico it can be done with US dollars as long as both parties agree to it. There is one thing that you must keep in mind when you purchase real estate property with US dollars is the price that was quoted for the title deed to the real estate property will be calculated, then determined for property taxes will be required in Mexican pesos.
The value of the real estate property will be recorded in Mexican pesos and you must realize this and understand this when you are dealing with the real estate market in Mexico, especially when you decide to sell your property. For example, if the peso continues to lessen and devalue compared to the US dollar as it has been doing in the past several years, then the capital gain taxes for the property could be higher than what you expected it to be and this is true even if the sale price for the property in US dollars is exactly the same when you purchased the real estate property in Mexico.
Another example is: if you purchased real estate in Mexico three years ago when for each US dollar you received 16 pesos and it equaled to $100,000 US dollars when you purchased it, which would be equal to $1,600,000 Mexican pesos. Currently today one US dollar is equal to 18-19 Mexican pesos, which actually means if you sold your property for $100,000 US dollars, then that would be equal to $1,800,000 Mexican pesos, and the capital gains tax is $200,000 pesos, and this means that your property in Mexico in not worth any additional US dollars. The taxes that you will be expected to pay is based upon the profit that it looks like you gained in Mexican pesos, and even if you did not gain any profit when you have converted the pesos into dollars.
US Dollars Currency for Real Estate in Mexico
There are numerous advantages that comes when you advertise your Mexican real estate property in US dollars, especially in the popular areas that tourists go to. It doesn’t matter if the purchaser pays for the real estate property with US dollars or with Mexican pesos. Why you may ask? The US dollar has always been more stable compared to the Mexican peso and it is very likely that it will fluctuate with the selling process of the real estate property.
When selling real estate in Mexico in US dollars it becomes very inviting and attractive for foreign investors, but you should know that some of the Mexican nationals may refrain from making an offer on the real estate property as when it’s time for the signing it could become complicated, especially if the buyer will be using a Mexican mortgage for the purchase and the Mexican mortgage will calculate, then pay for the real estate with Mexican pesos. Also, if you want any offers for the real estate property to be paid with US dollars, then potential buyers that are local will not understand how much the real estate property will cost them when it is time for the signing of the property. This could cause a sale to be lost. The best option if you are advertising the real estate property for sale is to have it with US dollars, but with the option to pay with Mexican pesos.
The main factor that you should remember about the real estate in Mexico is all of the title deeds will always be quoted in Mexican pesos and it doesn’t matter if you pay for the property with US dollars, Mexican pesos, or even with coffee beans. Paying for real estate in Mexico with US dollars has its pros and cons.