Guys In The Zone: Costa Rica Real Estate

In this episode, we start with a Q&A session and share a few tips for those retiring to the southern Pacific zone of Costa Rica. We also share specific ideas about property features that may not be on a buyer’s radar. Whether you are ready to relocate and retire or, like many of our Canadian clients, simply want a warm and sunny place to escape to when the weather turns cold, this Talk Show provides basic information and (hopefully) stimulates your desire to visit. Pura vida.

Regional to International, the Osa Airport Dilemma

A week ago, I was reading the Tico Times and the headline “Liberia Airport Renovation Nearly Finished” jumped out at me. It’s only been nine years since that airport opened, and now it’s getting $41 million dollars worth of renovations?? I had to figure out why, if only because it might offer a flash forward to what we can expect when (emphasis on “when”) the International Airport opens up in the The Zone, also known as, the southern Pacific zone of Costa Rica.

Long Lines

Whether it’s checking into a restaurant, hotel, or airport… people do not like to wait, especially when the line stretches out the door. Long lines and airports are synonymous, but the leaders at Liberia International (and the Guanacaste business owners) have figured out that a bad traveling experience doesn’t inspire repeat customers. The Liberia airport is scheduled to re-open any day now, and just in time for the tourist season.

The Profitable Impact

Did you know that 225,224 passengers arrived at Liberia’s airport last year*? That’s an average of 18,768 people per month and just over 625 per day. In January, foreign visitors in Guanacaste, increased by more than 28% over January of 2010. With the upgraded facilities (think mini-Juan Santamaria), services, and new carriers (JetBlue, Air Berlin), they are clearly anticipating an increase in arrivals in the near future.

The Liberia airport has done wonders for the development (read- boom) of Guanacaste. Not only does the airport employ hundreds of people from the community, it also stimulated new business opportunities in the immediate area, including— hotels, car rental companies, and commercial centers.

Conversely, there can be, and usually is, a relative downside to rapid development. Have you been to Tamarindo lately? I went two years ago, and the sleepy beach town I visited in 2002 was almost unrecognizable. The main strip looked like it had a SoCal facelift, the renown beach break was packed with surfers, and I found myself longing to be back in quiet and verdant Zone.

How It Relates To The Zone

The second most popular question we get is “When is the International Airport in Palmar going to open?” My answer: “I have no idea.” It’s not that I don’t read up on the subject, it’s just difficult to believe the words of Alberto Cole or the Minister of Tourism.

As I mentioned in an article a year ago, the construction of this airport goes hand in hand with the construction of new hotels. (At this point the area doesn’t have enough beds to accommodate an extra 400+ people/day in The Zone… especially in the high season.) Adding small to mid-sized boutique hotels isn’t an effective and complimentary plan. For the airport to be viable, large 100+ room resorts will need to be built and one need look no further than Guanacaste and its growing pains to be concerned.

To date, Ben and I have not heard anything concrete regarding new resorts in the area. Taking that one step further, there are only a handful of residents who want this airport to be built. Simply put, the majority of people who most desire this new International Airport… are people who don’t live here.

Tiger Heron in the Osa Peninsula

The Ecological Impact

Some of our reader saw the recent article in the Environment section of the The New York Times. The article outlines the potential ecological impact on the Osa Peninsula, an area that boasts 3% of the World’s known biodiversity. The author writes, “Construction is planned in two phases from 2012 to 2016… (initially) designed for 50 passenger planes.” IF (notice the big IF) that timeline is accurate, there will be a global blast of articles and special features, then… an influx of investors. Real estate and development markets will surely be stimulated, and these investors and relocators will have a large raw land inventory to choose from when they do arrive.

As real estate experts, Ben and I are standing in the path of progress and we are experienced “tour guides” in Costa Rica real estate. However, like the majority of people who move to The Zone, we also love our small town community and the postcard paradise that surrounds us.

* Costa Rican Tourism Institute

I was excited to find the Poll functionality on LinkedIn a couple of weeks ago. The question I came up with “What is the top reason to buy land in Costa Rica’s southern Pacific zone?” seemed like a good jumping off point for this regular feature on the blog. Although the sample size was small, the responses were revealing.

Low Property Tax
Costa Rica’s property tax rate is .25% on registered value. That means if you buy a $400,000 house in Uvita, you will pay $1,000 in property tax, plus another $1,000 (or .25%) for the new Luxury Tax passed in 2010. Your total annual property tax bill will be $2,000 which is a third of what you will pay in Houston, Texas.

Investment Value
If we can agree that people want safe, beautiful, and affordable environments to live in, then the southern Pacific zone of Costa Rica has to make that list. Clearly, “affordable” is a relative term. Some clients have $50,000 for a house, some have $1.5 million; however, this market has dipped according to the simple dynamics of Supply and Demand. An ocean view property (only 8 minutes from Uvita) listed for $30,000 was unheard of five years ago, yet now we have it (Sunny Josecito). In fact, we have access to just about every type of investment in every property category.

Growth Potential
I can’t tell you how many times per week people ask me when the International Airport will be completed in Palmar. Given the fact that construction has not started, it is a difficult question to answer. Eventually, it will be constructed (for better or for worse), and the area and property values will grow as a result. I state this with a fair degree of conviction because I’ve seen what paving the Costanera (Coastal Highway) and re-paving the road between San Isidro and Dominical has done for the area. I believe if it weren’t for those two improvements, the downturn would have hit our area much harder.

Walking the dog on your favorite beach.

Weather and Beaches
Today (Sept. 29th, 2011) marks the middle of the rainy season, yet we had sun with its accompanying ocean breeze all day long. The evenings are typically cool, especially if your house is strategically located facing the Pacific Ocean and its beaches. Speaking of beaches, The Zone has something for every sun lover. You want to surf or watch surfing, go to Dominical. You want a good dog-walking beach, go to Playa Hermosa. You want to do some cave exploring, go to Playa Ventanas. I’ve spent more time on the ocean the past 4 years than in my entire life in California, because the water is warm, dare I say perfect, year round.

Relaxing Lifestyle
According to our voters, this is the top reason to buy land in Costa Rica. You don’t realize how stressful life is in the progressive Western world, until you move here. Both Ben and I came from Santa Cruz and Aspen, gorgeous towns in California and Colorado, respectively. We lived the typical cycle of working hard and playing hard, and then right back to working hard again. We were surrounded by friends, family and neighbors who were stressed by this same cycle and material pressures. It all added up to a simple yet consistent desire for change. Without question, Costa Rica presents an opportunity to slooooow down and simplify. Sometimes I surf in the morning, sometimes I walk a big farm. There’s no rushing to Starbucks on the way to pick up the dry cleaning. Here, we sit down and enjoy our coffee. We wear shorts and flip flops. If anything, life in The Zone is indeed relaxing.

So, yes there are many reasons to buy land in Costa Rica. Whether as an investment, as a relocation destination, or simply as a place to visit and unplug for a couple of weeks in the winter… The Zone will not disappoint.

“Houses that produce rental income” has become an increasingly popular Costa Rica real estate strategy in The Zone. In this video, The Guys explain WHY this investment strategy is smart and how it can be achieved in a fertile rental market.  We moved out of the office and shot the video “on location” at such a property above Dominical, Costa Rica.

August begins a new Guys In The Zone tradition, the poll question. As some of you know, we have been increasingly active with the social marketing and networking lately. LinkedIn, in particular, has inspired many new connections and ideas. The Poll will be a regular addition to our Talk Show and articles, and who knows? It may even inspire youto submit your own poll question about Costa Rica real estate and life in the Southern Pacific Zone. If you have a LinkedIn account, thanks for voting!

“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. Read the full story

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, Read the full story

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? Read the full story

Have we hit bottom?

In the movie “Back to the Future” we saw an example of how beneficial it would be if we could tell the future. The character Biff Tannen gets his hands on printed results from some race track and other sporting events, before they happened, and went on to achieve phenomenal wealth.

In real world economics, the trick seems to be the ability to identify trends and accurately guess what is going to happen prior to it happening.  Here in Costa Rica, the real estate market is no different.  Discussion and speculation about the future run rampant.  Hints & clues are analyzed in a constant effort to make wise buying (and selling) decisions.

It caught my attention this morning when I received the following in an e-mail from an agent in one of the local real estate agencies. He was writing to update us on a client of ours that we had asked him to help with. Without trying, our associate provides a clue as to what the current state of the market is, and perhaps, where it is going.

*Hello [Guys],

Thank you for giving me the opportunity to assist you with the property interests of the Schmegerworgs (names changed to protect the innocent).

I feel it is of the utmost importance to give your potential buyers the Tico Times of today, Friday, Sept. 10 newspaper that explains in detail the past and current real estate market place that will back up exactly what I mentioned to them about the market picking up right now and that 2009 was a slower year (click here to read the article online). I feel it is important that the wife understands if we show them a property at a price point that makes sense and feels good in their heart, they need to move forward with a purchase as good deals are selling and we cannot always replace a fire sale or “perfect property” that one lets go by.

I truly feel our BOTTOM market has passed us and current activity with all us of can only prove that.

Whether we sell them something together or if you sell direct, that is all fine with me as I feel there is much business for all of us survivors right now.

Please take care and have a great weekend.

(Its noteworthy that this e-mail is from a “competitor”.  One of the really promising aspects of the real estate industry here in Costa Rica’s southern zone is the amount of cooperation between all the agencies.)

The ability to identify “bottom” is the hallmark of a successful investor.  It is extremely difficult to do, which explains why so many of us speak in terms of “would’a, should’a ,could’a” when talking about our investment history.

So how can we identify the bottom in the market now?

Indicators:

One of the more prominent factors are that there are less Fire Sale properties on the market now than there were before.  All the reports that we are getting from the other real estate agencies in the area are that they are busy.  This is not just under $100,000 ocean view lots.  It seems that the $300,000 home is a hot item now that won’t last long on the market.  There are also a number of larger, more removed parcels, selling.   Some of these have topped the $1,000,000 (USD) mark.  There is a growing interest in “off the grid” and “community-style” living.

We had one of our favorite developers approach us some months ago and indicate that the recession was finally affecting him, and that he really needed to sell some property.  Long story short, since that time he has sold a house and two lots, making him well.

All of the above activity was stimulated by the market ebb & flow.  The market was and is down.  The inherent quality of the properties that are available in Costa Rica’s southern pacific zone is compelling.  The low prices on these properties has caused enough action here to cause us to wonder what all this talk is about a recession – (well, not really, but almost :0)  Savvy buyers are here snapping up the deals.

No one knows what the future holds.  Things are changing on the global scale, some of which is unprecedented, causing insecurity.  We really have no idea what to expect in the future.  There is the unmanageable deficit in the U. S. There is China.  There is talk about the “double dip” recession.  There is global warming and other environmental concerns.

So have we seen the bottom?

Hard to say.  However, if you were a fly on the wall of the Guys In The Zone office (or any other real estate office in the zone), you’d hear conversations that would make it seem so.  We’ve had a number of folks come through during the down time that have found what they were looking for, but then felt that they had time to decide, to “think about it”. Or perhaps they think that prices will even come down a bit more.  Our feeling is that the time to buy has been here now for some time, and may well be passing.

What we do know is that we haven’t seen prices this low and on such a great selection for some years.  So, whether “bottom” is behind us, or lies yet ahead, we’re pretty confident that now is a decent time to buy a piece of property in Costa Rica.

Shameless Plug: Click here for all Guys In The Zone real estate listings

* Keith Schenkel of Costa Rica Real Estate Services

Half of my family is from Canada, eh.  My mother grew up in Newfoundland until the age of 13 when my grandfather found work in California.  The extended family that stayed behind, some later moving to Ottawa, would frequently visit us in the San Francisco Bay Area, especially during the cold, winter months.

A few years ago, when I moved down to Costa Rica full time, I realized there are a lot of Canadians visiting (102,471 in 2009*) and living the area.  One of the main reason Canadians (virtually all nationalities for that matter) visit, buy land, and in some cases, relocate to Costa Rica is the weather.  As one client put it, “Shoveling snow sucks.”  I have only experienced it a couple of times in Lake Tahoe, California, and I’d have to agree.

Canadians in Costa Rica

Shorts, No Shoes
The Southern Pacific Zone (The Zone) is the tropics.  Those living near the beach are rarely (if ever) cold here, and most people walk around in shorts 365 days out of the year.  For those who “melt in the heat”, The Zone’s unique geography offers many cooler locations up in the mountains, most offering spectacular views, waterfalls, and close proximity to the beaches and/or San Isidro, one of the fastest growing cities in Central America.  It rains 6 months out of the year, but even in September most mornings begin with blue skies and sunshine.

Active Adult Communities
The landscape and its wildlife are spectacular.  In fact, I’ve seen it written that the Corcovado National Park on the Osa Peninsula is “home to more plant & animal species than all of North America combined.”  Add in the many outdoor activities available in the area— world class sport fishing, whale watching, bird watching, hiking, golf, tennis, and surfing to name a few — and retirement in Costa Rica is actually when many expat residents really start living.  In fact, I just left two clients who were headed to a waterfall, then to the Whale’s Tail in Uvita for a low-tide beach walk and snorkeling session.

Another reason Canadians love Costa Rica is the cultural adventure.  It starts with the ticos.  On the whole, the polite locals are family and community-focused, and even the toughest-looking hombre will break into a smile if you smile.  Yes, there are a few cultural nuances to adapt to—“yes” doesn’t always mean “yes”, “tico time” means being late, strange driving habits— but ultimately these are all opportunities to take a deep breath and grow a little.  The Zone has a safe, laid back feel to it… add a hammock and a good book into the mix, and it is relaxation-defined.

A “Lot” For A Little
Foreign investors continue to visit and invest in The Zone.  Add in the fact that annual property tax in Costa Rica is .25% and there is no Capital Gains Tax, and the investment picture is even more appealing.  Canadian citizens who claim non-resident status and have residency in Costa Rica are not double taxed by the Canadian government on their Costa Rica income.  If you’ve always wanted to make Costa Rica your home, please consult your tax attorney for more details.  But, in summary, to be a non-resident Canadian you must—

1. live in Canada for less than 183 days in the tax year
2. not have any residential ties (e.g., cars, houses, a spouse or dependents) in Canada.

We see a lot of people visiting, buying and relocating to The Zone.  There is so much room for growth here, success only requires imagination, a little research, and some good connections.

Beautiful weather, abundant wildlife, friendly people, and good investment opportunities… no wonder so many Canadians are buying real estate in the Southern Pacific Zone of Costa Rica!

*http://www.visitcostarica.com/ict/paginas/modEst/estadisticas.asp?idIdioma=1