Costa Rica - General Investing Information
By Geoff McCabe
November 7, 2009
By showing your interest in buying property in Costa Rica, you've become part of a modern day gold-rush. Tens or hundreds of
thousands of North Americans are actively seeking to buy and/or move to Costa Rica because of the country's reputation for beauty,
safety, friendly people, and its "pura vida" lifestyle. The rush is really just beginning, and today's prices will seem like a bargain
in ten years when prices rival those of Hawaii and exotic locales such as The Virgin Islands.
Land prices in the area vary wildly, depending mostly on proximity to a white sand beach, and the beauty of the view. Beachfront
properties can be as high as $300 per square meter, or more, while large farms can be lower than $1 per square meter. Generally
speaking, prices have risen around 20-25% per year for the past ten years, although they have levelled off recently due to the downturn
in the U.S. market. Other parts of Costa Rica, particularly places like Tamarindo and Jaco, have been hard hit by the market crash, because they have grossly overbuilt
condos, but that hasn't occurred here. We believe that the southern part of the Nicoya Peninsula, which includes Montezuma, Malpais, Santa Teresa, and Tambor, we think will
eventually become super expensive because the natural geography of the land offers fewer "walk to the beach" and "ocean view" lots,
which are the two types of land that are most popular. This natural scarcity of the most desirable real estate will lead to
prices that rival those of Hawaii.
With over 26 millionaires in the U.S. alone, and 40 million baby-boomers set to retire in the
next decade, we expect prices to go to at least quadruple what they are now. Also, considering that ocean view lots in other parts
of Costa Rica, such as Nosara and Tamarindo, are still much more than here.. Yet, this area has more
to offer: better and more restaurants, more waterfalls and activities, better snorkeling and diving, more variety of animals and
birds, etc. Considering all these factors, we think ocean view lots will eventually reach $200/m2 or more, so each lot
will be $1-$2 million, which matches Maui. These types of lots are selling for $350-$400,000 now. Another factor that makes
real estate desirable in Costa Rica for retirees is that not only are living expenses low, but property taxes are as well.
A retiree who pays $20,000 per year in property taxes in Hawaii may pay 1/10th of that in Costa Rica, or less. So, retirees can
afford to spend more on their land. Building costs, medical costs, and auto insurance are far less as well.
Many people want something for nothing, and in the current real estate market, bargains have become scarce because there's no
shortage of buyers. The best bargains fall into one of several categories:
1. Ignorant or desperate sellers: Sometimes sellers want money NOW and can't wait a few months to get the market price for their
land, and will sell at a stupidly low price. These types of opportunities are rare, so check our website frequently. We typically put such deals
on the website almost immediately.
2. First lots sold within a development: Often a person who is creating a development will sell 1-4 of the first lots at a greatly reduced
price in order to generate quick cash to pay for the roads, electric lines, and water pipes in the development. These deals are
great, and again, check our website frequently to look for them.
3. Raw land: Sometimes a seller is too lazy, doesn't have enough cash, or too stubborn to make a few simple improvements on
a piece of land or house that would greatly increase the perceived value. For example, we have a great lot for sale now that has trees
blocking much of the view. If the owner just trimmed some of the lower brances on the trees, the view would be opened up underneath them and the
property would sell immediately. Most buyers make emotional decisions about whether they like a piece of land or not. If you want
a deal, think with your head, not your heart, and realize the potential a property may have, not what it looks like at the moment
you're seeing it.
4. Access Challenges: There are areas nearby in which access is difficult. For example, the road between Cabuya and Malpais is an
impassible, muddy mess throughout the rainy season, and few people would buy a property along that road when they can't even get
to it. But, this road will soon be improved and be maintained year-round. Property values on this road are often cheap, so if
you're willing to wait a couple years to have year-round access, then this land is a bargain.
5. Pay Cash Fast! One great way to get a property cheap is to make sure you have all the cash ready in a Costa Rican bank. Then,
offer to pay the money immediately for the property, rather than going through the usual escrow with all the delays. To do this,
you either have to have a lot of guts, or just make sure you and your lawyer to all your homework on the property in advance before
you make an offer. Some sellers will give you a great bargain if the entire amount will be in their hands in a day or two.
6. Buy farther in the hills: Everyone wants a property right by the beach, but not everyone can have what they want. Some of the
land that has appreciated the fastest in the past two years is land that's 10-15 minutes from the beach. Some of this land has
gone up 5-8 times in two years! Look in areas such as San Isidro, Santiago, Betel, or along the "Pura Vida Road" between Montezuma
and Tambor to find cheap land with a short drive to the beach, lots of
beautiful trees, a cooler drier climate, at a much reduced price, and in a few years you'll see a great increase in the value.
7. A Diamond in the Rough: Some of the smartest buys are lots that no one else wants. You may find a lot that is small, but would have a second or third-story view from a house. Ocean view properties are about double in price, so if you can build a house with an ocean view, you've added a lot of value to the property beyond the cost of the house. Building a beautiful house, in general, is always a great way to add value, especially when it's on a steep, sloping lot that appears to many people to be difficult to build on.
Tropisphere Real Estate
(011 506) 8844-4726