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.


Costa Rica Property Buyer’s Checklist


This entry is part 1 of 2 in the series Costa Rica Property Buyer's Checklist

To the right you can see what is the net result of my e-mail thread with Adrian. Due to the sheer volume of the data points, I’ll be working through this list episodically, probably in a series.

What I appreciate about Adrian’s approach is that he set out to identify the questions. This can be a tricky thing. You know how it is when you finally got the guy on the line – he’s all ears – and you’ve got your principle questions clearly in mind but the other ones, the ones that you had as you lay in bed mulling this thing over, are not coming to mind. The conversation hits that loaded pause as you try and recall those oh-so-important questions. The guy says: “Ok then. Great talking with you.”

I’ve recently been working with a fellow, a prospective buyer from the US. He is a great model of what I receive from so Costa Rica property buyer's checklist imagemany of my prospective buyers when they start to get serious about the big move to Costa Rica and buying a property here.

So, here you have it. All those questions (well, most of them anyway) that you would like to have answered as you set about on the path of buying a property in Costa Rica. Let’s start with the first one:

Water Supply

This one has become the hot button for a lot of our properties. This is a recent turn in the maturing process of Costa Rica real estate. The powers that be have decided to start enforcing laws that have been on the books forever, as well as adding some new ones. It used to be that if there was a spigot that produced water when you turned the handle on or near the property, you were good to go. You had water.

Not any more.

You now need to have “legal” water. This can be from one of two sources (or both): a community water system that is known as an ASADA, or a private source that you then get concessioned to have the legal right to it.

The ASADA option requires first off that there be an ASADA system available to the property. Supposing there is, you will pay a tap fee and have a meter installed. There will be a monthly base payment of somewhere around 3,500 colones ($7.00’ish USD). High usage will cost more.

The concession option can be for surface water such as a stream, river or pond. Or it can be a well that can be hand-dug or deep drilled. Or a spring.

The cost of a concession is $1,000 – $1,500 (single family properties). I concessioned a spring that is about 100 meters away from the house for $1,000. I paid $500 about 18 months ago (at this writing) for the initial payment and will pay the balance when it is registered. Due to the newness of these changes in the law, and the ensuing press of applications, I’m hearing time estimates of up to 3 years to finish the process.

I’d venture to say that the majority of water systems in Costa Rica were rogue (read: illegal) previously. If not in Costa Rica in general, then certainly here in The Zone. It used to be that a neighbor would run a tube from his well, stream or what have you, across the road and down the hill to your property, and now you’ve got water.

Again, not any more.

  1. water supply
  2. access road maintenance costs
  3. height above sea level – temperature / misty / view spoiling clouds / mold
  4. steepness of terrain for building
  5. solar power
  6. hot water
  7. distance from amenities
  8. 2 wheel drive access throughout the year
  9. wi-fi / Internet connection / TV (uninterrupted UK soccer on weekends?)
  10. views: ocean / jungle / sunset
  11. flooding
  12. erosion
  13. Fees: HOA / water service / road / annual taxes
  14. future neighbors – build out of area

Legal:

  1. corporation
  2. death of owner
  3. soil tests
  4. survey (plano)
  5. security
  6. squatters
  7. For Sale by Owner vss Real Estate Agency
  8. title

Building:

  1. getting materials to the property
  2. wood / cement / other
  3. building in absentia vss being there
  4. fencing
  5. sewage
 

So, the topic of water is a hot one. This is because without legal water, the municipality will not grant you a building permit. There are workarounds and ways to manage the situation on most properties.

What to do if there is no legal water available. I’ve yet to see a property that has no access to water. I suppose it can happen, but I’ve not seen nor heard of it. There is usually at least one option for water.

So, if there is a short answer, here it is, water is an important topic for the land buyer, but your real estate guy will be able to help you navigate through the rocky waters. Also, a good number of properties here in The Zone already have legal water, so it might just be a moot point in your case.

Road Fees and Maintenance:
The Zone is characterized by a coastal highway that has got to be one of the finest roads in Costa Rica. It wasn’t so in the not too distant past. But it is great now. Almost all roads that come off of this coastal highway are dirt & gravel. I recommend to anyone that is interested in this part of Costa Rica to buy a four wheel drive vehicle. Pretty much everyone that lives here has one. I personally use compound low to get home.
 
OK so, the road that leads to a property is most likely “public”. This is the legal handle for the road as opposed to “private” or “easement”. As a resident of a different country than Costa Rica, you are going to think: “well then, the government will maintain the road” – NOPE!
 
The community that benefits from the road, maintains it. So, one of the questions that you want to ask, dear prospective owner of a property in Costa Rica is: what does it cost to maintain the road? This will obviously vary from one area to another. I would say that generally speaking, around $150 – $1,000 per year will cover most cases. There are many that don’t have an annual fee, but where the community just takes a collection as the need dictates.
 
There will be varying degrees of road maintenance. Sometimes all the road will need will be a new cap of material that gets compressed into the underlying material. Or, the road may need some tractor work done on it so that it is crowned for water drainage and/or perhaps there are deep ruts caused by water running down the wheel tracks in the road. So generally you keep an eye on your road and take responsibility for it. If you notice that there is some water damage starting, get your pick and shovel and divert the water over to the drainage ditch alongside. This type of individual responsibility in road maintenance can reduce the costs.
 
As you can see this is going to take some doing to get through the list.  If there are any questions pertaining to the 2 points here, or to any of the points in the list above, please feel free to use the comment thingy below so that others can benefit from the Q & A as well. I will episodically add more explanations to the points in the list with subsequent articles.