Monday, April 4, 2011

Snag a deal on Mexican real estate

Jim Cramer, the bombastic, high-energy investment guru and host of the CNBC show "Mad Money," told his audience last summer that he recently purchased three properties in Mexico. Why, Jim?

"Mexico is a big country and not every province, every state is involved in the drug trade," said Cramer, a magna cum laude graduate from Harvard. "It has to be one of the nicest places I've ever been ...
"It's not such a bad idea to diversify away from stocks," he said. "I think that out-of-favor real estate in Mexico that's easily accessible to Americans represents a great buy."
Given the winter weather in the Puget Sound, many grumbling residents are seeking consistent sun. Warm water would also fit. However, they are skittish to ask about Mexico, believing the entire country to be awash in blood, crime and drugs.
Adam McAbee, senior manager and second-home specialist for San Diego-based John Burns Real Estate Consulting, recently completed a five-month inspection of more than 180 actively selling projects representing approximately 17,000 units in the Puerto Vallarta/Manzanillo, Mazatlan and Los Cabos market areas.
Violence and crime are foremost topics in the U.S.; they were not mentioned as factors in the resorts -- the struggling U.S. economy was, however.
"I can tell you that people I meet in the respective markets down there generally laugh and shake their heads, noting that the violence almost never reaches the tourist areas. The recent Acapulco issues aside ..."
Crime figures seem to be easier to come by than home-sale numbers. Statistics on Mexican properties sold to U.S. citizens and other non-nationals are nearly impossible to obtain.
The National Association of REALTORS® has a sister organization within the country but neither compiles the number of properties sold to Americans. The country has no connected multiple listing associations or licensing requirement for salespersons. Hence, most sales activity has been anecdotal or gleaned from individual offices.
However, some credible research has begun to trickle in, including the John Burns study. The company gathered information on location, product type, home sizes, price points, absorption, buyer profile and amenities. One of its conclusions:
"... Mexico is too close, too beautiful and too affordable not to return to the "norm" of serving as a major tourist -- and second-home-buying destination -- in the coming years."
Here are a few other takeaways from the study regarding second-home buying in Mexico:
  • The vast majority of visitors to the country are still Americans. The research indicates that they are coming back as buyers -- just not in "full force" until things improve at home. In the meantime, since the number of American buyers has diminished and/or they are focused on obtaining a "steal," near-term projects need to also target Canadian and Mexican buyers to keep sales momentum alive.
  • In Puerto Vallarta/Manzanillo: Most agents agree that the market is still slow, but 2010 was a definite improvement over 2009.
  • In Cabo San Lucas: One project sold at a rate of approximately 6.5 units per month (combined across two product lines) in 2010 -- driven heavily by a central location, distant views, good-quality amenities/lifestyle in place, and rock-bottom pricing.
"I was talking with another client about my work in Mexico," McAbee said. "I took a poll of the six people in the room. I asked who would go on vacation to Mexico right now. Half said they would go; half said no way.
"Even people within my company are the same way. Some are jealous I 'get' to go to Mexico; others are glad they are not the ones that 'have' to go. It tends to be a fairly polarizing question."
Jim Donahoe, recently returned to La Paz and said, the "sweet spot" for sales is approximately $230,000 near the city's waterfront with more Americans entering the market.
La Paz is not too big, not too small and not just a tourist place," Donahoe said. "There are places in gated communities for a lot less than $230,000, including one view condo building with all units for $159,000.
"Nobody asks about crime. They are only wondering if they have enough dollars yet to get here."

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