Thinking about snagging a piece of property in Costa Rica? Well, buckle up, because it's like stepping into a real estate rollercoaster! It's not a bad idea to ditch the hustle and bustle of city life for a chill beach vibe. It's as a beautiful vacation spot and with the prices nowadays it can turn into major rental cash. And guess what? Costa Rica is like the cool kid on the block when it comes to buying real estate, compared to its neighbors. But hey, slow down a bit and don't dive in so fast, you need to learn a few things first from a long time expat 🌴🌺
Costa Rica Real Estate: The Honest Truth
First things first, take a breath and slow down if you haven't already. You would be surprised how many people absolutely fall in love with Costa Rica and buy property on their first vacation there, especially raw land. Six months later, after being back at home, they realize that dream can't be a reality. By that time, the money is tied up and the headache starts. We will get into the headache part later, but let's go over some realistic recommendations first.
One of the top recommendations is to rent before you buy, everyone says this for good reason. Unless you are familiar with the country, you should get to know the ins and outs of it before you buy. If you plan on renting it out, we will go over that, but there are still a lot of things to know first.
Spending a lot of time there goes a long way. A vacation is a very different reality than living there. Try to choose the area you desire to live in and find a rental. While living there, you will most definitely meet a lot of people, especially expats. The locals there are full of truthful information about lifestyle changes. They know the common problems, cultural differences, the real estate market, and can even share the mistakes they made. After spending a good year there, you will know if it's right for you.
What to Expect
If Costa Rica is new to you, or you have only had a hand full of vacations there, then here is a glimpse of what to expect from someone who has lived there and has been going there 20 years. I typically don't add myself into articles, but this is what I saw and the stories should be told. I was heavily involved in real estate investing and development with the friends and family I had there. I learned a life time of knowledge in a very short time because of this. This later brought me to one of the founders of LandZero back in America.
This won't go over the culture so as much in this article, I will try and stay focused on Real Estate. However, understanding the culture is an important part the impacts real estate. It's an important thing to discuss before you plan to if you plan to live there. The people in my experience (Tico's & Tica's) are extremely inviting, friendly and love to laugh. If you plan on getting immersed in the locals ways, you should take on the Spanish language. It really goes a long way for you to stand out, even though most know english because they cater to tourism. While the ways of life may seem normal to them, it might not be the case for someone accustomed to United States standards. The Costa Rican people take things a bit slower, which is nice at times, but if you come with the mentality of getting things done fast like in the states you'll have issues. Things like needing work done on a home, getting government paperwork, road service, and police help can be very slow. While some work very hard, others prefer the more "Tranquilo" lifestyle and might not even show up for work. There are also often complaints about "milking people", in other words, working slowly to prolong the job or extending a project that requires more money. Then you have worker laws, you don't want to be stuck on the wrong side of this. Workers in Costa Rica have so many rights it's almost worrisome to own a business.
After a long time of living there, you find the expats stick to each other. This is fine, some prefer it due to language, but there's a dark side to the other reasons why. You can be seen as money bags over time, you most likely will have some theft at some point and you will find the gossip scene very intrusive. Now, some have a hard time with this and some know how to manage it well. Spanish helps of course but also you can't be a timid person, you have to show strength to be respected.
A friend of mines house was robbed, everyone knew who did it so my friend went and scared the daylights out of him. He confessed but spent everything on drugs. So my friend took his dog, he still has this dog to this day and gave it a wonderful life. The other guy didn't dare mess around with him again. It sounds drastic from western standards but you can't be a push over. Another guy I knew shot a gun in the air once a week so locals knew he had one. There is a lot of petty theft, if you leave to go back to the states you need someone to watch your home or live in it. Thus why people buy in gated areas.
Sorry if you're having a wonderful vacation and reading this but ask other expats. There are issues in Costa Rica, it just looks like paradise but it can truly be the wild west. There are many topics and stories I could cover but let's get back to the subject matter, Costa Rican real estate.
The Real Estate Headaches in Costa Rica
In short, there can be a lot of headaches if you don't know what you are doing. Here are some of the bigger ones I have seen.
Easy to buy, hard to sell - You're buying in a limited market, vacation destination. It's very easy to buy something, but when you want out, you could have to fire sale or wait a year or more to sell it. You're price range and area won't likely match what a local will pay.
Water rights issues - Know your water rights before buying, sometimes the well is owned by someone else or the country denies adding water to your lot. You could buy a home or land, then the owner of the well shuts you off, even extorts you to turn it back on. Now your home greatly loses value and becomes unlivable. Good luck selling that.
Lack of true ownership after buying - There are stories of people buying homes, land or businesses. When it comes time to move in, they find out they own nothing but junk paperwork. Yep, someone else owns, you own nothing and all your money is gone. There are seriously tragic stories about these cases. Use a reputable company and agent, always cross closing documents with your own lawyer. Also get title insurance from First American or similar, don't buy without it.
Pre-development tract abandoned - Companies will show you designs with 3D layouts of a beautiful gated community with a golf course, luxury pool and 24/7 security. They sell the land with promises of building this out in phases. After all the land sells, they vanish, often times with a gated entrance for show. Selling land is probably the worst after such an event, very few people want land, also you can't sell it with the dreams of all the amenities so its value tanks.
Utility disasters - Depending on the grid and area, utilities like power can cause issues. In some areas, the power gird isn't the best, storms will cut off your power for a day or more. Worst case, a surge completely blows every appliance in your home, rendering them useless. Get someone to inspect the power, it may be best to pay someone on your side to inspect power, water and sewer.
Petty theft - Unfortunately, a huge majority of people who don't live full time in their home have been impacted by petty theft. You're going to be considered rich just because you are an expat, so stealing goods isn't a big deal. If you are not at the home for months, you could come back to a robbed home. Either rent it out, have a neighbor watch it, get a property management company or a gated community home.
Squatters - Strange part about Costa Rica is that squatters have rights. If your home or land isn't looked after, someone could move in and live on your land, even build on it. Also take over your home, although this is more rare it happens. You may have to fight them in court, but you could also lose it to them in a court battle.
Renter Issues - Someone could potentially quit paying rent and not move out. This happens worldwide after all, you don't want to find yourself in court to get them out. Also cops are few and far between to help you. Use a property management company or maintain the renting while you are onsite.
Medical Needs - Medical care is actually extremely good in Costa Rica. Most expats go into San Jose for the most advanced hospital called Cima. If you are not part of the country medical system, which you can get into with the right qualifications, then you probably will pay cash. But, it's quite cheap compared to some countries like the United States. The issues you can run into are things like extremely specialized tests or treatments, your medication isn't available or if you have an emergency the ambulances are a bit slow.
Don't live in fear there, you too come from an area with plenty of issues but you're accustom to it. You'll get the hang of it there too. Now, How to Safely Start the Buying Process in Costa Rica
To do things right, the general process is not that hard, some just get some enamored with the country they skips steps. Here are some steps to take.
1. Chose the place you like - Do you like beaches, mountains, cooler or warmer climate, being close to main city or more remote? These are important questions to ask yourself, different places carry higher costs, some lack modern needs. Visit a few places to get an idea of the life there, you should also rent first if possible.
2. Find a reputable Agent and Company - It's safer to stay with brand names like Remax, Century 21 or Coldwell. There are some non brand name companies with many years in business, but just do your research. Make sure you can get title insurance with them and escrow. Some agents barely work, they might not even care to respond to you, after all the surf is good most days. Find someone eager and good at their job. Get someone on your side willing to put in offers that benefit you. Don't fall in love with one place right away, at least look at a few.
3. Find an experienced inspector - You can probably ask around the expat community for this. But get someone who can inspect water, power, sewer and quality of the build before you buy. It will cost a little for their help, but it's better than finding out your place is junk after the fact.
4. Get your own lawyer to review paperwork - It's a bit of a tip people rarely do, but the experts who know the deal always have one. An agent will have their own lawyer to draw up the closing documents, they will also be in Spanish. Find a lawyer outside of town, like someone in San Jose, someone who doesn't know the closing companies lawyer. Have them review the documents on your behalf and explain the situation. Know all your easements, rights and verify ownership.
5. Pre Development - If you decide to go pre development, make sure the developers plan to finish what they started. Always check their tract history of completion and size of their business. There are some major developers in Costa Rica, something like foreign companies with a massive amount of developments. These are pretty safe and more dependable to complete the project to the finishing phase. Be wary of companies without a history, sometimes a couple guys get together with the idea but due to finances can't complete it.
6. Property Management - Unless you plan on living at the home full time, find a property management ahead of time. Check the size of their business, the amount they manage and services they offer. There are some really good ones around as many people use them.
7. Importing furniture and cars - Importing by cargo ship is common, but understand your costs first. Furniture is pretty straight forward, but importing cars takes into account the value of the car. They usually charge you half the cars current value. So a $30k car could end up with taxes of around $15k. Cars are expensive in Costa Rica, chances are you could sell it for pretty close to the total cost of all that.
8. Know the Re-sale - You may need to sell the home at some point, this process is much slower than buying. For homes expats buy, your audience is more limited, it could be a slow process. With land this is even worse, land can be hard to sell. Location helps, but know your ability to be financially well off if it doesn't sell for a year or more.
9. Getting an S.A. - Typically people hold property in an S.A., the equivalent of a legal business company or LLC. It most likely will even be required, so look into it first.
Renting out your home
Renting your home is very lucrative in Costa Rica, basically US prices there. Often the AirBnb prices are very high during peak season and sold out, you could make some serious cash depending on the area.
It's common to offer tours to your guest too, Costa Rica has a well worked out rack rate tour system. You simply book it for them and get paid a nice percentage, just by putting brochures in your home. You might even be able to get a hotel type status. At the time of this article the Costa Rica government has really cracked down on AirBnb's. Laws that are almost in affect might already be in place by the time you read this. It was at one point very open and profitable. But now a major taxation on Airbnb profits came into the picture, so figure the cost of these out. They also made it harder to quality, things like handicap access and certain required structure needs will be key.
If you don't have these you won't be able to register for the AirBnb status. Like said above, also get a property management company and check the status of the items above in this article.
Don't be Fearful & Enjoy Buckle up, buttercup! This could be the life-changing moment that fills your heart with joy. Let me tell you, Costa Rica is like a magical wonderland with endless possibilities for all kinds of ventures. Don't let the stuff in this article freak you out - it's just a little thing called due diligence. Handle these tasks like a boss, and you'll breeze through the process. But if you decide to skip them, well, let's just say the whole ordeal might leave you with a not-so-tasty aftertaste.
Is Costa Rica a good place to buy real estate?
Costa Rica is a great place to buy real estate as long as you follow some guidelines and understand the process. Costa Rica has good property values, high rental rates, international buyers, calm political issues and stable economy.
Can foreigners by in Costa Rica?
Costa Rica has the same property rights for the international buyers as the local community does. You can hold property in the name of your own corporation for protection or name. There are several good property management companies to manage your property while away from the country.
How much is it to rent in Costa Rica?
The location and how fancy the home is will effect the price greatly in Costa Rica. Ranges are wide, $1000 a month to $10,000 a month are normal for long term.
Can you get property management in Costa Rica?
Costa Rica actually has some very good property management companies all over. This is because of the amount of international buyers that need someone to look after their property. Property management companies can take care of things like managing rentals, maintaining the property and handling the properties finances and bills.
Is buying in a pre development a good idea?
Buying in a pre development can be a way to get a discount on the land or home that is soon to be built. While this sounds good, there have been many issues with pre developments such as the developer not putting in any of the amenities they promised. It is always best to check a tract succession rate of the developer first.
Is there theft in Costa Rica?
The most common crime expected in Costa Rica is petty theft, violent encounters are rare. Taking measures to avoid petty theft are not leaving any valuables in your car and making sure your property is looked after at all times. Physical theft can be avoided by staying in safe places at night, avoid drinking too much and staying away from groups that deal drugs.
Is land cheap in Costa Rica?
Raw land in Costa Rica is affordable depending on the area. Beach towns in the Guanacaste region will be more expensive than inland farm land. You can find land as cheap as $25,000 for more remote small lots. For large acreage or quality view lots, you could expect around the $100,000 range to buy the land. Prices have constantly gone up over time in a massive way due to people all over the world buying them up.
Can you get title insurance in Costa Rica?
Title insurance is not required in Costa Rica and therefore overlooked. For Costa Rica the idea of title insurance is a fairly new concept but brings lots of confidence to the buyer as issues do happen. There are a handful of title companies that can be found and your real estate agent can help you with this. I wouldn't do it without it, deed fraud happens there.
