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Tips for Investors

Investing in Real Estate in Mexico: Individual vs. LLC

Key Differences

Feature

Ownership

Legal Liability

Estate Planning

Rental Income Tax in Mexico

Capital Gains on Sale

Fideicomiso (trust for coastal property)

Tax Reporting in U.S.
Individual

Property is held in your personal name

Unlimited – your personal assets are exposed

Must follow Mexican succession law

Taxed as individual (up to 35% on net income)

May qualify for personal tax exemptions

Required

Report foreign property/income to IRS or CRA
U.S. LLC (Legal Entity)

Property is held by the LLC

Limited – liability is separated from your personal assets

Easier transfer of shares in the U.S. without Mexican probate

Taxed as foreign entity – may require RFC and formal bookkeeping

Does not qualify for personal exemptions

Required, but may require legal review/approval from bank

Complex reporting – includes Forms 5471, 8858, FBAR, etc.

Benefits of Investing
as an Individual

Simple ownership structure – easy to buy, sell, and manage.
May qualify for capital gains tax exemption on primary residence in Mexico.
Fewer reporting obligations to U.S./Canadian tax authorities (still subject to FATCA).
Ideal for lifestyle buyers or owners of one or two properties.

Benefits of Investing
via a U.S. LLC

Asset protection: Limits personal legal and financial liability.
Easier inheritance and estate planning (no Mexican probate needed).
Partnership ready: Allows multiple members/investors to co-own.
Professional image for high-value investments or rental income properties.
Consolidated tax reporting in the U.S. through your LLC.

Cons / Considerations: Individual

Personal liability for debts or legal issues related to the property.
Exposed to Mexican probate if the owner passes away.
Limited ability to structure joint investments with partners or family.

Cons / Considerations: U.S. LLC

May require legal representation and RFC registration in Mexico.
No capital gains tax exemption when selling.
Must maintain corporate compliance and accounting in both the U.S. and Mexico.
May face resistance from Mexican banks when establishing fideicomisos.

Which Option is Best?

Individual: Best for single-property buyers using the home personally or occasionally renting it.

LLC: Best for investors with multiple properties, rental income, long-term estate planning, or co-investors.

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With years of experience and deep local knowledge, Pablo van Schouwen delivers tailored real estate solutions in Los Cabos. Whether you're buying, selling, or investing, trust in a process that’s smooth, strategic, and focused on results.

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Contact Details

Pablo van Schouwen

Phone

(624) 185-6000

[email protected]

Address

Camino de La Plaza 145 Cabo San Lucas, B.C.S. 23410

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