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| Timing
in a Real Estate Market
“The small landholders are the most precious
part of a state.”
Thomas Jefferson, 1785
by Harriet
Murray
April 6, 2003 |
 Last
year I wrote an article about a couple from the United
States that wanted to buy a condo in Puerto Vallarta.
They were determined to buy whatever they could afford.
We looked at properties for a week and made several
offers that were all turned down. The wife, in particular,
wouldn’t be discouraged. She was determined.
We made an offer on a studio condominium
that needed major re-modeling, in a tower next to a
hotel on the beach. The building was almost empty and
many owners had not paid their condo fees for years.
Maintenance had suffered as a consequence. The future
of the building was uncertain.
There were positives to consider.
The view from the terrace was the best you can get.
The whole bay was in view. The lights of the city at
night added another dimension. The long expanse of walkable,
sandy beach in front of the building was rare for in
town. As an added plus, the hotel tower next door offered
the use of the amenities of the pool, jacuzzi, and restaurants,
etc.
The price of the studio was right,
even though it would need a lot of work! “Studio”
is probably the wrong description. The bedroom and bath
were separate from a small living room, which had a
smallish deck. There was no kitchen. In the past, the
unit had been rented as a bedroom when the hotel next
door had an overflow of guests. To encourage eating
in the hotel restaurant, no kitchens had been built
in the private tower.
There were several other early buyers
that took the risk. They stayed within a tight budget
and bought a property on the beach, with a view. These
buyers knew that for them, there was nothing else in
that price range, in that kind of location within the
city of Vallarta.
The downside was the future of the
building. It was uncertain. What would happen if the
delinquent owners never paid their fees? What would
happen to their ownership?
What would happen to the services
in the building? The electric and water were common.
Expenses were high in relation to fees paid. The building
was shut down for a time during the summer in order
to save on the cost of air conditioning. Part of the
plumbing and a/c units needed total overall. Parts of
the repairs were common and parts were individual within
the unit. Could they get the building to pay some of
the repair costs?
This was pioneering. This was buying
in the belief that the future would prove that the risk
was worth the gain.
These first few buyers worked hard
to create a plan that would fit their needs. They carved
out a private bedroom and dining area, still keeping
a living room with deck. Where would the kitchen go?
After re-working the space and the plumbing, a compact
kitchen became part of the living area.
The first few pioneers worked within
budgets and were able, with the help of an architect/general
contractor, to achieve a charming and functional space.
This was making a “silk purse out of a cow’s
ear”, to contradict a familiar saying. One buyer
had created a good floor plan, and generously shared
information back and forth on e-mail with other brave
souls who were also taking the steps to buy and remodel.
Without these first few buyers knowing
it, the real estate opportunity in this building caught
the attention of some one else, some one who would make
a major investment in the building.
Today, the tower has a glamorous
new name, more in keeping with its view and location.
More than 50 condominiums are being offered for sale,
with a choice of one bedroom and two bedroom units.
An interior designer and marketing team have been hired.
There is a furnished model. Furniture packages are being
offered to those buyers who want a turnkey purchase.
New pricing includes the remodeling
of the basic interior. The higher units in the building
are listed for more money. With the sale of more units,
the operating budget is being revised. It appears these
first buyers will enjoy the lowering of their monthly
condominium maintenance fees.
These first few purchasers are now
enjoying a classical situation where they purchased
the right property at the right time. A large part of
their decision to purchase came from personal choices,
not from expecting a monetary return on their investment.
These first buyers wanted a great location with a great
view. They didn’t want to lose money. The location
they chose kept them within the core of the city. They
can walk or use public transportation.
I don’t believe most of the
first buyers are interested in selling their newly acquired
homes, but they have a very nice appreciation on paper,
and the likelihood that their building will continue
to become more attractive and better maintained. The
timing of their decisions worked every well for them.
This article is based upon legal
opinions, current practices and my personal experiences
in the PuertoVallarta-Bahia de Banderas areas. I recommend
that each potential buyer conduct his own due diligence
and review.
Harriet
Murray, Broker
For additional information on properties for sale or
lease within the bay, please call or e-mail me at: harriet@pvmirror.com
Thanks and until next week.
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