Do you have any plans to purchase a second home or condo in San Miguel de Allende to rent it out and bring extra cash flow into your life? Though having strangers stay in your home in a foreign country can be fraught with pitfalls and problems, the experience will go much more smoothly for you if you take the time to prepare yourself before handing over the keys to someone else.
You will be able to get the most out of your rental property in San Miguel de Allende if you put the following advice and strategies to use:
1. With a Tourist Visa, you can stay in Mexico for up to 180 days. However, if you want to conduct business while you are there, you must apply for either temporary or permanent residency status (a green card).
2. The next thing you must do is get the proper authorization to work or engage in commercial operations in Mexico. To do this, you will need to retain the services of an accountant and apply for a number from the Registro Federal de Contribuyente (RFC). This is your tax identification number.
3. After obtaining your RFC number, you will then be able to pay your taxes. If you rent out your home for an extended period, you will be required to pay income tax at 35%, minus any taxable deductions. Keep in mind that if you rent short-term for only a few days, this can be interpreted as a “guest service.” As such, you will be obligated to pay a guest tax of 3% (impuesto de hospedaje) in addition to a 35% income tax (ISR) and a 16% value-added tax or “impuesto al valor agregado” (IVA).
Important Note: Consult your own legal counsel and or accounting firm in Mexico to assist with the taxes required to be paid
4. Get to know your guests. If you investigate a potential tenant’s background in more detail, there is less of a chance you will end up with a tenant who will wreck the rental property you have. This holds true whether you make your inquiry through a simple email exchange or an in-depth conversation over the phone.
5. Lastly, make sure your San Miguel de Allende property is insured.
Most Mexican Home or Condo Insurance policies include coverages for third-party liability — this is important if a tenant suffers an injury or if a neighbor’s property is damaged, such as when a tree falls on their house. However, if you rent out your property and it is no longer your primary residence, this coverage will not help you.
Because you have transitioned the use of your property in San Miguel de Allende from personal to commercial, you are now required to have a Commercial Liability Coverage in place to offer adequate protection for both you and your estate.
Remember that some Mexican home or condo insurance policies do read USA liability covered. However, this does not imply that your Mexican Home or Condo Insurance coverage will cover your legal costs if you rent your home to strangers and they are injured on your property and launch a case against you in the United States.
The solution?
Get a Global Jurisdiction Liability Insurance Policy for Home and Condo Owners in Mexico from a reputable broker such as West Coast Global Insurance Services. With the help of this coverage, you will be able to defend yourself and your investment against any legal action due to injuries or errors/omissions. To properly safeguard your rental business in San Miguel de Allende, investing in a policy of this type is money well spent.
Get in touch with West Coast Global Insurance Services today for a free evaluation if you need help determining whether or not you have adequate insurance protection. Visit their website here to learn more and to get a quote for the most reliable Mexican insurance coverage available throughout Mexico.