Questions they ask at airport!

I'm just a Gringo about to live in Mexico, so I'm no expert, but I've done a lot of work... so I'll give you what I have.

Hi, I'm here, have arrived in Mexico City and love it. First impressions. Anyway, haven't begun the formal visa application process and was a little nervous by the questions asked me at the airport, most notably: is this your first time in Mexico?       

Did you fly into Mexico? If so, you ALREADY have a 'Tourist' visa... good for 180 days. They gave it to you on the plane to fill out. EVERYONE that flies into Mexico from the USA (on any major airline) gets the paperwork for a 'Tourist' visa.

It actually is, but I intend to exit and enter at least a few time before I get established here legally and am wondering if answering, "no, this is not my first time in Mexico" in the future will be a bad idea.

I think it's fine to tell them you have been there before. It's in your Passport anyway...isn't it?
MANY people live in Mexico for longer than 6 months... even on a 180 days 'Tourist' visa. You simply have to leave the country and then re-enter again, to get a NEW (180 days ) Tourist visa.
The Mexicans want our money. The laws over the last 20 years have gotten progressively easier for Americans. The Mexican government HAS to have immigration laws... they can't just wave us all in. But they have intentionally made it easy (to leave and then come directly back). If the did NOT was us to come back, they could have easily made it difficult/impossible to do so.

Also when they asked where I was staying, I wondered if saying I have an apartment was problematic since I don't have permanent or even temporary visa status yet.

Nope. In theory, they just need to 'keep track of you'... so they need to know where you will be.
Any real address should be fine. We gave them the name of the Rental LEGAL. There are more privileges with a  'permanent or even temporary visa', but you are still legal, for 180 days, with a Tourist visa.

Do they keep an official count of how many times someone enters and exits Mexico? Is it a red flag if you admit you go back and forth from the U.S. quite often?

Again. I believe this is in your passport. It's stamped everytime to enter a country, right?
Many, MANY people go back and forth. Thousands and thousands of 'Snowbirds' go down every winter.

How do those of you who live in Mexico without formal legal status handle the questions asked when re-entering?

AGAIN.... You are legal.... as long as you showed a passport and got your 'Tourist' visa on the plane.
They will NOT allow you into the country without a visa.... so you really can't be 'illegal'....
unless you sneak over the border by foot.
If you want to stay for more than 180 days without having to do the 'leave and come back thing', then look into a 'Temporary Resident' visa. This can be good for up to 4 years of legal status.
To get a 'Temporary Resident' visa, you must:

1) Apply for it in your home country (which I assume is the USA?)
You have to got to a Mexican Consulate in your home country. You can NOT do it in Mexico.  If you qualify, the whole process is done in one visit... a few hours. You will NOT get the visa in the USA, but rather the approval and paperwork you will need to do this. Once in Mexico (and they let you in with the approval and paperwork), you go to the correct office (Can't remember it's name), present your paperwork, pay the fees, and you will be issued your 'Temporary Resident'  visa.

2) To qualify....
a) You must prove you have had an INCOME of $1600 US for 12 months.
-OR-
b) You must prove you have had cash assets of $103,000 US for 12 months.
These are pretty easy for most retirees.

For 4 years, I believe the fee is like some $500.
You can also get a 'Temporary' for 1 year (cheaper), and then re-new it.
However, if you plan to stay, I'd go for the 4 years (if you qualify) and get it done with.

However..... if you plan on having a car, there is a BIG difference in what visa you have.
On a Tourist visa, you may bring in a car, and legally drive your USA plated car with a USA license.
It looks like you can NOT register a car in Mexico with just a Tourist visa.
I'm not sure if this ALSO applies the  (4 year Temporary Citizenship). It might not.
For a Permanent visa (and maybe the Temporary,,, you have to ask), you can NOT have a USA plated car. People that go through this transition actually have to ship their cars out of Mexico. I believe there is now a company that helps you do this. You are expected to get a Mexican license, buy a car, and register and insure it in Mexico (just like a citizen)

I believe you have to have a 'Temporary Citizenship' before you can go 'Permanent'.

Don't be afraid to call a few Mexican Consulates here in the USA. I have spoken with Orlando, NY and Boston. They will answer all your questions. This is their job.

Relax .... give them a hotel name.   Yes they track with your Passport

I'm a dual national now. But if I  was on a tourist visa again I would suggest  always tell the truth "If asked". Computers can keep track of movements, if you're caught in a lie you may be inspected more thoroughly.  Never volunteer information, stick to the facts. Also dress and act properly.
I saw a young kid on a flight  from Dallas with torn blue jeans and a battered guitar on the plane. When he got to customs they asked for proof of a credit card or money. He had two dollars on him. He was put right back on a plane to the states and refused entry.  I presume he thought he could survive in Mexico as a wandering street singer.  In 47 years I was only asked once (out of of hundreds of times crossing the border) if I had enough money to support my stay in Mexico. And even then I wasn't asked for proof, just a yes sufficed.
To become a legal resident is more complicated, contact a Mexican Consulate Office in your area to find out requirements.

People in Mexico often ask where are you from, how long have you been here, and is this your first time in Mexico. Officials, or just people you meet will ask these questions. I suspect the officials are just trying to get a sense of how many people are coming and especially how many new people are coming.

I have never gotten the sense they are taking records to confront you with in the future if that is your concern. They have an official record of your coming and going, they stamped your passport. Just be basically honest with them.
You are there with a tourist visa so you have legal status for 180 days.

People you meet are another story, don't over share just stay general. Exactly where you came from and where you are staying isn't their business, share if you want to.

You have legal status where you are staying also there is no rule saying you can't rent a apartment. Be honest but essential and brief with officials and share what you feel comfortable with others. Not that different than what you might do in the U.S. where they ask the same kind of questions.

I always tell the truth.  I put the place where I am staying.  I have been going three times a year since l990.  Some times I leave and go to Guatemala and return.  In the past I used to go to Belize and return also.  I am still coming and going to Mexico and it has never been a problem,

As a tourist, there's no reason why you can't rent an apartment.
I have never had a problem being completely honest.
The only time I had a minor hold up was when I neglected to list the bottle of scotch I had in my luggage.
Unlike the US, they expected to see a list of everything I bought in the states even though the total was well under the limit.  2 minutes cleared everything up.

The laws will likely change again before you seek a temporary or permanent visa. For now just relax and see if Mexico is where you want to be. You can just leave the country at the end of 180 days and return getting another 180 day visa until you make up your mind about Mexico and where in Mexico.

The temporary visa and permanent visa application process is not a simple , easy just walk in and pick one up process at all. I spent the whole day in and out of the consulate. There is a specific group of papers involved, passport sized photos , bank statements, and in the case of retirees the original paperwork showing you were granted the pension or SSI. The process is a 5-6 hour minimum process, and I went to one of the easier, friendlier consulates.

When you arrive in Mexico after seeing the consulate and getting a visa added to your passport, you need to be aware you still need that visa app from the plane . After you make it clear you are changing (CAJA) the agent will mark that paper visa indicating the process of change. That is part of the paperwork you will take to INM.

Once in Mexico there is more paperwork that must be completed at INM That is a longer more detailed process than the consulate was. That whole process can take several weeks and visits. During this process it would be helpful to either hire a lawyer to help or have a friend who is fluent in both languages. I have a friend who backed me up. They can reject your paperwork if you don't meet deadlines, or fill out the paperwork incorrectly or completely. There are options to correct your paperwork during the end of the process, but you have to know there is a problem. Don't pay the fee ( Just under 5000 pesos) until all the paperwork is correct and accepted by INM.

Of course as I said this may all change again. By the way you can go straight to permanent if you have a high enough income , the consulate will tell you if you can.