We’ve had a week full of working with buyer-type clients, but they definitely fit into what the “Man Says There’s No
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…)
October 2, 2009
Kicking Tires in Paradise
July 23, 2009
Directing Your IRA To Costa Rica
The Mysterious Disappearance of the “Equity Buyer”
It doesn’t take a real estate tycoon to figure out the primary reason for the decline in Costa Rica real estate activity— the disappearance of the “equity buyer” [noun- a mortgage holder who uses the amount of ownership built up through payments and appreciation to purchase additional real property]. With the banking industry on its heels at the beginning of 2007 (and flat on its butt by the end of the year) and home values at record lows, those buyers with a desire to invest in Costa Rica property were seemingly left without this viable capital source.
Yet the optimist in me feels compelled (at 6am on a Tuesday morning) to share a couple of thoughts and possible solutions for people who want to be down here. And let me tell you, if there is one market factor that has not changed it is that people love Costa Rica.
A Little Known Fact– The Self-Directed IRA
I had a client contact me recently with her desire to purchase land in our area of Costa Rica. She is a real estate professional from Florida and knowledgeable about buying property in Costa Rica. Her approach was, via a third-party investment trust company, to self-directed funds from her United States IRA (Independent Retirement Account) to buy land in Costa Rica. After our initial discussion, I did a little research.
I discovered that in 1974 Americans were allowed to invest tax-deferred retirement funds in real estate and, get this, foreign real estate! Even though it wasn’t publicized (or understood), this was a landmark moment in the evolution of the Internal Revenue Code. And even now, many people are unaware of the diverse benefits of switching from a traditional IRA to a Self-Directed IRA.
The benefits will appeal to many IRA owners—
- Tax-deferred: The U.S. government allows this money to be used for purchasing land outside of the U.S. on a tax-deferred basis as long as the funds are not withdrawn before retirement age. This means you can purchase any type of legally owned property (i.e., a house, a condo, raw land, commercial property) in Costa Rica. For those of you who have always dreamed of growing your own food on a large farm or just simply retiring in a resort community, this presents a magnificent option.
- Control: Unlike stocks, owners can have a direct affect on the property’s appreciative value by making improvements to the land or structures. This added sense of control over your real property investment can be appealing for those who are tired of stocks being improperly managed by a broker or financial advisor.
- Income: ANY income generated by the property goes back into the IRA account. In the examples of rental income generation via houses and luxury estates, this is an attractive investment benefit… especially considering the burgeoning market of tourists who now vacation in the southern Pacific zone. (2008 tourist arrivals were estimated at 2.2 million, up from 2007’s total of 1.97 million)
- Financing: Property purchased by your Self-Directed IRA can also be financed, as long as the purchase is structured properly.
Allow me to share a few considerations if you are contemplating this financial move:
Self-Directed IRAs are similar to traditional IRAs except they must be managed by a financial custodian, typically a trust company. The custodian is actually the entity that buys the real estate on your behalf. My client is using Equity Trust, but there are many options (e.g., Sunwest Trust) and I encourage you to investigate their level of experience investing in Costa Rica, as well as, their annual fees.
It is also important to keep some additional liquid funds (cash) in your Self-Directed IRA, property taxes (In Costa Rica only .5% – 1.5% of declared property value) and other necessary payments that need to be made, via the custodian.
Finally, if you are under 59 & ½, you cannot use this foreign investment as your primary residence or vacation home. However, my client (who wishes to retire in Costa Rica in the near future) has devised the wonderful strategy of buying a big piece with her Self-Directed IRA funds and also buying a smaller adjacent piece with her personal savings. We also discussed segregating a buildable parcel of land off a larger farm to facilitate this idea. This way she can monitor and improve her larger piece while living on the smaller parcel, thus holding to this Self-Directed IRA restriction. For those over 59 and ½, great news…. this residential restriction does not apply!
Even for those American investors who are years away from retiring, the Self-Directed IRA is a fantastic option for those looking to invest or relocate to Costa Rica. And speaking from personal experience, there’s no where IRA-ther be.
February 19, 2009
A Brief History of Real Estate in The Zone
“The Zone” is made up of a stretch of coastline starting from Hatillo in the north, and stretching south to Palmar Sur. Included in that zone are the following towns, noted from north to south:
- Hatillo
- Dominical
- Uvita
- Ojochal
- Palmar Sur
The inland portion of The Zone is a leg that runs from Dominical to San Isidro de el General, also known as Perez Zeledon. In between Dominical and San Isidro is the town of Platanillo.
The Southern Pacific Zone of Costa Rica
A word about pricing:
When dealing with ocean view properties in Costa Rica’s southern zone, the usual criteria of looking for a “per square meter” pricing fails us. This becomes evident quickly as one familiarizes themselves with the market place.
Evaluating an ocean view property in this area is a combination of attributes, or virtues that come together to give the property its value. Based on observing land buyers over the years, I rank these virtues in roughly the following order:
- view
- access
- size
- infrastructure
- amount of usable land
- proximity to the beach or a river
- privacy
- air motion
As an example of this, I once had a 10 acre property that had a window view of the ocean. Of the 10 acres, perhaps 1 ½ were usable, the rest falling away in jungle covered hillsides. Price: $115,000
Across the way from this property, perhaps within 500 meters, I had another property of 2 acres with a sweeping ocean view, (more…)
February 3, 2009
Relocation – Surviving the Transition Financially
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 (more…)
January 5, 2009
How to Sell in a Down Market
As all of our sellers (who were once buyers) know, value is one of the most important elements for any investor, never more so than now. In years past, headroom for appreciation was a given. Land was relatively cheap and on the rise compared to the rest of Costa Rica. In fact, many investors purchased multiple properties at that time.
We now find ourselves in a more mature market with more discerning buyers and subsequently some properties sitting unsold for an extended period of time. Due to the recent economic downturn we see an increasing desire to move something now. This is a different approach to the “let’s put it on the market and see what happens” mindset of years past. We have now hit the lull so commonly experienced in a previously booming market. Seller financing has allowed more buyers to secure a property, as well as, partially alleviating the financial pressure on many sellers. (For more information on seller financing, see Ben’s article “Do You Have To Be Rich To Own Land In Costa Rica?” ) In any case, for those sellers who seriously need to sell this high season, list price has fast become the key element in the sales process.
Ben and I always strive to create win-win deals. We love those clients who are not limited by a hard-ceiling budget; however, our impression is these liquid investors will probably not make up the majority, moving forward. Most prospective buyers who approach us (either online, as a referral, or as a walk-in) have a budget of $XYZ. We start by showing them the best value in that general price range. More often than not, we only have one or two days to spend with them. This limited time frame means a seller’s property may not make it in the first circuit, or “A” group. When the “A” group is exhausted, then we move to the “B” group, which include equally stunning properties at a slightly higher list price.
I describe our listings in this way not to get our sellers to lower their list price necessarily, but to understand that if they need to sell their property, list price is key to getting the property shown. Ventanas Oasis (listing #299) is one example of a fantastic ocean view listing priced to sell. Without a prospective client taking the drive to your property, standing on the dirt, and blending their vision with the features and possibilities, you have virtually no chance of getting an offer. So, our suggestion is to leverage the next few months with a list price that will get your property shown and sold.
Ben and I are available to answer any questions for buyers and sellers regarding comparable pricing, as well as, the best properties available in the southern Pacific zone of Costa Rica.
December 21, 2008
Help for Buyers and Sellers Takes a Big Step Forward
Imagine this: you are interested in buying a piece of property in Costa Rica’s southern zone, so you walk in to one of the real estate offices in say – Uvita. You consult for awhile with an agent there. (For the sake of this article, lets call him “Ben” 
) and off you go looking at properties that fit your interest. After looking at all that Ben has to show you, nothing strikes you as the right piece (hard to imagine, but it has happened a time or two).
So far not a lot of imagination has been required. Here’s where it gets a little more difficult.
Ben says: “how ‘bout we pop on down to this other agency, some competitors of mine down by Ojochal, and see what they’ve got” or “Let’s go on up to an office of my peers in Dominical that’s been around for years. They’ve probably got a few listings that I don’t that may be a perfect fit”.
I know – hard to imagine, but stay with me here.
Last Saturday marked the 2nd meeting of… well frankly I’m not sure what. I’m not being evasive – we actually don’t know what to call it: Costa Ballena Realty Board? Association of Real Estate Professionals? There were a few other names tossed about: Think Tank, Master Mind Group, Coffee Talk… whatever it ends up being, it holds the key to making the real estate buying and selling experience in our zone 10 times better than what it currently is. (I like “Unified Realty Professionals”. This could have the distinguished acronym URP which would be said something like – well, like ‘urp’ which would bring to mind the satisfied feeling one has having just enjoyed a good meal.)
Ojochal, Uvita, Dominical, Hatillo Platanillo and San Isidro are the towns that make up “The Zone”. There are numerous real estate agencies in these towns. Some with recognizable names from other parts of the globe such as Coldwell Banker, Century 21 etc… Then there are the “no namers” such as yours truly with Dominical Dot Biz Select Properties, and there are many such private label real estate companies.
The objective of the meeting was to improve our ability, as a unified and cooperative group, to serve people who want to either buy, or to sell property in our zone. This is a beautiful, and much needed thing.
The meeting was attended by the owners of Osa Tropical Estates (Ojochal), two of the Coldwell Banker partners in the Dominical office, The Land Company (Dominical) principal and myself (Uvita). We all have knowledge of all areas of The Zone, but have greater expertise in some areas over others.
Problems Identified:
It was agreed that the non-MLS (Multiple Listing Service) business model in Costa Rica makes it difficult for sellers and buyers. The core problem is the lack of REPRESENTATION available to our buyers and sellers.
Buyer’s Problems:
When a buyer spends a day or two with a single realtor looking at property, they are only seeing what that particular real estate agency has for listings. To really know that they have seen everything, a buyer would have to (more…)
December 17, 2008
Who is Buying Land In Costa Rica?
I think that this question is probably the second most asked question of a real estate agent in Costa Rica. Second after: “what’s going on in real estate in Costa Rica”? Actually, the two run hand in hand. In my recent post where I stuck my neck out and made some specific predictions regarding the coming season, I basically said that I felt that there was compelling reason for 1) relocators and 2) land bankers, to buy land in Costa Rica in the present financial climate, and specifically, the southern zone.
I’ll profile my two most recent showings below.
Profile #1:
I’ll call them the Boydsons, were the ones that inspired the post: “Do You Have to be Rich to Buy Land in Costa Rica?”. We spent a couple days together here, and I think that they represent a large percentage of buyers that we’ll be seeing here this season.
Mr. Boydson had mentioned that he had a little money, $50,000 to $75,000 to put down on a property, and that he would like to have an existing house. His budget was around $150,000. So seller financing would be required. An ocean view wasn’t required, but privacy and acreage were. Mr. Boydson is an avid gardener.
The Boydsons and I met in the office and spent our first couple hours discussing their objectives and arranged to go out the next day and put our feet on some available Costa Rican soil.
In our conversation, I mentioned that a lot of folks come to Costa Rica looking for a finished house so that they can avoid the hassle of building, but after looking around some they more often than not, end up buying a piece of land and building. This has been due to the fact that we are early in the real estate cycle and the bulk of our inventory is still raw land. The available houses enjoy somewhat of an inflated value due to their scarcity, and the fact that many folks don’t want to build. After looking at land and houses, the calculations generally make it clear that the best financial decision is to build. (more…)
December 1, 2008
Do You Have to be Rich to Buy Land In Costa Rica?
I received the below e-mail last week and have been working with “Jim” (name is changed to protect…). His situation is one that I think a lot of folks will be able to relate to. 
Reading through your blog it appears that purchasing a home or property in the southern zone is now just for the wealthy. Those who have 5 or 6 other houses and for which one more is just another investment. There are those of us who would like to make Costa Rica our new home and leave the corporate hassles behind. We just may not have the $300K – $1M in cash for such a move. What do you recommend for those of us who are a little ahead in the US real estate game and are looking for a quiet, secluded, place to raise some fruit, veggies, etc. and settle down?
Nicely put, and meaty. I wrote back:
I hate to do this to you, but I’m going to answer your question with some questions. Nearly all of our deals here are cash deals. What amount of cash (more…)
February 16, 2008
Sales Process Overview Part I
This is the first of a 3 part series. Click for: Part 2. || Part 3
Down and Dirty:
- Pick your real estate agency
- Pick and Consult with your agent
- View properties
- Make an offer either in writing or verbally through your agent to the seller
- Negotiate the price and terms
- Get signed Offer To Purchase document to lawyer that outlines the details of the deal so that he/she can draft the Purchase and Sale agreement
- Deposit 10% with the accepted offer. The deposit is “non-refundable” with the exceptions of the contingencies mentioned in the offer. The deposit is held in escrow until closing.
- Due Diligence period
- Close
If you want to know specifically about any of the above details without reading through this entire 3 part article, please click on the bulleted point above to go directly to that information.
(more…)
Sales Process Overview, Part II:
This is part 2 of a 3 part series. Click for: Part 1 || Part 3
Go and View Properties:
Once we have identified the purpose that the person(s) have in looking to buy land in Costa Rica, the agent will consider this as he directs them to the available properties that suit their interest.
I have always found it interesting to watch the process of land selection. I think that we all come down to Costa Rica with some pre-conceived notions of what we want, and for most of us, these change after we’ve stood on a few properties. Our marketplace is, for the most part, coastal mountain terrain. It’s hard to arrive here knowing what these properties are like; they are quite unique, even on a global scale.
Throughout the consultation and property viewing, the buyer is asking questions, getting informed, and making decisions. They are considering the various value affecting features of the property such as: the view, the access, proximity to neighbors, proximity to the beach, golf course, waterfall, how much breeze there is, the jungle, and so on.
Most buyers of land in Costa Rica are not all that familiar with the peculiarities of the land. However, most have had experience in land transactions somewhere, and that familiarity of basic good business is helpful. Basic good business practices are the same everywhere. The broker should be an open book with respect to the properties, “full disclosure” being the key words here. You should get the sense that your broker wants you to know everything that he knows about the property, good, bad, and indifferent. If you don’t get that sense from your broker, get rid of him/her and find another one.
When their property is found, it is time to move on to –
(more…)
