Guys In The Zone: Costa Rica Real Estate

Wouldn’t it be nice to have a crystal ball that you could rely on to foretell what was going to happen? In the present “down” condition of the world’s economy, everyone is guessing what is going to happen. If one were to guess correctly, there is no doubt some opportunity out there. It is interesting to hear Nobel laureates in the media using the now well worn phrase “we’ll see”, ad nauseum.

I am having daily discussions on the current state of the market with regards to Costa Rica real estate. I suppose that my position in the Costa Rica land marketplace makes my opinion of value to some. But really, nobody knows what it is that is going to happen. There are just so many factors at play now. But, having said that, I’m going to stick my neck out and make some concrete predictions about what we’re going to see here in Costa Rica’s southern zone.  But my prediction disclaimer remains in force… we’ll see.

I think that this coming season, which is starting now, we’re going to see some land banking (see below) sales, some of which will likely be higher end, and I think that we’re going to see some determined re-location buyers here. Here’s why.
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The Costa Rica real estate market is an immature market place. What I mean is that we are WAY early in the cycle. If you think back to Boston 200 years ago, I suspect that you’d find that there were large parcels of land for sale there. These were bought and subdivided, and little by little it became what we have now, which in some of the “nice” areas of Boston, the houses go right to the property line and all real estate transactions are sales of property with a building on it.

In my years of selling real estate here, I have sold very few built homes. Most of my deals have been raw land, either large parcels that could be developed in any number of ways: subdividing and selling lots, farming, reforestation, commercial ventures such as a golf course or a restaurant, yoga retreat etc…

The large parcels are rare now, and a lot of the subdividing has been done. We are now strongly, into the re-sale of lots phase of the cycle. We are also seeing more houses on the market.

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The big question of the day seems to be, is Costa Rica real estate being affected by the topsy turvy current global economy? In a word: yes.

In a previous article dated December of 2007, (click here to read) I had simplified the possible affect of the economic downturn in the States. I wrote that the affect can be negative, neutral, or positive. My conclusion at that time was that the affect had been positive. I’m modifying (please note my choice of word there) my position now that we’ve been in “the change” for some time. Please note that I’m not changing from my position, but as you will see, I am detailing out the affect of the global changes. I am still of the mind that, overall, the change is in the “positive” column.

(Read the rest of this entry.)

Evaluating a property here in Costa Rica is a dicey prospect, and “comps” as often as not, are based on what someone else is “asking” for their property, and not so much in what something comparable has actually sold for. The problem is, there may have been a gap of time since a nearby property has sold, and what the seller calculates his property to be worth now. This is based on the word-on-the-street about land value appreciation here. Or there may be an anomalous sale somewhere in the zone that can be referred to. So there is often a huge disparity between what the last nearby property sold for, and what the seller thinks his property is worth.

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Its changing. (Now there’s some real insight for you).

The global markets are in the throes of change. The US dollar is at an all time low. The Canadian dollar is, for the first time in some fifty years, stronger than the US dollar. Even here in Costa Rica, the Colon, for the first time in anyone’s memory, gained against the dollar.

So, whats happening here in Costa Rica with land sales and investments?

A little history:
We boomed here, super hot, from about mid 2004 up through mid 2006. Properties were snapped up and the biggest concern that us real estate agents had was, is there enough property to go around? Literally - I had numerous discussions with other Realtors on the topic. “Do you have anything to show your clients?”

After the boom, we settled into a steady flow of business with the occasional BIG story happening. Talk of big money hoteliers coming in, or at least, having an interest in the area started up and are continuing on at this writing. One seller that I have spoken with had some serious talks with Marriot about a hotel here. But the thrust of the market was and is single family lots that offer an ocean view.

The equity buyers from the land boom and easy financing in the States powered a lot of what we did here. People were enjoying large chunks of equity capital from the appreciation in their homes in the various hot markets such as, from Florida up the Eastern Seaboard, Colorado, and Southern California. Liquidity was rampant.

The change:
Lending practices (among other things) in the US have thrown that country’s economy into a tail spin and it is now difficult at best, to get financing. The equity buyers are gone and the prestige and buying power of the US dollar is declining.

United Kingdom:
A few months ago I went to England to a real estate expo put on by a reality television program there called “A Place in the Sun”. It is evidently a big deal over there. “A Place in the Sun” is a program that locates single family properties in beautiful parts of the globe and then screens applicants that are looking for such properties. They take these couples to the various selected properties where the prospective they view, and then likely buy, that property. They film the whole thing. The show is a hit.

I was helping a friend with a booth there that was exclusively for Costa Rica real estate. Walking around the expo was an enlightening experience. There were maybe two other booths that dealt with Costa Rica real estate, but only peripherally. Ours was the only one that dealt exclusively with Costa Rica real estate, so I would say that Costa Rica was not represented in a big way. But Spain was. And Croatia, and Turkey and Morocco etc… It was quite the exotic presentation.

The Brits have got money, plus their currency currently is enjoying about double (and increasing) the buying power of the U.S. dollar. My few days there in England were easily the most expensive few days of travel I have yet experienced in my life. The hotel where I stayed charged ₤285 (sterling) which equated out to $570 US per night. We got a break for being at the Expo, but still… I didn’t even think that the hotel was all that great. The hotel was packed.

The flush Brits have lots of interest in spending their money outside of the UK. There are tax laws in the UK that have the effect on the residents there of wanting to get their money out of the country. It seems strange to me that a country would have such laws, but there it is. They have effectively pushed ocean view land values, especially in Spain, Turkey, and Croatia through the roof. The booths in the show were elegant and peopled with some gorgeous human specimens. Big screen displays showing how you can buy into a nice ocean view condo along what some marketer had name “Costa Blanca” in Spain for a mere ₤750,000 ($1,500,000 US) and so on.

From our booth at the expo we would watch as say, a couple would saunter on by. They’d glance up at our sign that said “Costa Rica” and keep on walking. A short peice down the way they would stop, talk with each other, turn around and come back. First question: “Where is Costa Rica?” Many, of course, thought Costa Rica to be an island. I eventually printed out an add-on for our marquis that said “Central America” to try and help a bit.

So, the conversation would go from what I would call an absolutely cold beginning, to some pretty serious interest in investing in Costa Rica.

United States:
A few months ago, a Realtor from Boston Massachusetts referred a stock trader from New York down to me that ended up buying in the San Buenas area. They bought a beautiful 6+ hectare (2.48 acres to the hectare) property alongside a year round waterway that features a 50 foot waterfall. The property listed at $265,000. This resulted in a generous referral commission check to that Realtor.

My most recent travels took me, as chance would have it, to Boston. I just gotta say, it was COLD there. I had the chance there to talk with a number of Realtors there about the state of the market. They all had done extremely well in the recent years of prosperity in the States, and were now, well… quite frankly, they seemed a bit scared about the situation in the real estate market there in the States. Consequently they had a pronounced interest in Costa Rica as a possible referral option for branching out and developing an alternate income stream from their existing client base. Their clients have money. The equity buyers may be gone, but there is still, evidently, a good amount of money in them thar States.

So here is my guess as to what we are heading into here in Costa Rica as regards land sales and investment opportunities. I think that we are going to be seeing more investors from Europe, and a new breed from the States.

Yesterday I was out on our San Buenas Golf Resort with some investors from France and Italy. They bought two lots. We had to use horses to get up onto the properties and we stood amongst the Melina trees and peered through them at the ocean, and over the golf course. They moved easily into the concept of investing there since it seems that investors the world over can relate to properties in a golf community. This particular deal though was more than investment only; they intend to use the properties for family and friends to enjoy as vacation homes, as well as income generating properties. They purchased three lots.

The day before that, I was out in the same project with an old hand here at investing in Costa Rica real estate. He has been living in Costa Rica for some ten years and has done extremely well. His interest in some of the proposed condominiums in this development piqued my interest as I have been trying to formulate where we are headed here in our land sales.

My summation:
The loss of the equity buyer does not appear to indicate that we are out of buyers. I think that we are seeing a wave of well heeled global investors, including US, buying into property in Costa Rica as a strong international haven for their investment funds. Take and put the sagging dollar into land that is being bought up by those that have the strong currency now. Our land values, although having risen sharply over the last few years, are by comparison to what I saw in the UK, quite low. To be invested in a market where strong currencies are buying seems to offer a hedge against declining currency strength in the US.

Investing in real estate in Costa Rica is not a new concept. Its been going on for years. In the more recent years however, it has taken on a voracious scope. However, this has been primarily up in the Northwest in the Guanacaste area. Playa Coco, Conchal, Playa Flamingo, Papagayo and so on.

Dominical entered the scene as a bit of a johny-come-lately, but it’s a funny thing, this is not due to being less desirable. In fact, what we hear down here in Costa Rica’s southern zone is that “we have finally found Costa Rica”, after having looked up in the Guanacaste area and around the Caribbean.

So why is the Dominical area and the southern zone so late to be discovered? There are a number of factors that all make some pretty good sense, one being access. Getting to the southern zone was a bit dicey in the past. For Guanacaste one could simply fly into the International airport in Liberia and short-drive it over to the coast. Whereas for the southern zone one had to fly into San Jose and then long-drive it (4+ hours) to Dominical, on rather unsavory roads. Although for some, the access was the reason they chose the Dominical area.

Also, there is the question of conveniences. We’ve got ‘em now, but in the very recent past, we didn’t. For instance, the highway was paved just in the last 5 years. What is now a 15 minute drive from Dominical down to Uvita, used to be an hour, and you weren’t really ever sure when you set out if you’d be able to make it, what with river crossings and all. Go to Ojochal? No gracias, that would put you out in the middle of nowhere on a car-abusing road with no services anywhere. Electricity was available in some spots, and there was a public telephone in Dominical, but you might get stuck behind a young Tica gal talking with her heart’s desire and so you might find the wait prohibitive.

So, for those that came into the area back when it was like that, and that for some reason decided to buy a large tract of land, and who then went off to make boatloads of moolah when the place got discovered, my hat is off to them. They invested a buck in what could only be deemed an extremely high risk venture, and they got $120 back for that buck.

This was all going on down in the Dominical area on raw land while hotels were already being built up in Guanacaste and as nearby as Jaco. There has been this gaping chasm between Quepos and Dominical that seems to have stopped the big development efforts right up there in the Quepos / Manuel Antonio area - that chasm being the bumpy road. This bumpy road is, as we type/read being improved and prepped for paving.

The new-ish highway that runs from Dominical down to Palmar is reputed to be one of the best in the country, and I ‘spect that’s true. You can almost use cruise control on the thing. If this is the quality of road that we get with the Quepos / Dominical link, we will be a mere 25 minutes from Manuel Antonio, which is reputed to be the number one tourism destination in Costa Rica. This will undoubtedly make the southern zone much more accessible for yet more investors to “discover” Costa Rica for themselves.

And then, of course, there is the much touted International Airport slated for construction in Palmar Sur. This means that travelers will be able to fly direct from say, Los Angeles to Costa Rica’s southern zone, no muss no fuss. The question of access is being addressed.

I think that with those two things, plus the “Third Thing” that I wrote about some time ago, we are in for a bit of a wild ride in our world of Costa Rica real estate here in the southern zone. For those of us that work here and support our families, the money is good, although, not at all like those that were here buying 10 years ago. We all live and work in a world that is probably a lot like what one experiences in Sacramento, or Des Moines, or Denver. We get up and go to work, hoping to make enough to live how we like. Of course, it looks quite a bit different here than in those places, but everywhere has its virtues and negatives.

There has been big money made here, word is out, numerous indicators suggest that the future is bright for the Costa Rica’s southern zone, what should we do? Should we jump into the fray? Should we come down to Costa Rica and get a piece of land and then subdivide it? How do we go about getting our piece? What about global warming? What about the fact that Guanacaste is lacking the necessary water to make life there comfortable? What about all this development in this land that was one time “third world” and that is now becoming the sweetheart of the world’s vacationers and consequently, the world’s tourism merchants? There is so much at play here.

So if speculation is your game, you might want to read up a bit on this new frontier in Costa Rica Real Estates new frontier - the southern zone. Check out “The State of the Market” and “The Third Thing”

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.

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.

Dominical.biz - Answering the question:

I am getting sieged by the question, ‘what is happening to land prices in Dominical?’ Ok, well here goes my attempt to update the answer to this question.

I am currently involved in a deal for a front ridge piece of property that is 2,000 sq. meters (1/2 acre) for $450,000 (no, I didn’t mis-place the comma). Being as this price is totally outside of anything I had previously experienced, and I felt that the seller had lost his marbles, I held my nose as I quoted the price to the prospective buyer. It turns out that it is exactly what he wants and well… ‘if that’s what it takes to buy it… OK’.

This has skewed my concept of land values here. Now, all of a sudden, Canto Del Mar, and any the other front ridge stuff coming down the pike looks like great deals and promising investments.

‘Front Ridge’ refers to the ridge of mountain that runs parallel to the ocean just inland from the beach around Dominical. It is this ridge that gives Domincal its huge appeal from a real estate prospector’s point of view. The mountains come right down to the sea. Go to the north, and this ridge moves back away from the ocean, likewise with the south. So, right here on this front ridge you can look right down on the beach, listen to the waves, walk to the beach, and have a 24/7 breeze to make living quite comfy. So, any properties in this ‘blue chip’ zone are slated for big things in what appears to be the very near future.

So, I guess the answer to the question is, ‘they are going up rapidly’. I know that this is going to get a rash of complaints about unruly business developers and realtors ruining the area with these high prices. But the market here is very much ‘free’ and it is simply riding the ebbs and flows of supply and demand. There is no way that I can see to artificially inflate the pricing in this real estate market, at least to any appreciable degree. The demand is high for these properties, and yes, there are those who, in recent memory, saw these properties for a whole lot less. Such is biz. Imagine what will happen when the road gets paved down from Quepos, and the international airport comes in down in Palmar… and then there’s that “Third Thing”

For a long time we here in Costa Rica’s southern zone have been talking about how the real estate market is going to be affected by two big events.

1. The road being paved between Quepos/Manuel Antonio and Dominical
2. The coming international airport in Palmar Sur.

These two events are bound to impact our market-place significantly, and are points of fact that all of the prospectors in this area are hanging their hats on. But there is a yet more compelling thing out there

3. The topic of this article - financing.

I’m inclined to view this third thing as potentially more significant than the previous two.

A number of our investors are relatively young. These are people that have perhaps purchased a property in the US a few years ago, and that property has gone on to appreciate enormously in the white-hot markets of California, Florida, Colorado, and other areas of the country that have enjoyed huge appreciation surges in value over the last few years. Now they have $100k in equity and have heard that you can buy a nice ocean view property in Costa Rica for that and so they come down.

I wonder what the effect will be when investors with $100k in their pockets walk into our office, and with that amount of liquidity, are able to purchase something of 10 times that value. I suspect that the effect of financing on land values in the Dominical market could be greater than simply being able to get here easier, which is, of course, the effect of the first two things.

We currently have 10 properties in our inventory that are all ocean view, and afford views of the Whale’s Tail. They range in value of between $125k - $195k. If one were to track the history of land values in this particular area, they would see that the prices on such properties have gone up considerably. However, when you factor in that everyone who has ever bought up in this area, had to have the cash available for their purchase, in its entirety, one can start to appreciate how the lack of financing has held down land values as though with a ball and chain. Cut that chain, and provide financing, and watch out… a helium filled balloon? ( a metaphor moment )

Consider another area of the planet where the mountains come down to the sea. More than this, throw into our scenario that the mountains immediately in from the coast are very nice and desirable for living. Where would you say? I’d love to get some input on other areas that are comparable, but I come up with Malibu California, USA. I’ve gotten online and done a bit of research for values there.

Its a little tough to do a comp, since our properties range in size from a minimum of 1.25 acres to 6. And it is a little difficult to find a chunk of undeveloped land in Malibu California of this size. So, just looking at it all and tumbling it around in my mental mixer, I come up with comparable land being valued in the $7,000,000 - $8,000,000 range. This is a considerable difference. When we consider that the purchaser of such land in Malibu actually needs to have, in pocket some $700,000, and oftentimes less. Now we can begin to appreciate the affect that financing for land acquisitions in Costa Rica real estate will make. Imagine that all that a land buyer would need to purchase a piece of land in Costa Rica… Lets say one of the ones in our current inventory, was $40,000 down, and could then service the loan over the next 5 - 15 years. It is conceivable that that same investor would be able to add another property to his portfolio and consider him/herself to be a bona fide real estate investor kinda person in Costa Rica.

So where the buyer would have bought 1, they are now buying 2. Or where the buyer would have spent $200,000 for their property, they are now spending $800,000. In our current market place, we real estate agents are sweating the inventory concern. We ain’t got it. It is low. Now lets double the buying power of each investor that walks through our door, and we have a serious supply/demand situation: one can imagine the effect on the pricing.

Now, add to this 3 point equation, an easier access to the Dominical area. Factor in international flights coming into Palmar Sur, just 45 minutes south of Dominical, and 20 minutes south of some of our hottest selling properties. And this is on the smoothest, best darn highway in the country. Now throw in an extension of this highway to the north up to Quepos, and we’ve got ourselves some ingredients that sum up to serious land appreciation in the coming years.

For those considering an investment in the Costa Rica’s southern zone, this “Third Thing”, the inevitable coming of financing, this could be a key ingredient affecting investment decisions that one makes today.

I recommend reading “Discovering Costa Rica’s Pacific Southern Zone” for more help in investing here.