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A Mexican land boom lures US citizens to buy south of the border

An explosive land boom is echoing all across Mexico, especially along the country's 6,500 miles of coastline. Unspoiled beaches and skyrocketing prices for US beachfront property have turned many American eyes to the south.

At the same time, however, soaring rents in the metropolitan areas have caused increasing numbers of Mexican executives, Americans working in Mexico, and retirees from the US and Canada to seek suburban accommodations in a rash of new housing developments springing up in Guadalajara, Morelia, San Miguel de Allende, and a score of other communities within a two-hour radius of Mexico City.

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Sales and resales at constantly increasing prices are being made of beachfront condominiums for which construction won't even be completed for another two or three years.

Buyers at posh developments near the Hotel Las Hadas in Manzanillo, for example, stand on a chalk line on the side of a hill and imagine the view they will have from their seven-story patio condo in 1983.

Brokers in the area report that two and even three resales before completion of the facilities are not uncommon.

Real-estate prices throughout Mexico were rather stable and sometimes depressed during the final years of the administration of former President Luis Echeverria. Mr. Echeverria's mildly anti-American attitude, his Israeli boycott blunder in the United Nations, and, in the US, the Nixon administration's antidrug campaign directed against tourists combined to nearly wipe out half a century of a steadily increasing tourism industry.

Then, with the inauguration of President Jose Lopez Portillo in 1976 confidence returned to the country and the attitude toward tourists and foreign residents improved.

In Guadalajara, for example, where some 25,000 Americans and Canadians reside , newspaper reports in 1976 decried statistical evidence that the foreigners were leaving in droves. The trend was later reversed.

Admittedly, not all experiences of foreigners acquiring land in Mexico have been pleasant. But overall, buyers acting only upon proper legal advice and avoiding illegal schemes find their ownership tenure placid and secure.

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In 1973 the Mexican Congress passed a law permitting ownership by foreigners as long as the property was held in a fideicomisom (a trust) by an approved Mexican banking institution. This law eliminated most uncertainties.

Prospective buyers of property in Mexico should take into consideration factors that are usually ignored in the US.

Is there an adequate supply of potable water? Is the electric service steady or sporadic? Are the telephones already in?

While these factors may be assumed in the purchase of a comparable US condominium, they simply cannot be ignored in Mexico where some communities find themselves without drinking water for months at a time, where electricity drops to levels dangerous to appliances and electrical equipment, and where the installation of a telephone can cost thousands of dollars.

Here are some tips which will enable a shrewd buyer to at least sort out the losers and concentrate on the better projects:

* Has the project been qualified for sale in the US?

* Is the developer a bank-sponsored or strong public corporation. Such developers as Casolar in the Manzanillo area or the BanPacific-sponsored Los Tules development in Puerto Vallarta generally honor contractual provisions, make prompt refunds when required by the contract, and provide services more consistent with the expectations of American buyers.

* Rent an apartment for a week or two in the area in which you intend to buy. Talk to neighbors about water, electricity, and telephone services. Does the development have its own standby generator and water supply which can be used in the event of public utility shortages?

* Check the contract thoroughly. Is it fair? If, for example, you are five days late on a payment, does it provide for forfeiture of the property and all payments you've already made? If the seller resists modifications of such clauses, don't deal.

* If you're buying into a housing development, be sure there are restrictive covenents applicable to all lots in the development which would prevent the construction of, say, a supermarket next door.

* Discuss the purchase with your US tax adviser beforem you sign any contracts. Careful structuring of the contract may result in substantial US tax benefits.

* Shop around before establishing a trust. All of the terms of the agreement between the purchaser and the bank, including the amount of the trustees' fees, are negotiable. Some banks are charging two, and even three, times the yearly fees of others.

* Avoid undeveloped or rural land. Unless you're prepared to spend a lot of time and money investigating title and the applicability of agrarian rights, these deals are better avoided except by the large real-estate developers. City lots, on the other hand, are usually secure and free of problems.

Sure, all of this is a lot more difficult, and infinitely more complicated, than buying a comparable condo in Hawaii. But price differentials, uncrowded and sometimes unused beaches, and that traditional Mexican ambiance are compelling factors in a decision to stake a claim in old Mexico.

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