Guys In The Zone: Costa Rica Real Estate

Even though we call it Talk Show 15, this is indeed the 16th Episode of the Guys In The Zone Talk Show. This episode delves into the topic of construction in Costa Rica. Ben, the founder of Guys In The Zone, interviews Matt Callero of Mango Construction (mangoconstruction.com). Matt offers some answers to the popular questions– Is it difficult to build? How much is construction per square foot? And, what trends he foresees unfolding in the southern Pacific zone. Enjoy!

“Few people actually stumble into wealth.”
- Smith Barney (although I couldn’t determine if it was Mr. Smith or Mr. Barney?)

In Part One of this article, I outlined how million dollar houses fit into the Costa Rica real estate landscape, specifically in the southern Pacific zone (The Zone).  There are a few obvious reasons to buy a luxury home in Costa Rica—

*  It’s A Buyer’s Market (Prices are down approx. 50% from the peak in 2008.)
*  Desirable Area (International Living Magazine rated The Zone as, “one of the top three real estate destinations in 2010.”)
*  Stable Prices For Construction Materials And Labor

The three-year Costa Rica real estate trend has reflected a significant drop in value, including property in the luxury home category.  Although there are some very nice million dollar homes in the area, this young market enables another popular strategy— Buy-And-Build.

Buy and Build

The majority of buyers who come down to the greater Dominical area with a plan to purchase a house, often end up purchasing raw land instead.  The reason is the area has a relatively small inventory of quality homes with floor plans and finishes that appeal to most North American and European home buyers.  So, they end up buy raw land or a lot in an established development, design their home with the help of a Costa Rican architect, select a builder, and then start the building process. Continue Reading

In Northern California’s Bay Area, million dollar homes are very common.  They typically combine elements like— a desirable location, a large floorplan, upscale finishes, and/or estate-sized acreage.  My first position in real estate was in a beach area near Santa Cruz, and the power agent I worked for had no less than five million dollar listings when I joined her.  I just checked that broker’s website, and they currently have 307 houses listed between $1 million to $10 million.  Conversely, the Southern Pacific Zone of Costa Rica has a young real estate market and million dollar houses are less common.

Luxury Estate in Escaleras, Costa Rica.

As recent as 2006, this area was considered the new frontier in Costa Rica.  Access was difficult and more exhaustive than it is now.  Developments were few and far between.  Then, the real estate boom hit.  This boom affected all aspects of real estate—raw land, developing, construction, rentals and associated services.  All of the key elements for million dollar homes—desirable location, sweeping ocean views, large building sites, and affordable construction—were easily realized for a relatively affordable price.

Let’s start with the land… Continue Reading

Hydroelectric power is BIG in Costa Rica.

The Costanera Highway, The Caldera-San Jose Highway, The Cortez Hospital, The International Airport and The Diquis Hydroelectric Dam… it is easy to see that Costa Rica is serious about improving its infrastructure and securing a bright future.

Over the past decade, the dramatic increase in tourism and investment has sparked a bit of a power-struggle between proponents of economic growth and socio-environmental protection groups.  In this case, the “power” is the proposed billion dollar hydroelectric project called “El Diquis” near Palmar in the Osa Peninsula.  This isn’t recent news, but I believe it is worth mentioning as it will affect life in various ways in the southern Pacific zone of Costa Rica.

The Zone Is HOT

This large-scale project, facilitated by I.C.E. (Instituto Costarricense de Electricidad), is calling for the construction of a dam on the Térraba River in the greater Boruca Canyon. The dam will create a lake equaling approximately 25,000 surface hectares (over 6 million acres), the largest of its kind in Central America.  By comparison, Lake Arenal is roughly 8,500 hectares.

This station will generate up to 630 megawatt units capable of providing over one million families with electricity!  This project is about Power, both electric and economic.  According to a Continuum report commissioned by the Costa Rican government, Continue Reading

While browsing the storefronts of Quepos the other day, I saw this Hurricane History Map in an office window.  What caught my attention was how Costa Rica was completely free of any direct hurricane/tropical storm trajectories.  People ask us if we get hit by hurricanes, and now it’s nice to have a chart showing just how ideally located Costa Rica is, especially on the Pacific side.  Clearly, the vast majority of tropical storms and hurricanes are born in the oceans to the west and especially the east of Costa Rica, and then almost always track north.  In recent years, only Hurricane Cesar and Hurricane Mitch (1996 and 1998, respectively) traveled all the way across the Central America landmass.

Even though Costa Rica is Hurricane-free Zone, it still feels the effects of heavy rainfall from time to time.

During the hurricane season, June 1^st – Nov. 30^th, Costa Rica will occasionally feel the effects of these major hydro-meteorological events.  Tropical storms are more common than hurricanes in Costa Rica, and it is important to note that heavy rain isn’t the same as heavy rain AND 100+ mph winds!

According to this NASA webpage, “Tropical cyclones are like giant engines that use warm, moist air as fuel. That is why they form only over warm ocean waters near the equator.” The small towns in our area (e.g., Dominical, Uvita and Ojochal) are located at approximately nine degrees north of the equator.  The benefit of being at this latitude, and on the Pacific side of Costa Rica, is the wind is significantly lighter than along the Caribbean storm corridor where hurricane winds can rip off your roof.  I suppose that’s why the famous Portuguese explorer Ferdinand Magellan called the Pacific Ocean, Tepre Pacificum or “Peaceful Sea”.

What Does This Mean For Pacific Zone Residents and Investors? Continue Reading

A longtime associate in Costa Rica real estate stopped by our office after being out of the country for an extended period.  One of his first questions was, “So, what’s going on with the international airport?”  My response was, “What airport?”  He found that amusing considering the broker he just spoke to was talking it up like the asphalt trucks were lined up and ready to pour the tarmac.  We both had a good laugh.

I’m not saying major infrastructure projects aren’t being completed here in Costa Rica.  There have been many projects completed in the past two years—

• San Jose-Caldera Highway
• Quepos-Dominical Highway (affectionately known as, “The Dirt Road”)
• Re-paving of the Dominical-San Isidro Highway
• The Bridge at San Buenaventura
• The Bridge at La Cusinga (almost)

From that list it is easy to see the progress and the progression.  What I mean by “progression” is the land routes need to be completed first before an international airport is built in The Zone.

International Airport In Paradise?

Rumors to Reality

The list of rumors regarding the southern zone Airport is long and varied— operational for international flights by 2010, moving to a new site in Sierpe, moving south closer to the border in a joint venture with the Panamanian Government… to name a few.  The reason I am sharing this news story released by La Nacion a few days ago and forwarded by a reputable broker in the area is it actually sounds like the government has a (more) realistic plan.

In summary, Costa Rica’s third international airport will be located in the same exact spot currently occupied by the Palmar Regional Airport.  To comply with Aviacion Civil (the FAA of Costa Rica) standards, the runway will be extended 400 meters and facilities for immigration, customs, and security will be constructed.  The “facilities” will include extra hangers, buildings, and even a terminal that will provide hangers and services for commercial shipments.  The price tag on this project is quoted at $25 million dollars, half the proposed cost of the mega-terminal in a new location.  They did not release a projected completion date, but I would be shocked if it was ready in two years.

One of the most interesting points in the announcement is the Minister of Tourism’s call for more hotels to be built in the area.  It is a similar point echoed by the longtime mayor of the Osa Canton, Alberto Cole.  It’s safe to say, major hotel projects are going to get the green light, moving forward.  One of the more interesting things to me is exactly how they are going to accomplish this with no Plan Regulador (e.g., zoning plan) for the area?  Where are these new hotel-resorts going to be located?

What Does It All Mean?

It means that at some point in the future there will be international flights landing in Palmar.  It means there will be more hotels, and the beaches will be alive with activity.  It also means there will be many, many more investors buying in the area.  People look at me funny when I say this area is poised for another b-o-o-m, but all of the regional signs—improved access from every direction and significantly lower property prices— point that way.

It means property in areas like Tres Rios and San Buenaventura, once thought of as “too far south of Dominical” will be a 15-minute taxi ride from the terminal.  Check out Tres Rios Estate and Tres Sandalo 17 as examples.  We only have a few listings in Palmar (see photo left), but I guarantee that number will double before the high season.

Most of the expats in The Zone have adopted the “I’ll believe it when I see it” philosophy.  We have also been surprised by the recent completion rate of infrastructure projects.  Safe to say, the completion of the 3rd International Airport in Palmar will be the crown jewel for the region.  If you are interested in buying Costa Rica real estate, this recent news bodes well for smart investors.

Water is a necessity.

If you ask the World Bank or one of the mega-water corporations (e.g., Coke, Nestle, Vivendi), fresh drinking water is a commodity.  If you ask virtually everyone else in the world (including the United Nations), fresh drinking water is a basic human right.  Whether it is the encroachment of privatization or Nicaragua’s plan to divert the San Juan River[1], water in Costa Rica is an increasingly lively topic.

One of the most popular questions for potential property owners is, “What is the water situation for this property?” Most of these new investors come from North America and Europe, areas that have hundreds of years of infrastructure development.  However, this southern Pacific region of Costa Rica is still early in the cycle of development.  We continue to see rapid growth in communications (cell phones and high speed internet), power (high tension power lines), and roads (the newly paved Costanera between Quepos and Dominical).  That being said, cell phones are a luxury, but water… is a necessity.

Property In A Development

Most quality developments have a water system that has been installed by the developer.  The most common sources for these systems are high flowing springs, and in some cases surface water (e.g., creeks and rivers).  Some developments, like Osa Estates in Uvita, even have back-up systems and extensive water storage capabilities.  The interesting thing is very few developments actually have a concession (permission to extract water from the ground).  The good news is the majority of them are “in process”.  Either way, the developer usually provides the property owner a prevista (water right document) which guarantees use of water into the future (assuming the property owner is in compliance with established CC&Rs and other laws).  Proof of a water document, like a prevista, is also required by the local Municipality before they will approve any construction project on a property. Continue Reading

What does the future hold for The Zone?

The crystal ball… standard equipment for psychics and investors, alike. Ben and I are constantly observing the trends and then peering into the future of our little Costa Rican real estate market.

The First Wave

Around 1995, the first wave of developers arrived to the area. These early mavericks (let’s call them environmental-preneurs) benefited from a combination of vision and cheap land. Development was easier back then. Buy a big farm and segregate it into smaller farms (or lots). As the news of cheap land and low costs for materials and labor trickled out to the world, there was a 10-12 year rush on land that led to spiking prices for ocean view home sites. At the beginning of 2007, there were no quality ocean view lots left under $100K, at least not any in developments with good infrastructure (roads, water and electricity). Well, it’s now 2010 and we suddenly have many ocean view properties that can be purchased for under $100K. This quick “land in The Zone” recap is an attempt to set the table for the next trend I believe we experience, moving forward—Houses in The Zone.

Ben and I estimate over 60% of the people who inquire about property want to buy a house; however, over 60% of those house hunters end up buying raw land. There is a very obvious lack of supply in this economic equation, and the reason is we are simply at an early stage of the development cycle. According to CFIA (Colegio Federado de Ingenieros y de Arquitectos de Costa Rica), compared to 2007, the province of Puntarenas experienced decrease of -67% in total square meters constructed compared to the January–April of 2008.[1] Safe to say, the global economic downturn effected everyone investing in Costa Rica.

Gorgeous villa in San Buenaventura.

Yet toward the end of 2009 to present, we find ourselves busier than ever! We currently have 40 house listings on the coast (which means not including the mountain towns of Platanillo, Tinamastes, and the regional capital of San Isidro) ranging from $66,000 to $3.2 million. And, it’s no surprise that 90% of home buyers want an ocean view.

For those with construction experience and a desire to build houses in a foreign country, this where there may be money to be made. The crystal ball formula is– buy a cheap ocean view lot, no more than 10 minutes from the Costanera (our paved coastal highway), and build an affordable house with a swimming pool. The main question we anticipate from potential builders’ is “What kind of house do I need to build to guarantee a sale?” Unfortunately, we cannot provide a “guarantee” only guidance based on our personal, feet-on-the-ground perspective.

Price

The $weet $pot in our house market is between $200-250K. There are folks looking for houses on the coast in the $100K range, but they quickly realize those days are over. If you their budget is fixed at $100K, then we show houses up the mountain in towns like Platanillo and Tinamastes. We do have a couple of nice coastal properties with old tico houses on them for under $100K, but most of these are “tear downs” and re-building on these footprints is generally un-advisable.

Floorplan

Swimming pools sell property.

In this $250K price range, one effective floor plan is the 2&2 en suite (e.g., double master), central kitchen and small living area, and a large patio outside to enjoy the view. Most of the living experience in Costa Rica is done outside. Without question, one of the key rental amenities is the swimming pool.

IT doesn’t need to be huge, or have an infinity edge. But, it really helps a sale because it really helps rent-ability. Even thought there is a bathtub-warm ocean with miles of empty, gorgeous beaches just sitting there for people to enjoy, vacationing groups, couples, and especially families, love the pool.

I could offer a few more building suggestions, but I’ll leave those details to those with far more experience in spec building. What I do know is… Ben and I need houses, and I see them in our future. Thanks for reading.

Build or Buy in Costa Rica

Episode 3 features a discussion on the Pros and Cons of buying a house or building a house in Costa Rica’s southern Pacific zone.  Featured listings in the episode include–

Casa by The Pond – #319; a lovely house located in central Ojochal with a pond, swimming pool and extra sub-divided building parcel.

Uvita House – #83; a well-built, two-story house with a private, ocean view setting in upper Uvita.

Casa La Big Sur - #355; with construction almost complete, this large estate home promises to set the standard for luxury living in the southern Pacific zone of Costa Rica.

The Oasis - #319; enjoy ocean views, privacy and plenty of amenities in this artistic, modern architectural retreat in the well-established enclave of Lagunas.

Building materials, construction scenarios and land purchase trends fill out the topics covered in the episode.

Are you an entrepreneur who wants to relocate in Costa Rica? Many of you have ideas of what you would like to do but you don’t know if it is feasible. Do you buy a well-priced piece of real estate then develop it to your liking? Or, do you buy a turnkey business in one of the small towns of the Southern Pacific Zone (SPZ)? Those are two questions The Guys In The Zone are asked often, and I thought I would shed a little light on the possibilities.

Buy land, build structure, announce grand opening.

Relocators who lean toward the Buy & Build model are the most common brand of investor. Rarely, does the building process go perfectly smooth especially if you are a “first timer” in Costa Rica. Even with a good contractor, we encourage most owners to be on-site often. In fact, the more you can be there to answer questions and provide direction, the better. There’s nothing worse than flying down to check on the status of your building only to discover the size of your custom kitchen and bathroom have been interchanged?! If you follow this advice and move down to oversee the building process, then there are the obvious costs associated with living here (rent, bills, food, gas, etc.). However, this increases your chances to end up with the small (or large) business you always dreamed of. I have attended a few “Grand Openings” in the past few years, and most owners smile with pride, albeit with a touch of fatigue.

Most of our commercial land sellers are open to negotiating price and/or carrying paper (seller financing) as long as there is a significant down payment. Currently, we have excellent “raw land” properties that can accommodate businesses ranging from a small hotel-restaurant (listing #224) and one of the best “large commercial” pieces on the Costanera (listing #312).

Or, buy a landmark!

Until just recently there were very few businesses to buy in the SPZ. Over the past five years, the ticos and early bird gringos have successfully Continue Reading