The Current Market January '07 Part II

As I wrote in my previous article "The Current Market", the normal means that are commonly used by the world’s investors for determining if an investment is any good were misleading in the case of buying land here in Costa Rica. One would have needed to throw off the shackles of conservativism and forge ahead in what any conventional commerce maven would have deemed foolhardy behavior. But such is life. The "foolhardy" ones scored the big bonus, and the conventional ones find themselves here wondering how to capitalize on what has been, and continues to be, a strong investment opportunity.

So then the question: how does one go about it now, now that the sub dividable parcels are gone?

There has been a tremendous surge in land acquisitions down south of Ojochal. (For some reason, this word "Ojochal" is hard for North Americans to say correctly. It is frequently pronounced "Ocochal", and who knows why. There is no "c" there where people say it. "J" in Spanish is "H" to our English way of looking at things. So it is pronounced "oho-chall", with the emphasis on the "chall").

When all those well heeled investors arrived to jump onto the land-grab ship, and they realized that there were no more investment properties in the Dominical area, they collectively did something sort of unique. They stood on the coast looking out at the Pacific wondering how they could have missed something so lucrative. As the waves continued to roll into the shore, and the pelicans flew overhead they got to thinking about how stuff just keeps moving on and forward motion is what keeps the guy on the bike from falling over. So what else does a guy do now but look to the right, up the coast to the north, up towards Manuel Antonio? This would make
good sense as far as progress goes, since after all, Manuel Antonio is THE most visited tourist area of Costa Rica, bar none. There is the little problem of that infernally bumpy road though. This kicked all but the most ardent investors off of that idea. So what about that forward motion? Well, the obvious next thing was to look to the left, towards the south and the Osa Peninsula, with that natural marvel Corcovado. What the heck, lets ask around a bit about that direction. Whats down there?

From Dominical, you drive down past Uvita, and get to Ojochal. Word is that the area had been initially settled by French Canadians, which is readily apparent when one visits the few shops and restaurants around. Go into the Internet café in Ojochal, and you are bound to hear any number of different languages being spoken. Apparently Europeans have also been drawn to that area. Ojochal is lacking in infrastructure. They are just now getting their land lines in for phone, and cell phone coverage isn’t the greatest. But the land there is beautiful, and the infrastructure is being worked on as I type.

Moving on down the coast, we get down to areas that are known as San Buenas, Tres Rios, Balsar. The towns are: Cortes, Coronado, Palmar Sur and Palmar Norte. These areas and towns are the current frontier. There are still a few large parcels available, and there has been a considerable amount of activity there. The current wave of investors, many of whom have impressive financial backing, have purchased and are developing these large tracts of land. So, there is a great selection of ocean view lots there.

Downside

The beauty of the Dominical to Uvita zone is the proximity of the ocean to your cool mountain, ocean view lot. A property in this zone can put you at 300 – 1,200 feet elevation, and still have you minutes from the beach.

In the south-of-Uvita zone, the mountains move back away from the ocean. This results in a number of factors that affect the value of the lots.
1. The ocean views are further away.
2. The air is warmer since it passes over some flat lands prior to getting to the lot.
3. The distance to a swim-able or surf-able beach is longer.
4. Some say that they feel "out in the boonies" there.
5. Some of the accesses to the properties are a lengthy drive on dirt roads.

Upside:
The big winners in the Dominical to Uvita area bought when it didn't really make sense to buy. We can easily envision a repeat of this in the south-of-Uvita zone. It is possible to visit this area and feel like it's a bit removed from everything. But it is exactly this point that makes it so promising.

The 2 most basic reasons that foreigners move to Costa Rica are to invest, and/or to re-locate. Both of these motivating factors can be achieved by buying land in this zone of Costa Rica. The infrastructure for the area is arriving at an astounding pace… well astounding by Latin American standards. When the government agencies are slow to build or improve, the investors have been known to take matters into their own hands and do it themselves. The roads accessing the various developments are among the best around, so one can drive back from the coastal highway to their property in relatively smooth conditions, (although it should be mentioned that 4 wheel drive is a must, if not to get home, but to live in the area and get around).
Reasons to consider the south-of-Uvita zone:
1. Great selection. You can shop any number of beautiful, large, ocean view lots and likely find one with the features you’re looking for.
2. Prices are low relative to the other more developed areas of Costa Rica.
3. The developers are doing high quality developments and providing the infrastructure (water, electric, roads, Home Owners Association, etc…)
4. The views, although not being close to the beach, are breathtaking. A typical view in this area can see out to the Pacific and take in the Osa Peninsula, the Terraba river, year round sunsets, misty mountain and valley views.
5. Large lots are available if one wants to ensure privacy in the coming years.
6. It is early so the upside for property appreciation is high.
7. There is an International Airport planned for Palmar Sur. History indicates that this will have a rather marked affect on land values in the area.
8. There is a modern hospital in construction in the heart of this zone. This indicates that the government sees tremendous growth for the area.
9. When the road linking Quepos and Dominical is paved, the southern zone will likely open up to much more tourism. (Aside from the coming airport and road improvement, I wrote about "The Third Thing" which will have a strong upward push on land values. You can read up on this by clicking here.)

I think that you get the point. I could go on. It takes a bit of an adventurous investor to buy into a remote section of Latin America. But there are lots of people doing it, and succeeding at it. Costa Rica, by comparison to Panama and Nicaragua is probably the safest bet, if for no other reason, for sheer desirability.

We hear it here repeatedly. After having gone up north to the Guanacaste area, where there are large hotels and golf courses, and having arrived here in Costa Rica’s southern zone, the visitor feels that they have finally “found Costa Rica” or, found what all the fuss was about.

The area south of Uvita offers a great opportunity for anyone looking to invest, or relocate to Costa Rica.

If you are interested in investing in Costa Rica's southern zone, you are likely looking for signs that indicate what the headroom on your investment will, or can be. You might want to read this article which talks about 3 factors that point towards plenty of upward movement ahead.

A little more on Costa Rica's Southern Zone.

The Current Market January '07

Click here for part 2 of this article.

Our main web site www.Dominical.biz has a sort of Dominical-centric perspective to it, and so it is from this vantage that I view things here. Its kinda funny though, this perspective, because really, what the heck is Dominical? It's a fun question. People travel here like they are going some place… I don't know, some place impressive or involved or something. When they get here and see Dominical's main road and its dire need for improvement, and it's funky surf culture, I think that they often times wonder if perhaps they missed it, which is in fact what a lot of people do when they are driving south on the highway.

As you come down the highway from Quepos, you bump along on the dirt road for some 25 miles until you finally get to the big intersection of the coastal highway (that you are on) and the highway that comes down from San Isidro, (which is another way to get from San Jose to Dominical). That intersection is an introduction of sorts to Costa Rica's southern zone. The roads smooth out, and there is a large fruit stand there, as well as a police check point, then a bridge over the Baru River that you cross – then the next right turn, such as it is, is what conducts you down into Dominical. I have talked to countless folks that passed right on by the turn into Dominical and arriving at Uvita they figure out that they missed it. Such is Dominical, the hub of it all here in Costa Rica's south pacific - or so we are inclined to think - those of us who live and work here. (I should mention that Uvita is THE hot spot on the coast now. In fact, Uvita is where our office is located.)

Boom History
July of 2004 is when I put it. Someone threw a switch then. Prior to this date there had been quite a bit of inventory as regards lots and large parcels in Dominical's real estate market. Beautiful ocean view lots that were within minutes of the beach. All prices sort of pivoting around that $100,000 figure. The really good ones started with a 2, even back then, but these were something VERY special. When the switch was thrown, it all got bought up.

Nowadays we talk about what percentage you can expect to make from an investment here. 20%? 30%? How does it compare with what you can do in the States? Well, you have to factor in the "riskiness" of investing in a foreign land, and all that. But these first round investor's... well it would be a joke to talk about "percentages". How 'bout buying a 60 hectare farm for $120,000, dividing it up into 15 lots and selling the lots off at $150,000 apiece, average price? Or even better. I have heard of factors of 60 over initial investment. Crazy stuff.

It's these accounts that make the rest of us feel like we are a bit late. But really we're not. This is a cycle that has been witnessed in human history repeatedly, and it can only be a select few that happen to be in the right place at the right time AND, who have the will and chutzpah to plunk down the funds necessary to secure a piece of land in an area where there is no electric, phone, nor roads really. Most of the transportation is via horse back. Who would want to buy land here? To visit, yeah maybe. Its like going into a National Geographic special, but to actually buy; power to them. They deserve what they got. I contend that the majority of us, if we were to stand in the shoes of these now very rich land investors, we would have opted out of investing here.

So, the first round of inventory that had been laying around, punctuated by the occasional sale happening, all got snapped up within a very short period of time. Then, these same developers rushed to prepare other pieces they had in the wings for the market, and got these to market, where they were greedily snapped up by the ever accommodating press of buyers to the various real estate offices in the area. Word got out to the global market place: "there is gold in them thar coastal properties around Dominical!".

And so the next wave of global investors began to arrive in droves. These are the ones that respond to indicators. Indicators such as – well – such as people making buckets of money off of buying and selling land. These investors differ some from the first wave that really scored. So now it is their turn. They are arriving and saying: "I understand that if I buy a large parcel and cut it up, and sell the lots I can make great returns on my investment". But there is a problem for these guys.

The problem is that there are no more such parcels. They are all gone. The last of the big parcels around the Dominical area have been bought up in 2006. I hear rumors about stuff up a little north of Hatillo for $6,000,000 that would accommodate a golf course, and there are still some sub dividable parcels down south of Ojochal, but not many. The problem is that the comfort level necessary to attract the big money investors arrived after all the deals were gone. Now what we have here are lots, great for single families and for the ever popular and necessary B & Bs, and other possible income generating endeavors.

Actually there was a little phase that we passed through that I call the "juicing" phase. To take advantage of the "juicing" phase, one needs to acknowledge that the above has come to pass, that there is not some big parcel out there waiting for them to buy it, cut it up, and make a bundle. To juice, one gets a good understanding of what's out there and puts together a few single lots and gets creative with what one can do with it. Or, an investor can find a seller that wants to sell in the "zone", but his property has some problems, such as poor access, or water or some such thing, and the resourceful investor can contract to buy the property, provided that he determines that the problems can be remedied and be willing to effect the remedies. I have personally had some pretty good successes with juicing and will be happy to discuss some possibilities with you if you like. I currently have one of these such listings that is a joining of 3 otherwise rather disjointed properties, and putting them together into one exceptional property. This took some diplomatic work on my part to get all concerned to agree, but the sale is now a perimeter around three seller's property. The property has big ocean views, as well as waterfalls and numerous building sites. Click here to view

So where are we now? There has been a huge land grab by this wave of super-capable investors from all corners – well points, of the globe. I will write soon about the new frontier here in Costa Rica’s ever changing real estate market. To find this frontier, we have to travel south. “South of what” you might ask. Why, south of Dominical, of course.

Click here for part 2 of this article.