Costa Rica Real Estate Investing - The Basics

If you are really serious about possibly investing in Costa Rican real estate then you have absolutely got to make a trip to the country for the purpose of investigating opportunities that fit with your investment motives. You may have been to Costa Rica before on vacation, but that is not good enough. What matters is to come to the country and spend enough time investigating (not "touring") to get an idea of what is available and where and for how much. The Costa Rican market is not "efficient" like that of the U.S. and sources of information are much harder to come by. So start planning your real estate investigation trip to Costa Rica today.

There are many consultants that offer to arrange such tours and serve as a personal guide. Just make sure you are dealing with a reputable person or company. Of course, you can also just do it yourself. I have provided a links list in one of the sections below that include such resources.

If you would like to see what a Real Estate Investigation Tour Itinerary might look like you can CLICK HERE.

Why do you want to invest in Costa Rica real estate? Is it for retirement? Then you probably want to be close to the city (San Jose) and its excellent medical system, especially if there are any pressing health concerns either at present or on the horizon. Is it for a vacation home? Then you might want to consider ocean view property if you like the beach, or mountain view property if you prefer the mountains and a milder climate. Is it to relocate and start a new life? Then you might again want to be close to a city or at least to an area that offers some business opportunities for you, as well as high speed internet connectivity (depending on your ideas for providing yourself with an income while here, if that is needed). Are you looking to develop property or simply "land-bank" property for speculation? If that is the case then obviously you are going to be looking at location-specific properties that give you the most potential for a return on your investment. I could go on and on. I hope you get the overall message that your motives for investing will play a major role in where and what you invest in.

Buying Real Estate in Costa Rica can be a joy, or it can be a nightmare. Here is my Top Ten List of things you really should know.......

1. Beware of unscrupulous "developers" who have set up "boiler room" call centers and will sell you a lot in the middle of the jungle with no infrastructure, nor any hope of there ever being any infrastructure. Bottom line, never, put money down on property you haven't actually seen!

2. Beware of unscrupulous real estate agents that will pressure you to buy now, or will mark properties up beyond the asking price of the owner to enhance their cut of the deal. Costa Rica has no real estate brokering regulatory system. Anyone can be a broker. Best to get one that has at least taken the real estate course offered by the Costa Rican Chamber of Realtors and has a good track record. Get references.

3. You need to be familiar with the Maritime Law. In short, it is difficult to own beachfront property in Costa Rica. The first 50 meters from the high tide mark is public domain and the next 150 meters can only be leased through a concession granted by the local municipality. Beware of any realtor or owner offering titled beachfront property as it is very rare.

4. Always check the National Registry for ownership, liens, mortgages and other encumbrances prior to making a move to buy a property. The system is computerized (though in Spanish) and you can have a lawyer check the property out for a minimal fee.

5. Make sure you are dealing with the true owner of the property. Again a search of the National Registry will reveal that fact.

6. If buying in Guanacaste (or anywhere out in the "boonies") make sure that the property has access to adequate and potable water.

7. If buying an improved property, just like back home, it pays to get a thorough inspection and yes, there are very qualified inspectors that can be hired for a reasonable amount.

8. Best to retain a reputable attorney at the outset to help with registry searches, setting up a corporation to retain title, escrow services, etc.

9. Much has been said of "tico" versus "gringo" prices. I am of the opinion that the local market is efficient enough nowadays that this sort of thing doesn't exist to the extent it once did. It makes no economic sense for a tico owner to sell to a fellow tico far cheaper than to a gringo when both opportunities exist. So I really do not believe it is necessary to have a local do your negotiating for any reason other than the language issue - and for that a good realtor with a working knowledge of Spanish will suffice.

10. Property valuation is more of an art than a science in Costa Rica. There is no multiple listing service to speak of so no really good source of value information such as comparables exists. You just have to roll up your sleeves and do some investigatory work to determine if you the owner is asking a fair price. A good realtor that knows the area can help, but do your own homework as well.

There are certainly other things you need to know and stay tuned to Strictly Business Costa Rica (my blog) for frequent posts about investing in Costa Rica.

Of course, as stated above where you invest and what you invest in depends largely on your objectives. But below are five great areas to consider that include a little bit of everything Costa Rica has to offer.....

Maps are Courtesy of Go Visit Costa Rica.com

Southern Pacific Coast



Much has been made in recent years about the so-called "Gold Coast" of Guanacaste in the Northern Pacific and the area around Jaco in the Central Pacific. However, in my opinion the most beautiful stretch of coastline in the country is the Southern Pacific. This is what I like to call the "Big Sur" of Costa Rica because a beautiful coastal mountain range, the "File Costeña" hugs the coast all the way from Baru to the Osa Peninsula. Popular spots in this area include Dominical, a growing and popular beach town that has for years been very popular with the surfing crowd. A little further down the coast is Uvita, which is a sleepy little fishing community that is becoming more popular as the home of one of Costa Rica's newest national parks, Marino Ballena National Park. North of Dominical is Matapalo, which is an up and coming area with some interesting developments that have popped up in recent years. One of the "problems" with this area is the road. However, there is also a silver-lining to this problem. The Costanera Highway which stretches all the way from Tarcoles to the Osa Peninsula is one of Costa Rica's best maintained highways, with one big exception. That is the stretch from Quepos to Baru that has historically been one of the worst roads in the country. However, all that is in the process of being changed as the paving of this stretch of highway is one of the remaining major commitments of the Arias administration. I can tell you for a fact that work on this highway has been underway for the last year and already the time it takes to traverse this 40 kilometer stretch has been reduced from 2 hours to 1 hour, or less. Once paved that should be about 30 to 45 minutes. While it can be argued that the real estate in this area already has "priced-in" these infrastructure improvements, I am not so sure that there is not plenty of appreciation potential left. The Southern Pacific coast offers breathtaking ocean views, pristine and uncrowded beaches and unrivaled and untamed natural beauty. It does rain more here than other coastal areas, such as Guanacaste, but the beauty and the potential for future growth easily make up for that downside. I highly recommend this area for anyone looking for beach and/or beach-mountain property and a location that has tons of growth potential.

The Southern Caribbean Coast



The Southern Caribbean Coast has been written off the trip list of many vacationers in the past because sometimes it has been labeled as too lawless and dangerous. There were some problems years ago that gave the area a "black-eye." I will admit that Puerto Limon is a dangerous town, no argument there. But here I am talking about points a good distance south of Puerto Limon (note that the whole area is the "province" of Limon to avoid confusion) including such areas as Cahuita, Puerto Viejo, Cocles, Punta Uva and Manzanillo. These are quite simply some of the most beautiful beaches that one will find in Costa Rica. Because of the lawless reputation the area has suffered, tourism has in the past been far less than in areas like Guanacaste or the Central Pacific. However, the potential for growth is enormous. Personally one of my favorite areas to vacation is Cahuita. It is as laid back as you can get and the Cahuita National Park is simply stunning. One of the most important coral reefs lies just offshore of the park where snorkelers or divers can find an oasis of tropical marine life waiting to be discovered. I also really like the Caribbean vibe, with great reggae, superb seafood and lots of love in the air (or maybe that is something else I smell). This area has yet to be "discovered" in any major way by the foreign investment community, but in my opinion it is only a matter of time. I think there are great opportunities for those that maybe have a longer investment horizon or are looking for vacation property in one of Costa Rica's most beautiful and laid-back areas.

Lake Arenal



I have always been a lake lover. I grew up on a water-ski and there is something refreshing about fresh water. Lake Arenal is the largest lake in Costa Rica with an area of 85.5 km (33 sq. miles). It is a man-made lake that was created when ICE (Instituto Costarricense de Electricidad) flooded the area to create a damn that is one of the main sources of electrical power in the country. But in the process of creating this lake they also created miles and miles of beautiful lake property in the rolling hills that surround the lake. Here you can get the best of two worlds, a gorgeous view of the Arenal Volcano and the lake itself. The lake offers water sports, great fishing and incredible views of the volcano juxtaposed with the lake. This area has started to get discovered already, but I believe it has a long way to go. On the other side of the lake (from La Fortuna and the Arenal volcano) is the town of Tilaran. Tilaran is only about three hours from the Guanacaste coast, so you are not too far from the beach (that is basically true anywhere in Costa Rica, which is another reason the country is so unique). Currently I live in Santo Domingo de Heredia, a suburb of San Jose. While I like this area and it is convenient to my office, I have been considering quite a bit lately where I want to ultimately build my Costa Rica dream home. I can tell you that Lake Arenal is high on my list, as well as the mountains overlooking the Southern Pacific coast. We will have to see which area wins out in the long-run. In the meantime, I consider both to be excellent areas for investment.

Turrialba



I included this area because, quite frankly, it is one of my favorite. It is one of my "escapes" when the busy city life begins to get under my skin. The area is actually on the "Caribbean slope" and is about one hour and a half east of San Jose. You pass though the former "colonial" capital of Cartago and the towering Irazú Volcano (highest in the country) until finally arriving at the popular sports enthusiast town of Turrialba. One of the main attractions of the area is the Turrialba Volcano itself, which at over 11,000 feet in altitude is the second highest in the county and lately, one of the most active. Turrialba is near the river "put-ins" for rafters on two of Costa Rica's (and the world's) most famous rafting rivers, the Pacuare and the Reventazon. This, along with the volcano, makes the area a strong tourist draw. Things I love most about the area include the beautiful and pristine mountains, panoramic views and tranquility. It is just in my opinion one of the most incredible mountain locations in the country. If you are looking for mountain property at great prices and not too far from the city, Turrialba may fit your bill perfectly.

Central Valley



The so-called "Central" valley encompasses a vast amount of territory. What is generally referred to as the GAM (Gran Area Metropolitana) consists of not only San Jose, but also Alajuela, Heredia, and Cartago. I believe any top investment list has to include this area for a multitude of reasons. Certainly one cannot claim that this area remains "undiscovered." However, the territory covered is so vast and varied that pockets remain where great buys can be obtained. The other reason to include this area is because if one does not want to be too far from the resources of the city, it is an area that has to be considered. Of the some four million inhabitants of this country, almost one-half of them live here. This area offers the best of the best in terms of telecommunications infrastructure, shopping, dining, night life and on and on. There are so many areas that are contained in the Central Valley that one could potentially consider that I could write several pages and still not cover half of it. Suffice to say that if your investment motives necessitate a location that is "civilized" then the Central Valley needs to be a top consideration.

People often ask about real estate prices and it usually goes something like this......"how much would a 3 bedroom beachfront house on a half acre lot cost in Costa Rica".....well that my friend is a very delicate question. You see in Costa Rica there is no MLS system or any other efficient source of reliable information as you find in the U.S. Prices are quite simply..."all across the board and then some." Prices depend on quantity, location, what kind of view, how much infrastructure, etc., etc. Just like anywhere else, but the difference here is that the market is still woefully inefficient. That can be a real "boom" for smart investors, but a real "bust" for dumb ones. If you have to have figures here goes.....you can pay anywhere from $5 per square meter (or $20,000 per acre) to $50 per square meter ($200,000 per acre) for unimproved land depending on all of the factors mentioned above. That is a pretty reliable range for most "civilized" areas of Costa Rica. And, yes, there are drastic outliers. For instance, in Jaco or Tamarindo, you might pay closer to $1,000 per square meter for property that is both residentially and commercially viable. So there you have it, my ten cents on pricing in Costa Rica.