A Step-by-Step Guide to Buying a Pre-Construction Home in Los Cabos as a Non-Mexican Citizen
Are you thinking of buying a pre-construction home in Los Cabos? The process can seem complex, but with the right guidance, it’s an exciting opportunity to invest in one of México’s most sought-after destinations. This guide strips away the mystery of buying a pre-sale home in Los Cabos and gets straight to what matters: cost breakdown, legal requirements, and homebuying tips that will maximize your investment here in the Baja.
At South House Real Estate, we ditch the typical “list all properties, hope something sticks” approach. Instead, we work with only a handful of trusted developers with decades of proven experience. So, instead of taking you on a tour of endless development sites, we narrow down the top choices within your price bracket.
From initial market and developer research to negotiating price and finalizing your purchase, we’ll walk you through the exact steps to building your life in Los Cabos. Let’s get started…
1. Why Preconstruction - And What to Look Out for
Buying a pre-construction property often means securing the lowest possible price compared to resale properties, which are usually sold at peak market value. Early buyers may even get access to exclusive discounts, such as “friends and family” deals.
Developers offer huge incentives on the first few units of a new project, often 15-20% below market value. This creates a great opportunity for substantial savings. Another advantage of buying pre-sale properties is the ability to customize finishes, layouts, and upgrades to suit your personal taste and lifestyle.
At South House Real Estate, we only work with reputable developers and builders, confirming that they have delivered as promised on all of their past projects. We ensure they have a successful portfolio and have proper funding for the project. We even go as far as investigating if they have a line of credit, which bank it’s with, and if they’ll use the proceeds of the money received via deposits to finish the construction. This allows you to purchase your property at an exclusive price without sacrificing your peace of mind.
However, on the downside, you typically have to wait 18-24 months for the construction to finish on a pre-sale property. That said, the potential for significant savings, customizations, and early equity growth often outweighs the wait, making it a rewarding investment for those with a long-term vision.
2. Obtain Financing
While many non-Mexican buyers in Los Cabos opt to pay in cash, financing options are available for those who need it.
First, it’s important to note that banks will not finance pre-construction homes. What your bank can do is provide a pre-approval that most developers will accept, along with a deposit of 35 percent. At the time of closing, you’ll need to go back to the bank to secure the financing or find other means.
As a US or Canadian citizen, you have two financing options available with a loan-to-value ratio of up to 65 percent of the appraisal value. Current rates range from 8 to 10 percent at the time of writing this. Terms range from 5 to 25 years, and the rate is fixed, giving you peace of mind throughout the life of the loan.
MoXi Mortgage is one of the most popular options that will allow you to purchase or refinance a home in Mexico. They offer secure cross-border home loans with no hidden fees. This makes it an attractive and straightforward way to begin your new lifestyle in paradise.
Another option is Intercam’s Dream Loan, designed specifically for US and Canadian citizens or residents. You’ll need a minimum credit score of 700 to apply and the process is completely online.
With each of these options, you can choose the financing solution that best fits your needs.
3. Submit an Offer and Complete the KYC Requirements
Once you’ve found your dream home, you’ll need to submit an offer to purchase (sometimes referred to as a Letter of Intent or LOI). This document states three essential elements:
- The specific unit or property you want to buy
- Your offered purchase price
- Your proposed payment timeline (like when you’ll pay the deposit, down payment, and final balance).
The offer to purchase is a formal document designed to show the seller you’re serious and outline your basic terms. Your real estate agent will ensure your offer to purchase includes protective clauses, such as making the offer contingent on financing and allowing adequate time for due diligence. This typically takes between 14 and 28 days. Once the seller accepts the terms, both parties sign the offer, and your purchase process begins.
Another important step in the offer submission process is submitting a Know Your Client (KYC) form, a verification process required by Mexican banking and real estate regulations. Note: this is sometimes called a Know Your Customer form as well.
Your KYC forms will ask you to provide several specific documents: a government-issued photo ID (like your passport), proof of your current address (typically a utility bill issued within the last 3 months), and sometimes additional documentation like bank statements or proof of income.
The KYC process prevents issues like money laundering by verifying the source of funds and protects all parties by confirming everyone’s identity and legal ability to participate in the transaction. Mexican banks and escrow companies must complete this process before they can handle your purchase funds.
4. Make the Initial Payments
Now that you’re ready to start the payment process, you’ll typically be required to put down an initial payment of $10,000. This is completely refundable, should things not line up. Once your initial payment is received, both you and the seller will sign an escrow agreement that outlines the terms of the purchase agreement.
Once finalized, your initial payment goes into an escrow account, which is a separate bank account managed by a licensed third-party escrow company. This allows for a ‘due diligence’ period. This period will typically last between 14 and 30 days, however, there’s room for negotiation here.
While the bank is reviewing the promissory purchase agreement, it’s time for you to make your initial deposit payment (usually 30-40% of the total price). The escrow company will hold and disburse these funds according to the terms of your purchase agreement, and will not release your money until the specific conditions are met, protecting you from potential fraud or seller issues.
After the initial deposit, you’ll follow your agreed-upon payment schedule until you pay off the final balance. Each payment has specific timing requirements and must be properly documented for both Mexican and U.S. tax purposes.
5. Legal Representation
In Mexico, real estate lawyers play a broader role than in the U.S. or Canada. Most law firms will ask for a small retainer upfront. Your local Los Cabos lawyer handles several other critical functions:
- They will arrange for a survey, which is government-required for Non-Méxican citizens.
- Typically with presales, the law firm will charge an hourly fee to review the promissory agreement to ensure it complies with Mexican law and protects your interests. You can expect to pay anywhere from $1,500 to $2,500 in total for this.
- Coordinate with a notary (a specialized Mexican lawyer who officially validates property transfers) to prepare closing documents. They will also assist with negotiations.
- Establish your Fideicomiso—a specialized bank trust required by Mexican law that allows foreigners to own property within 50 kilometers of the coast or 100 kilometers of the border. The Fideicomiso structure gives you full ownership rights while complying with Mexican constitutional requirements about foreign property ownership.
Your lawyer also ensures all permits, taxes, and registration requirements are handled properly under both Mexican federal law and Baja California Sur state regulations. Then, at closing, the law firm will charge a flat fee for closing, which will be anywhere from $5,000 to $10,000 depending on which pre-construction home you choose.
Our advice? Work with a highly respected lawyer here in Los Cabos like Jonathan Pikoff of Pikoff Law, whose firm has been established since 2002. He’s licensed to practice law in both Texas and Mexico and is a personal friend of ours at South House.
Javier Mazoy from Lex Advisors is another visionary of Mexican real estate law, both here in the Baja and beyond. With over 20 years of experience, the firm is known for simplifying the process of buying a home overseas—an essential quality when stepping into a new market.
6. Sign the Promissory Agreement
The Promise to Purchase and Sale Agreement (often called the promissory agreement) is your legally binding contract. Unlike the offer to purchase, this extensive document covers every aspect of your purchase: the exact property specifications, final negotiated price, complete payment schedule, closing date, property condition requirements, what happens if either party defaults, and specific terms about property delivery. Each clause has legal implications under Mexican law.
Your lawyer will pay special attention to contingency clauses (conditions that must be met for the sale to proceed), penalty clauses (what happens if deadlines are missed), and any promises about the property condition or included fixtures. By law, all new construction projects should come with the following warranties: 1 year for hidden defects, 3 years for leaks, and 5 years for structural issues.
South House will review this document with you to ensure all conditions of the sale are included. 5 key points to confirm in the promissory agreement include property details, payment schedule, delivery timelines, developer permits, and legally required warranties. Be sure to attach annexes such as the floor plan, finishes, and ongoing costs (e.g., HOA fees) to avoid misunderstandings later.
7. Understanding the Fideicomiso and Restricted Zones
In Mexico, foreign ownership of property is regulated within designated restricted zones. This includes land within 50 kilometers (about 31 miles) of the coast and 100 kilometers (about 62 miles) of international borders. As mentioned, you will buy and hold your property through a fideicomiso, a bank trust specifically designed for non-Mexican citizens. This trust allows you to enjoy full ownership rights while complying with Mexican property laws.
A fideicomiso also allows you to sell, lease, or pass down your property and is renewable every 50 years. The trust is managed by a Mexican bank, acting on your behalf, and provides you with all the benefits of ownership without needing Mexican citizenship.
International buyers widely recognize and trust this system, offering peace of mind and compliance with Mexican laws. For more detailed information, consult with your agent and lawyer or explore reputable resources to understand how the Fideicomiso works and its benefits fully.
8. Closing the Sale
The closing process is a vital step in finalizing your Los Cabos property purchase and ensuring everything complies with Mexican law. For pre-construction properties, this process usually takes between 60 to 90 days.
Here’s what closing involves:
- Federal Registration: The developer is responsible for completing all federal registration requirements to document your property and prepare it for legal transfer.
- Legal Review: Your lawyer will conduct a detailed review of all documentation, ensuring the Fideicomiso is properly established, property taxes are current, and there are no liens or legal claims on the property.
- Closing Costs: Total closing costs typically range from 4-4.5% of your purchase price. This includes notary fees, registration, appraisals, administrative costs, and the 3% Real Property Acquisition Tax. For example, if you purchase a property for $1 million dollars, your closing costs will be around $40K to 45K. Note: these costs are separate from the legal fees mentioned above.
- Condominium Regime: Pre-construction properties require the developer to establish the Condominium Regime before closing can occur. This legal framework ensures compliance with property laws and can sometimes delay the closing process by up to six months if additional requirements are needed. Fortunately, most developers allow buyers to take possession of their finished property earlier if the purchase price is fully paid.
If you can’t attend the closing in person, a power of attorney can manage all necessary actions on your behalf, which your lawyer can arrange for a seamless process. Working with a reputable real estate agent, developer, and experienced legal team is key to navigating the closing process smoothly and avoiding delays.
For more details, refer to this resource: Mexlaw – Closing the Deal.
9. Additional Considerations
Property Walkthrough and Hidden Defects Warranty
On possession day, a property walkthrough inspection is conducted to ensure that everything aligns with the agreed terms of the purchase. During this walkthrough, you’ll identify any visible defects or incomplete work. These items are documented in a punch list, which the developer is obligated to address promptly.
An essential aspect of purchasing property in Mexico is understanding the hidden defects warranty. Hidden defects refer to problems with the property that were not apparent during the initial inspections and that the buyer could not reasonably have been aware of at the time of purchase. These defects must have been present when the property was sold and could render it unsuitable for its intended use or significantly diminish its value.
Under Mexican law, sellers are required to address hidden defects, even if they were unaware of them at the time of sale. For new construction, specific warranties apply:
- One year for hidden defects and general repairs.
- Three years for waterproofing issues.
- Five years for structural defects.
These warranties begin on the property’s delivery date. If defects are found during the walkthrough or within the warranty period, the seller must repair them at no cost to you. Repairs reset the warranty period for the repaired components, ensuring ongoing protection for your investment.
By partnering with an experienced team, you’ll have the guidance needed to navigate these warranties and the walkthrough process, securing your new property with peace of mind.
Hurricane Preparations
When investing in Los Cabos real estate, you’ll need to be prepared for storms and extreme weather conditions in the rare chance that they do occur. Many properties already include housing for hurricane shutters, though you’ll need to purchase the shutters separately if they aren’t included. The price point can vary largely depending on the size of your property and the number of windows but is a necessary investment for safeguarding your new home.
Armor Screen is a trusted manufacturer with over 2 decades of experience protecting homes in the Los Cabos area. Their category 5-approved hurricane shutters are transparent, easy to use, and most importantly, will protect your home without failure.
Ongoing Costs
Just like anywhere else, owning a home in Los Cabos comes with ongoing expenses, which can vary depending on the type, size, and location of the property. Understanding these costs upfront is key to budgeting effectively and maintaining your investment. Here’s an overview of what you can expect:
Property Taxes
Property taxes in Mexico are significantly lower than in many other countries, averaging roughly $2,500 USD per $1,000,000 in property value. These taxes, known in Spanish as “predial”, are paid annually and are often straightforward to manage, especially if set up through a local property manager or financial service.
Insurance
Home insurance costs are relatively affordable, starting at approximately $400 USD annually for basic coverage. If you plan to rent out your property, additional coverage is required, which can raise the premium but ensures protection for both your home and liability for guests.
Utilities
Electricity and water costs in Los Cabos are generally lower than in the US, but usage can have a big impact, especially during peak summer months when air conditioning is essential. Many homes in the area also use propane gas for cooking and heating, which is another affordable utility to factor into your monthly budget.
Property Management
For non-Mexican citizens buying property in Los Cabos, finding a credible property management company is crucial, especially for those planning to rent out their homes.
Companies like Casago and Lumina Stays are integral to the process, offering professional services on an ‘à la carte’ basis to meet your specific needs. They use innovative technology to manage your property, handle maintenance, and increase bookings. Partnering with experts ensures your investment is well taken care of and maximizes its rental potential.
HOA Fees
Homeowners Association (HOA) fees are a common expense for properties within gated communities or developments. They are usually tied to the size of your condo and the amount of amenities the development has.
In beachfront communities with all of the bells and whistles, like Tortuga Bay, you can expect to pay between $800 and $1500 USD per month. On the other hand, new owners of Casa Nima will pay anywhere from $350 to $850 per month. These fees cover services such as security, landscaping, and maintenance of the many shared amenities, contributing to a higher standard of living.
Understanding these ongoing costs ensures you’re fully prepared to manage your investment effectively. Your real estate agent can clarify the typical expenses you can expect, specific to your property type and location.
Furnishing Your Home
Now comes the exciting part—decorating your home. We highly recommend working with a designer who can help you source furniture from mainland Mexico, as they have established relationships with suppliers for better pricing. Not only that, but they also have a crucial understanding of which materials will withstand Baja’s climate.
The good news? Many developers will work with interior designers to offer furniture packages to create a real turn-key approach. Tortuga Bay has partnered with House of Barrie, located at the Shoppes at Palmilla, to offer comprehensive packages to furnish your new home.
Another interior designer we love working with is Gabriela Rionda of Rionda Design, as she has had some amazing projects under her belt both in Los Cabos and Mexico City. With an incredible eye for design, she’ll bring your personal style and vision to life.
10. Residency and Long-Term Benefits
Mexican residency is a must if you plan extended stays in Los Cabos. The process usually takes 2-3 weeks and costs approximately $1,000 USD, but the benefits are substantial. With residency, you can:
- Open local bank accounts
- Move through immigration more efficiently
- Potentially save significantly on taxes when you eventually sell your property
- Get duty exemptions when shipping household goods to Mexico, making it easier to set up your new home
- Become a citizen through naturalization (this process takes at least five years of legal permanent residency)
The application process is straightforward when you work with experienced immigration consultants, and South House Real Estate can connect you with the right experts to guide you through each step.
Take the Next Steps to Begin Your Baja Lifestyle
Los Cabos is one of México’s most sought-after real estate markets. Your investment here will have proven rental returns in a destination that balances modern luxury with traditional Mexican heritage. Whether you’re looking for a breathtaking Mediterranean-style pre-construction condo, pre-sale pricing at the hottest upcoming beachfront communities, or a custom home in the highly sought-after Puerto Los Cabos, we can help.
Our team is here to provide you with guidance on crucial decisions: when to enter the market, which up-and-coming developments will have the strongest appreciation, and how to maximize your property’s rental income in the future, if that’s your goal. We’ve built relationships with Los Cabos’ most reliable professionals—from legal experts and property managers to the most trusted local developers—ensuring you have support long after you receive your keys.
Ready to explore your options? Let’s have a transparent discussion about your Los Cabos real estate goals. Reach out to us on WhatsApp to start the conversation.
