This entry is part 1 of 1 in the series Understanding Costa Rica Real Estate

Costa Rica History in knife metaphorI’d say that about 1/10th of my time spent with people looking to buy property in Costa Rica’s Southern Pacific zone is spent in the actual buying/selling of property. The other 9/10ths is a mix of conversations regarding what’s involved with living here, as well as discussing the business of real estate in Costa Rica.

At its core, the lack of an actual MLS (Multiple Listing Service) colors all aspects of the business here, and I’ll go into that later on in this series. To really understand the business of real estate here, I have found it helpful to go back in time and see the progression of events up to the present. This helps to not only understand the current market but also, to project what is to come.

Early days:
I got into real estate in Dominical in 2004. It felt like the day I got into real estate was the day that someone threw the on-off switch on the market. Since then I’ve heard some tales indicating that the market was already simmering and poised to boil.

I made a sale on my first day in the business. A $60,000 gorgeous ocean view property sized at around 2 acres.  The property featured Uvita’s Whales Tail front and center. That property has gone on to have a lovely home, guest house and pool built on it. It has been re-sold and enjoys a stellar vacation rental history (link to rental page on HomeAway)

Quick overview of The Zone:
The Zone is made up of a string of 3 towns with Dominical at its northern end. The northern boundary is not a hard line but is decidedly fuzzy, easily extending up to Hatillo and at times, up to Portalon. (link to Hills of Portalon Development).

From Dominical heading south on the coastal highway you get to Uvita and then further south, to Ojochal. The area between Dominical and Uvita has a nicely laid out mountain range that runs very parallel to the ocean. Hence the handle “coastal mountain range” This means that you can travel inland from the beach just a short way and get to elevation where it is breezy and cool and offers expansive views of the ocean and coastline, attributes which make this area extremely desirable to investors, relocators and migrators (part-of-the-year residents).

More History:
Before the incoming press of foreign interest in The Zone, the Ticos (Costa Ricans) owned all the land, and their land holdings were always in the multi-hectares (1 hectare = 2.48 acres. Think 2.5 to make it easy).

There was a time in the not too distant past when land in Costa Rica was nearly value-less. There were land-grant programs whereby a man simply had to be willing to take responsibility for a property and the government would “grant” him the land, with conditions.

At that time it was not known that “nature” had a lucrative aspect to it. Instead nature was largely viewed as “in the way” and needed to be tamed, subdued or eliminated. So, one of the conditions to receiving a land grant was to cut the trees down and raise cattle.

I suspect that this era may have coincided with the “McDonalds” explosion. This is an arguable point, so let’s just say it coincided with an extreme demand in the U. S. (and world) for beef.

After some time of cutting down enormous canopy trees and attempting to raise cattle in former rain-forest environs, there was a shift in our world’s appetites; nature became an important commodity. Granted, beef has continued to be an active commodity, but it was also learned that former rain forest land doesn’t necessarily make for the best pasture land.

Raising cattle in Costa Rica was a daunting struggle. The farmers found themselves up against nature. Having to maintain former rain forest jungle land in “pasture” condition presented its trials, as well as the fact that the beef business (exporting meat, bureaucratic inefficiencies, and 3rd world infrastructure or lack thereof) made a guy scratch his head and wonder if having all this land was such a good idea.

The Tico culture was/is multi-generational. These large, granted tracts of land, would end up being populated by the man who acquired the land, his now grown sons & daughters and their families, and the grand kids (soon to also have families.)

So despite having lots of land, a condition that in first-world countries equates to being wealthy, these farmers were subsistence. They lived off of what their land produced. As a child would grow to adulthood, Abuelo (abuelo = grandfather) would simply build them a house and apportion off some land (or not) and they would continue on contributing to the sustenance of the family. The land itself was not thought of in lucrative terms.

Abuelo just happened to acquire a land grant on, let’s say, 60 hectares of land that reaches from the inland side of the maritime zone on the coast up to the highest point of the coastal mountain ridge. He’s not thinking “oh boy! I’ve got some ocean view land here.” No, he’s thinking: “man I hope this land is fertile.”

Enter foreigner:
One day Bob, a tourist, is exploring the area and decides that he’d like to buy Abuelo’s property. Bob offers Abuelo $60,000 for the land. Abuelo has never even considered the remote possibility of maybe someday having such a sum. In fact, he’s never even seen that much money. He talks it over with his family and they (very understandably) feel that this would be a wonderful thing for them to do. So, they sell their land.

Bos is a visionary. He sees what is likely coming and so he stakes his early claim. Now, keep in mind that there is no electricity to this property, the access is horseback and the water is from a nearby spring that is bubbling out of the ground. Abuelo has run a pipe from the spring to an elevated storage tank near the family homes. Bob’s a visionary in that – what foreigner in their right mind would possibly want such a remote and forbidding piece of land?

To understand this is to understand the element that is credited with making the world go round. We all have different likes and dislikes. I wonder at the likes of Steve Jobs, Bill Gates and Paul Allen’s level of focus on the personal home computing idea at the time that they had that focus. I’m not of this ilk and so my hat is off to such ones. I view the early investors here in The Zone as being made of the same stuff.

In looking back over the history of the first wave of investors here, I marvel at their foresight. My then wife and I looked at some Whales Tail view property in Uvita around 2002 and, despite its being gorgeous and nicely priced, I felt that it was simply too remote. This was in the same area where 2 years later I sold my first property.

Ok, so I said that to understand the real estate market here in Costa Rica, it helps one to know a bit of the history. Granted, we’ve gone back to what I appropriately call the first-wave of intrepid and visionary investors – The Visionaries. We’ll continue on in the next article with Bob’s next steps and incredible gains on his visionary act.


Moving to Costa Rica Part II 1


This entry is part 2 of 3 in the series Moving to Costa Rica

Migrators

Keeping a property “back home” and having a property in Costa Rica is a common device used by many here in The Zone (Costa Ballena). This is especially evident this time of year as we transition into the dry season and familiar faces that have not been seen for some months start to reappear.

Retirees: once again a mainstay of expat residents in Costa Rica. These have the financial wherewithal to keep a home here in Costa Rica, as well as “back home”. This is a rather common scenario for migrators.

Geese metaphore for seaonal residents in Costa Rica

Moving with the seasons.

Canadians: This group of migrators is in an almost enforced pattern of migration. Canada has a socialized medical system that seems to work pretty well. However, in order to qualify for this health care, they must spend (and this varies by province), roughly half of the year in their home in Canada.

Most provinces and territories also require residents to be physically present 183 days annually, and provide evidence of their intent to return to the province. (Click for reference)

I have some Canadian clients who had intended to fully relocate to Costa Rica. Upon discovering this fact about qualifying for health care, their plans changed and they became migrators.

Life-stylers: this flavor of migrators have the enviable status of being able to maintain a home here as well as “back home”. They come for the season of their choice, and then spend the rest of their time in whatever pursuits they have elsewhere.

Upside / Downside:

With a single visit, it becomes apparent that Costa Rica is popular for a reason. One can actually relax here.

Quieting down the internal dialogue, when once experienced, becomes important. Rather abrupt, and in some cases, extreme, changes can take place at this point (read about my soon-to-be famous theory). In real estate, I’ve actually cautioned some to not make a hasty decision (like buy a property) when this phenomenon occurs.

As stated, some of our migrators keep a home here and one there. They have arranged their affairs such that they can return to work for part of the year, and enjoy the therapeutic benefits of getting out of the rat race for part of the year.  It is interesting to note that for some of these, when the time comes to leave, they are ready to.  And when they come back, they can’t believe how lucky they are to be able to count this area as “home”. Kind of a nice blend.

The rigors of back-home are such that they seem to accumulate and by the end of their tenure there, the migrators are so very ready to get back to Costa Rica. Upon arriving, and having the stresses of advanced-societal-living (read: life in the United States) dissipate, they truly value this lifestyle that they have crafted.

However, towards the end of their – let’s say 6 month – stay here, they are chomping at the bit to get back to the grind and stress it up a bit. Sounds weird, right? But such are we human species.

I experience this itch to get away from tranquility on a much smaller scale than the migrators, but it is enough to where I can relate.  I have a loosely held pattern of leaving every 6 months or so.  This has largely been facilitated by my mother who continues to live in Davis California USA, in the house that I was raised in. I like to go up and visit her a couple times a year.

I really enjoy the whole thing: the airport, getting on the plane, the layover, arriving to hugs and catch-up on doings, see what is hot in the States trend-wise (read article on how to know what is hot in the US). But after a stay of around 2 weeks, I am ready to get home to Costa Rica. Flying into Costa Rica and being able to call this place home is something that I never seem to lack appreciation for, and almost without exception, others that live here will say the same thing.

Some migrators have a caretaker that lives on-site that cares-for (hence the name) and protects the property.  Others look for a trusted career house-sitter for their time away.  Still others manage to rent their place out, in many cases covering the costs of owning the home and in a few cases, actually making money on the arrangement.

The migrators are, generally speaking, not legal residents in Costa Rica. This means that every 90 days or so, they must exit the country and then re-enter so that their passport shows the exit and entry stamps. This has been a common practice for many years.  For many, myself included back in the day, the requirement to leave the country every 90 days was usually a welcome change-of-scene.  Obviously, there are times when a required departure from the country comes at an inconvenient time, but there have been work-arounds to this.

Some laws are changing that are making it more difficult for these “perpetual tourists” to live here. No deal-breakers, but it seems that the Costa Rican government is trying to get everyone to either get their residency, or limit your stay. Areas that have recently been affected by this are:

  • banking
  • health insurance
  • drivers licenses

Banking: the limitation on banking is that it is difficult, if not impossible to open a bank account here in a non-resident’s personal name. You must use the name of your corporation. Also, to do cross-bank transfers, you must be a resident. Meaning: to do a transfer from Banco Nacional to Banco de Costa Rica, you have to have a resident ID called a DIMEX number, which is the number on your resident ID card.

Health Insurance: prior to getting my residency here in Costa Rica, I had both Caja insurance (Costa Rica’s socialized medicine insurance: cheap.) and INS insurance, with is like a private medicine option for those willing to pay for it. The price on this is cheap by U. S. standards. I pay $1,600 per year for full coverage at the age of 53.

I understand that this is now not possible and you must have residency to get insurance here. I don’t think that there is a corporation work-around for this, but I could be wrong.

Drivers licenses: this is just word-on-the-street at this point.  But I have heard several people mention it, and I’ve spoken with one person so far who was denied the ability to renew his Costa Rican drivers license because of not being a resident.  I have not found any information on this yet despite looking and asking, but will keep you apprised of this as I get more info. Your foreign drivers license works in Costa Rica much the same as your passport does.  It is valid for 3 months. So, when you leave the country to get your passport stamped, your drivers license gets to start a new 3 months of validity.

Next up in the Moving to Costa Rica Series: End of the Worlders (off the grid-ers)


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