Guys In The Zone: Costa Rica Real Estate

February 6, 2010

Did Taxes & Tourism Blow Costa Rica Real Estate Out?

Costa Rica Real Estate Listings

I just received an e-mail from a reader that shamed me into sitting right down and writing.

I have read your face book page and articles on the tax issue there.

I had been planning to take a trip in March in the hopes to travel to Domincal and Uvita nd look at some land that over looks (has view of) the playa. But with all this discussion of election and no tourism and the tricky tax factor it sort of puts a damper on it.  Was this a major blow to the real estate and tourism market, and did it blow you out?

I’m sorry but I’m not aware of the negative effect that the election could have on a land purchase in Costa Rica so I’m not able to address that.

As for tourism – well now that’s an interesting topic.

Tourism has been as hot here over this last holiday season as I have ever seen.  With the new road from Dominical to Quepos, I think that we’re really in for it here.  I understand that the status of tourism is currently anybody’s guess.  Around here it feels like we are in a growth mode. Granted, I haven’t read a lot of media recently and I don’t have a TV, so as a news source I’m limited to what I see and feel.

Over the holidays Uvita was caught by surprise.  The grocery shelves were bare and we spoke with people everyday looking for a place to stay.  I think that everyone found a bed and it felt like one big party around here. I think that it is notable that the beer supply seemed to hold despite what appeared to be a gargantuan demand.

Although the crowds have left, the festive feel continues with a good strong tourist presence.  So, without reading an article to the contrary, I’d say that tourism is alive and well in Uvita and Dominical Costa Rica, and that the prospects for the future are bright, especially with the two new segments of road making the drive from San Jose to Dominical a 2 hour and 40 minute affair now, instead of the former 4+ hours and some of that on teeth loosening dirt roads.

I have not seen an article written from your blog or website in February on your website so I want to know if you are still in business down there?

Well, I thank you for getting me off of my butt to get this article posted.  I sure don’t want to give the impression that we’re out of business.  Our lack of posting is a testament to our being busy.  Rod and I have been doing quite a bit of real estate business.  We’ve done some deals, and more are coming our way.  All of the agencies are reporting the same, some with best ever numbers – (I heard this last part through a third party, but I hope to confirm it shortly.) (more…)

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January 9, 2010

2009: In The Rearview Mirror

Filed under: News, Projections, State of the Market — Tags: , , — Ben @ 3:17 pm

Rod & I have decided to write a few words about the year just past. We did so without consulting each other or giving any clues regarding what we’ve written.

First off is Rod

If you subscribe to the idea that life is a series of ups and downs, then last year was a harsh reminder of how challenging the “downs” can be.

  • “Unemployment soars to highest level in 16 years.” – New York Times
  • “U.S. Foreclosures to Reach Record 3.9 Million in 2009.” – Bloomberg.com
  • “New car sales a ‘disaster,’ says Sergio Marchionne, CEO of Chrysler/Fiat.” – NY Daily News

While people were losing their jobs and houses in record numbers, they still had the time and interest to search for Britney Spears and WWE (World Wrestling Entertainment, which is fake wrestling, right?) making them the top two search terms on Yahoo! for 2009.

Although I have no idea what Britney was up to in 2009, I do know that most of us here in Costa Rica felt the impact of this economic downturn.  After a decent start to sales in January and February, most real estate companies saw offers dry up during the following 8 months.

Like many people around the world, the Guys In The Zone shifted gears to “beans & rice mode” (luckily, we both like beans and rice). We tightened up the expenditures and found new streams of income. [Ben deserves some kudos here for his quick mastery of the hard money lending business.  He, (leveraging his experience, contacts, and bilingual-ness) saved more than a few local families from economic disaster.  This lending experience taught us that putting good food on the table is important, but to literally save someone’s table (and house it sits in) from foreclosure is a genuinely rewarding experience.] While we didn’t sell any property during the middle of the year, we did put a lot of time and energy into new listings, our websites, and the Talk Show feature which we will continue to work on in 2010.  Ben also started writing articles for Montana al Mar, a new weekly magazine focused on health, sustainability, and community.

The old adage “When you love what you do, the money will follow” proved true in 2009.  The end of the year found activity picking up noticeably.  Three excellent deals (more…)

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December 21, 2009

Costa Rica Culture – Say Hello

Filed under: Culture, Just for Fun — Tags: , , — Ben @ 9:54 am

Typical Latin American Greeting

Typical Latin American Greeting

When we first moved to Costa Rica in 1999, my son Neil was 11 years old and my daughter Hannah was 15.  In those early days, after coming home from a visit to the town center, maybe to the grocery store or whatever, they would complain “Dad, why do they stare?”

The answer was and is “because they are Ticos.”

One of the major reasons that I chose to move to a foreign land with my family was that we, as a family, would learn another culture & language.  Well, I’m happy to say that it worked.  We learned a language and a culture, but lord knows it wasn’t all smooth sailing.

It really helps to keep in mind the objective: that of learning a new culture.  That way when things are different, we can tell ourselves: “that’s why I came here.”  The problem is that sometimes different equates to strange and uncomfortable.

The eye contact thing was something that, for me, took a little getting used to, and even more so for my kids. In time we all have come to appreciate it.  In Costa Rica you always acknowledge the presence of the other person, whether it be driving along a dirt road and passing a guy walking along, or in the grocery store as you walk past the stocker.

I think that my gringo, privacy-loving heart, is a little afraid that if I engage with this person, they will take a bunch of my time, or need something from me.  I think that it was somewhere right about the 200th greeting – the 200th greeting that happened for the simple love of the greeting, I began to accept it.  Touch base, say hello, share a good feeling and move on with your day. (more…)

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November 8, 2009

Guys In The Zone Talk Show – Episode 5

Filed under: Talk Show — Ben @ 2:20 pm

Episode 5 of the Guys In The Zone Talk Show, hosted by Ben Vaughn and Rod Martin, features a lively discussion on life and buying property in the Southern Pacific Zone of Costa Rica.

In this episode, we discuss a couple of recent U.S. and Costa Rica tax-related items that have come to our attention. We also share a new “Featured Listing” called The Secret (#378) located in the first ridge of Escaleras, Costa Rica. The white water ocean views and adjacent waterfalls are spectacular.

Feel free to join the conversation below, by “logging in” and sharing your thoughts and questions. We, the Guys In The Zone, thank you.

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October 21, 2009

Confusion Around Costa Rica’s Luxury Tax

Filed under: News, Taxes — Ben @ 6:52 am

taxlawconfusion_0 So, I get this great e-mail from some super in-the-know real estate guys the other day that answers a number of my questions regarding the new Luxury Tax law. After this “clarification” I post to my Facebook page and Tweet the news where I stated “I have determined that the new Luxury Tax in Costa Rica is for construction only and does not include the value of the dirt under the house.”. This is wrong.

Today I wake up to find out that I had posted incorrectly and in the process cost thousands of people their homes and livelihood – OK, well it wasn’t quite that dire, but still…

I read an article in AM Costa Rica that says:

The biggest issue appears to be if land should be included in the valuation to determine the amount on which tax is to be assessed. Some say yes and some say no.

Well, the law says yes, but that appears to be a late change by the legislative staff without the knowledge of some of the key legislative players.

Consequently the title: “Tico and expat confusion reigns on new luxury tax” In it the author explains how the law is poorly written, and the “Hacienda de Tributacion” (Costa Rica IRS) has not communicated the law well through press releases (there have been none to date) nor through their website where it is mentioned in a cryptic and hard to find form.  So, even for those well meaning, law abiding tax payers who want to comply, they aren’t really sure what to comply with. (more…)

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October 14, 2009

Costa Rica’s New Luxury Tax

Filed under: News, Taxes — Tags: , , — Ben @ 4:32 pm

Everything that I know about it (which ain’t much).

There is a new law that has now quietly come into force in Costa Rica.  It is being called the “Luxury House Tax” or a facsimile thereof.

I now have it on good authority that there is mass confusion about this law by the few that have even heard of it. I am one amongst the throng of the confused, but I will here report what I know and will continue to post as I get new information.

There appear to be many that have not heard of the law, but whether a person doesn’t know about the law or simply chooses to do nothing about the law, word is that there will be some rather harsh consequences.  How ‘bout them apples?

This is a new tax and it is only for constructed properties – houses, not for raw land.   Houses built on both titled and maritime zone property are affected.

House owners must declare the value of their house, and then pay the tax between January 1 and January 15th.  The law went into affect October 1, 2009 so the amount in this first time slot will be from October 1, 2009 to January 1, 2010.

If the value of your house is below $170,000 (give or take – this amount will vary depending on the exchange rate), you are exempt.

I have included a table of the current tax-to-value table. At the writing the colon is hovering right around 580 per dollar but you can take the figures below and use the conversion thing by clicking here.

Colon Value From Colon Value To Tax
From 1 to 100,000,000 0.0%
From 100,000,000 to 250,000,000 0.25%
From 250,000,000 to 500,000,000 0.30%
From 500,000,000 to 750,000,000 0.35%
From 750,000,000 to 1,000,000,000 0.40%
From 1,000,000,000 to 1,250,000,000 0.45%
From 1,250,000,000 to 1,500,000,000 0.50%
From 1,500,000,000 to 1,750,000,000 0.55%

There is an example pdf form on the Costa Rica government’s web site. If you’d like to see it for who knows what reason: click here. It’ll open in a new window and load a pdf document that is an example of what the final version will look like shortly.

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October 13, 2009

Now What’s My Land Worth?

Filed under: How to Sell, Info & How To's — Tags: , , — Ben @ 5:51 am

I’m going to go out on a limb here and define some specific points that we at Guys In The Zone use to evaluate a property.  At the moment, this practice tends towards the black arts since the basis for land values in the zone went right off the cliff with the rest of the world’s economy.

Jesse over at Green Leaf Real Estate has come up with a rather interesting formula for property evaluation:  take what was paid for the land and add 25% annually, and then reduce that number by 40% to get today’s market price.  I find this technique to be ingenious, not so much for it’s accuracy, (that would be a subject of much debate), but due to the fact that Jesse actually came up with a method for evaluating land that sounds like it’ll put you somewhere in the ballpark.

The problem is, we’re not sure where the ballpark is these days.

Rod & I have been working more with the other real estate agencies in The Zone as we move towards a more cooperative real estate profession.  John Wieland of Coldwell Banker invited us out to look at a couple of houses in Ojochal and we got to listen to how he addressed the question “what’s my house worth?”.  He answered: “you can follow the market, be right at the market, or lead the market”.  To “follow the market” would be to realize that others have dropped their price and so you follow suit.  “Be at the market” would be to stay in the trajectory, up or down, that you feel the market is in.  Now, to “lead the market” means that you anticipate the market and blaze a trail with new prices that are compelling to the type of buyers that we now are seeing here in the zone.  In today’s “down” market, this means doing extraordinarily low pricing to get a timely sale. (more…)

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October 2, 2009

Kicking Tires in Paradise

We’ve had a week full of working with buyer-type clients, but they definitely fit into what the “Man Says There’s Noriocortezalrunsthroughit Market here” article says below.  I’ll call them the Schmuggerdoos.  They are intent on buying some land, they came here to buy land, they found land that will suit their needs and budget, but that extra spark of “I think I’ll buy this property now” is lacking. They are going back home so that they can return in a few months, maybe, and buy something then. It’s been a great week though.  Rod & I enjoyed getting to know the Schmuggerdoos quite a bit and hope they realize their dream of moving to Costa Rica.  We also are enjoying the ever expanding cooperation between the real estate agencies here.  It is proving to be a real value-add for both buyers & sellers, and it’s improving the quality of life among us real estate professionals. Prior to the Schmuggerdoo’s arrival I had sent their criteria to the other agencies in the area, who responded by sending links to listings on their websites that fit the criteria.  Here is their criteria: (more…)

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September 9, 2009

The Man Said – There Is No Real Estate Market Here

Filed under: Projections, State of the Market — Ben @ 8:59 am

2 Guys in ConversationThe effect of the statement on me has been: enlightenment.  Interesting, how a single expression out of an entire conversation can have such an effect.  The rest of the conversation simply served to establish the credibility of the man, and that two people, coming from two very different points of view, can arrive at the same answer to the questions:

  1. What’s going on in Costa Rica real estate?
  2. Where are we headed?

“The man”, (for the purpose of this article I’ll call him Mr. Steenburf ) has a property listed with me – quite a nice one actually.

Mr. Steenburf appeared during last weeks Farmer’s Market in Uvita. He migrates between the US and Costa Rica.  So when we bumped into each other at a booth selling car safety kits, we started to converse.

Steenburf: “How are things going”? This is perhaps the number one question on all peoples mind when they first start talking with one of us real estate people.

How are things going”?

Vaughn: “Slow.  We’re not dead, but we’re slow”.

Steenburf: “There is no real estate market” he said.  ZING! He’s talking about my market, and he’s saying that there’s no market. (more…)

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August 28, 2009

Thoughts From The Outfield #1

Softball Group Photo

I was standing in the outfield at the Saturday Softball game in Uvita, when the feeling hit me. It was the warm feeling you get (and I’m not referring to the direct sun variety) when you are with a group of people having fun. In a word: community.

We have a special one down here in the Southern Pacific Zone of Costa Rica. Perhaps it is the international mix of ex-pats— Germans, French, Italian, Swiss, Argentinean, Canadian, Mexican, African, Chinese, and the list goes on. A variety of backgrounds and personal stories better than any television series— the crazy Italian chef turned humble bread maker, the ex-radio personality turned successful bar owner, animal activists, people activists, retired couples from Atlanta to Ibiza…. the list is long and varied. It’s diversity meets adventure meets pura vida, and we love it.

For many investors, Costa Rica has been (and continues to be) primarily a smart place to put your money. And, that’s fine; investing is encouraged given the bright future of the country and region. But, for those people considering a permanent (or semi-permanent) move down to Costa Rica, the reasons stretch beyond democracy, economy and sunshine.

Variety evolves culture. This is especially true with the exotic cuisine found in the area; there is even a restaurant named Exotica, and it is excellent. In addition to numerous Tico restaurants, international options include—French fusion, organic Italian, Japanese sushi, Curry Night, and yes even elements of “the western diet” satiate the The Zone’s inhabitants.

Uvita Farmers MarketIn addition to these restaurants dotting the landscape, a staple of any conscious community is the farmer’s market. There are in fact two weekly farmer’s markets in The Zone—Thursday and Friday in the fast-growing city of San Isidro, and the Saturday Farmer’s Market in our sleepy beach town of Uvita. This relatively new farmer’s market offers an increasingly broad array of (mostly) organic produce, baked breads and pastries, homeopathic elixirs, and hand-made gifts. I consider all of these wonderful vendors “artists”, as you only need to grow or create something and share it with others to qualify. In fact, we have more photographers, painters, writers and musicians per capita than any place I’ve ever been. Perhaps it is this artistic quality that blends so nicely with the laid back, friendly nature of the Ticos.

Most of the people living here agree that the economic downturn is no excuse to lose sight of the importance of doing what we love. In fact, it compels us to re-adjust our sights on something uplifting and sustainable. Simply put, Ben and I love helping people invest in property in the Southern Pacific Zone of Costa Rica. We love every aspect of this service—putting deals together, hiking around large farms, chopping tall grasses with machetes, designing new websites…. all of it. In fact, work doesn’t feel like work at all. Experience tells us the recent drop in property prices will soon hit bottom (if it hasn’t already), and another long rise will begin.

This coastal area, as my friends in California like to say, is golden. The reasons are many—low population & construction density, great value, the Coastal Highway is almost paved between Quepos and Dominical, an International Airport in our future, it’s a tropical paradise. And, let’s not forget the original inspiration for this article—community. It’s not something you can put a price on. It’s something you feel.

Especially on days when you observe 20 gringos cheering for a Tico kid who hit his first home run.

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