Mexican property: still hot?

When Mexico revised its laws so foreigners could own Mexican real estate by using a ''trust'' device, buyers were unsure whether or not the new law would be ''safe.''

Now, with that concern generally gone, buyers today wonder if Mexican real estate is still a good investment compared with properties in the United States and elsewhere.

While it's important to be hard-nosed when making a decision whether to buy a house or land, some 15,000 US, Canadian, and other foreign buyers of property in Mexico based their decision on their use of the property.

A Vancouver couple, for example, use their Mazatlan condominium to escape the British Columbia winter for four months each year, but aren't particularly concerned as to whether or not investment in their own province would have yielded better returns.

One thing is sure: Those who bought in the past, and especially before 1976 (despite subsequent peso devaluations), made money.

The Mexican price boom of the 1970s was even stronger than in the US and Canada.

What's even more striking from a seller's standpoint today is that a $1 million Mexican luxury home in Puerto Vallarta is still readily marketable at that price.

Traditionally Mexico's economy has been based more on cash than on credit; it still is.

While there are some leverage possibilities available when buying in Mexico, the termsfacilidadesm are generally short term, and interest rates are high enough to make even a US banker blush and are generally available only for new residential developments or when buying from US or other foreigners.

The peso devaluations in 1976 and 1982 have been instructive about the effect on real estate prices. It was important whether the property was foreign- or US-owned.

Foreign holders of real estate in 1976, for example, seemed unwilling or unable to adjust the prices of their holdings based upon the new lower peso values and, for the most part, sales of these properties continued at about the same rate and at about the same prices expressed in US dollars.

One of the reasons for this is probably explained by the basic differences in the configuration of housing designed for foreigners and that designed for Mexicans.

Mexican beachfront condominiums, for example, generally set aside bedroom space for as many as three or four servientes, who handle many of the duties ordinarily done by the foreign husband or wife.

Thus Mexican residential as well as commercial properties were affected, often radically, by the 1976 devaluation.

Even six months after the devaluation, it was possible to buy Mexican-owned real estate at prices that were bargains (in US dollars). This condition, however, lasted less than a year, at which time prices of even Mexican-owned property had regained their predevaluation value in dollars.

An additional factor is the commuting time between ''bedroom communities,'' such as Cuernavaca and Chapala, and the industrial centers.

Other things may affect future values:

* Technological breakthroughs, including a rumored system for converting ordinary beach sand into building blocks, and another for converting largely unusable sugar cane and corn waste byproducts into building materials, could affect Mexican housing.

* While highly unlikely, a US decision to ''close'' the border to Mexican workers would tend to reduce building labor costs considerably in Mexico.

* Experts attribute a high percentage of the cost of Mexican housing to that country's largely undeveloped transportation system. A federal decision to spend petrodollars in modernizing this network could influence housing prices.

Putting investment decisions aside, however, the following hints should still be helpful to anyone considering buying land or other property in Mexico:

* Is the project or home being considered actually completed or still in the construction or planning stage? Most litigation between Mexican sellers and US buyers has resulted from paid-for, but uncompleted, projects.

* If you're buying into a tourist-oriented project, check to see if sales have been approved by the various state real estate agencies in the US. Some of these agencies are fussy and conduct thorough investigations before allowing such properties to be marketed within the state.

* Pay special attention to utilities taken for granted in the US. While liquefied natural or petroleum gas is generally available in Mexico, electricity , water, and telephone service can often be difficult and costly to obtain or install.

* Since zoning is not a concept ordinarily used in Mexico, buyers must rely on restrictive covenants designed to prevent residents from starting businesses that are not conducive to pleasant living conditions. Be sure that your residential development contains such restrictive covenants.

* Before actually signing any documents for purchase, discuss the matter with your US tax adviser or attorney, as careful structuring of the contract may result in substantial US and Mexican tax benefits.

* Contact the trust departments of several Mexican banks before signing any contracts. All trust terms are negotiable, including the price to be paid to the trustee on a yearly basis. Some contracts will permit property to pass on death without probate or other proceedings, while others will not.

* Avoid undeveloped or rural land unless you're prepared to spend a lot of time and money investigating the title and the applicability of agrarian rights.

* Don't make any purchase unless you're being advised by a US lawyer experienced in Mexican land matters or a Mexican lawyer whom you've known for at least 20 years and who specializes in acquiring properties for foreigners.

A booklet, ''All You Ever Wanted to Know About Owning Real Estate in Mexico, '' is available for $4 from the Guadalajara Law Center, PO Box R10190, Marina del Rey, Calif. 90291.