Guys In The Zone: Costa Rica Real Estate

I just received some questions from a connection that I made in the Social Media site LinkedIn. I am reprinting these here due to the increase in these types of questions lately. I’m sure that these questions, and their answers, will be of help to a number of our readers.

One of many developments above Dominical.

Location In The Zone:

1. We don’t want to feel like we’re living in the middle of nowhere, but we’re not looking to live in a large city like Seattle!  What is The Zone like?

As a starting point, you picked a good one. The Zone, as we like to call it down here in the southern pacific zone of Costa Rica, is definitely a bit removed from things.  The developments are typically more spread out than North American developments, so in most cases your neighbor will not be right on top of you.  Access to The Zone is possible via two regional airports (both approx.40 minutes from Uvita) and the Costanera Highway.  Thanks to the new San Jose-Caldera Highway, the trip to San Jose is now 3 hours.  That said, it is difficult to say if this area would appeal to you with this point, and I would recommend a visit before making that determination.

You can buy or build your dream home.

Buy or Build:

2. We are also trying to decide between building a home or buying existing… Do you have any suggestions?

This is one of the more common questions that we deal with. Here is an interesting data point: the majority of people that walk into our office want to buy an existing house. Yet, the majority of people that buy from us buy raw land & build.  Why is that?  Here in The Zone, we have been outside the main flow of tourism.  This was due to the bumpy, dirt road between Dominical and Quepos.  It is now paved, and we are more in the flow.  Historically, those visitors and relocators who found their way down here were a bit… well, let’s call it eccentric… might be the way to put it. These are truly individualistic individuals who built their house as an expression of that individuality. These houses are not easy to sell. Now, I should clarify that this building approach is ancient history.  There are very nice homes available in The Zone; however, there just aren’t that many of them.  The inventory continues to evolve, and home sales are up.  That said, I suspect that it’ll be a while before we hit the 50/50 mark of house/lots sales.  Our recommendation is to take your time and look at everything.  After you go through this process, you can compare those houses with what it would cost to buy & build on a similar piece of land, keeping in mind raw land is plentiful.  You might find that $450,000 house can be built for $350,000, and you’ll have it the way you want it.  Conversely, you might find a great house for less than what it would cost to buy and build.  In today’s market place, and with the economic crisis, you never know what you might find.  Building in Costa Rica can be a daunting and frustrating task.  For this reason alone, some people simply refuse to go through the process.  This question really is best served in a face to face consultation.

The ARCR is one of many sites with good info.

Groups and Associations:

3. I have heard to be very wary of some places being over priced for foreigners who don’t know any better. Any good groups or services to retain?

Hmmmm, well I am inclined to think that you’ve found all you need right here with me.  A not so self-serving answer would be, “yes.”  There are actually PLENTY of options for information, so many in fact that I wonder at how one can really know what the straight story is.  Residency, taxes, zoning, business and so on, in a foreign land, requires that one be on his toes. I like the Costa Rica Living news group at Yahoo groups. Also, the Association of Residents of Costa Rica (ARCR) have been a helpful residency and insurance resource for some of my clients.  Ultimately, I think that what you are doing is a good idea.  Talk with individuals who have done what you want to do.  When I get new clients in the Dominical and Uvita area, I set up lunches with my previous clients who have moved here, built, learned Spanish etc.  It seems that everyone is more than happy to share their experience, and from these tidbits you’ll get a very good idea of what to do and, often more importantly, not do.

Starting A Company:

4. Did you find it difficult to start a company there? I will be looking to work, but understand I will need to start my own business to get paid. At least until we were able to become residents.

Starting a business, or buying an income generating property, or both, used to be oh-so-easy in Costa Rica.  Business owners would only complete the necessary steps to get a business license if someone from the Municipality came and bugged them about it.  And, income generated by businesses or rental properties was reported even less.  In today’s Costa Rica it has become a bit more difficult, or maybe I should say involved, to operate without them.  For better or worse, Costa Rica is growing up and finding ways to enforce laws that they have had on the books for years, in some cases, decades.  The simple fact is, to do any kind of work in Costa Rica, you need to be a resident.  Otherwise, you run the risk of being deported.  We know people who can help with residency and setting up a business, among other services.

I hope these thoughts help to answer your questions, although it is my experience that they usually bring up new questions.  Safe to say, The Guys here to help.

Episode 12 features a candid look at community in the Southern Pacific Zone of Costa Rica. If you’re considering relocating, buying a house, raw land, or a commercial business in the greater Dominical or Uvita areas, we encourage you to watch. And, please feel free to share your comments or questions. Gracias.

Talk Show – Episode12 by GuysInTheZone

Seller Financing Open The Door in Costa Rica

The Downturn… (cue ominous music)

It would be easy to label the decline of the Costa Rica real estate market (since the peak in 2007) in a negative light.  In truth, there is no such thing as “negative light” only the opportunity for change, and if our market has seen anything over the past three years, it is change.  The shift from bank loans to seller financing is one of the primary changes that has (pardon the pun) opened the door to prospective home buyers, as well as, land and commercial buyers.

Before defining the effects, basic models, and legal structure of seller financing, let me back up just a bit to clarify why we now find it present in about half of the Costa Rica real estate deals we facilitate.  Like most lending institutions around the world, Costa Rican banks are better described as “institutional holders”.  Banks are not lending for a few reasons— falling real property values, the recession, and they are not lending to each other (e.g., no credit to leverage).  In Costa Rica, the debt-to-income ratio required to obtain a loan is as ridiculous as the double-digit interest rates being charged (often twice the rates in the United States).  The banks’ parsimonious response has opened the door to seller financing, and Costa Rican property owners have embraced the new paradigm.

Sellers Get Creative

“What do I need to do to sell my property?”  We received this common question too many times to count over the past few years.  Our answer typically included these answers— Read the full story

Rod being attentive at the Camara de Bienes Raices course in San Jose Costa Rica.

The Guys just got themselves certified!  Rod & I are now card carrying Costa Rica real estate agents.  Imagine that.

I know – you’re saying: “I didn’t know that there was such a thing”. Well, in fact there isn’t, yet, but there is about to be, and so we have joined a number of our peers in anticipating the coming change to the U. S. (and elsewhere) model of licensing for real estate agents.

The organization is called CBR or “Camara de Bienes Raices” (Chamber of Real Estate).  Perhaps you’ve seen the CBR logo around on various websites. You’ll be seeing it on ours as well now.  It is a 4 day course of 8 hours a day.  We did it, enjoyed it (for the most part – butts are a little sore.), met & networked with lots of people and now feel just that much more entrenched with our chosen industry in Costa Rica.

CBR has proposed a law that they feel will become adopted this year of required licensing of Costa Rica real estate agents.  Our position is that this will be Read the full story

There is a new law that has now quietly come into force in Costa Rica.  It is being called the “Luxury House Tax” or a facsimile thereof.

I now have it on good authority that there is mass confusion about this law by the few that have even heard of it. I am one amongst the throng of the confused, but I will here report what I know and will continue to post as I get new information.

There appear to be many that have not heard of the law, but whether a person doesn’t know about the law or simply chooses to do nothing about the law, word is that there will be some rather harsh consequences.  How ‘bout them apples?

This is a new tax and it is only for constructed properties – houses, not for raw land.   Houses built on both titled and maritime zone property are affected.

House owners must declare the value of their house, and then pay the tax between January 1 and January 15^th.  The law went into affect October 1, 2009 so the amount in this first time slot will be from October 1, 2009 to January 1, 2010.

If the value of your house is below $170,000 (give or take – this amount will vary depending on the exchange rate), you are exempt.

I have included a table of the current tax-to-value table. At the writing the colon is hovering right around 580 per dollar but you can take the figures below and use the conversion thing by clicking here.

There is an example pdf form on the Costa Rica government’s web site. If you’d like to see it for who knows what reason: click here. It’ll open in a new window and load a pdf document that is an example of what the final version will look like shortly.

Yesterday started off as a typical, glorious Costa Rica morning. Rod and I got an early start with San Buenas Golf Resort Project Manager Larry Breau, walking the golf course project. This involved a drive from our Uvita Costa Rica office towards the south about 20 minutes. There was a slight delay in travelling south due to to ICE (pronounced ee-say), which is the monopolistic agency here in Costa Rica in charge of telecommunications. They are running a new grid of lines to accommodate the rapid growth in the zone. No problem, just a 5 minute wait.

We had a full morning of rubber boots, machetes, broad rimmed hats and a liter of water reviewing the project.

In driving back to the office we encountered a line of cars backed up. Thinking it was ICE we sat patiently waiting. A number of people had turned off their cars and were milling about in the road, talking, some with exaggerated arm gestures. One gal walked by and upon seeing the lighter shade of our skin (assuming that meant English is spoken) she approached us and asked what the hold up was. We very authoritatively informed her what was going on with ICE. Turns out we were dead wrong. This was a road block caused by angry protesters out in front of Crystal Ballena, a local hotel and restaurant where a high level meeting was in its second day.

Costa Rica government officials met with developers and the local Osa government departments to discuss some of the project closures that were the result of an inspection sweep Read the full story