Relocation | Guys In The Zone: Costa Rica Real Estate

February 23, 2010

Houses In Our Future

Filed under: Construction, How to Sell, Land For Sale — Tags: buy land in costa rica, Construction, Costa Rica, development, prices, real estate, Relocation — Tigre @ 6:09 pm

What does the future hold for The Zone?

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

The First Wave

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

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

Gorgeous villa in San Buenaventura.

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

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

Price

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

Floorplan

Swimming pools sell property.

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

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

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

[1] Indicadores CFIA de la Construcción. Costa Rica, Enero-Abril 2009

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December 21, 2009

Costa Rica Culture – Say Hello

Filed under: Culture, Just for Fun — Tags: Culture, Personal, Relocation — Ben @ 9:54 am

Typical Latin American Greeting

When we first moved to Costa Rica in 1999, my son Neil was 11 years old and my daughter Hannah was 15. In those early days, after coming home from a visit to the town center, maybe to the grocery store or whatever, they would complain “Dad, why do they stare?”

The answer was and is “because they are Ticos.”

One of the major reasons that I chose to move to a foreign land with my family was that we, as a family, would learn another culture & language. Well, I’m happy to say that it worked. We learned a language and a culture, but lord knows it wasn’t all smooth sailing.

It really helps to keep in mind the objective: that of learning a new culture. That way when things are different, we can tell ourselves: “that’s why I came here.” The problem is that sometimes different equates to strange and uncomfortable.

The eye contact thing was something that, for me, took a little getting used to, and even more so for my kids. In time we all have come to appreciate it. In Costa Rica you always acknowledge the presence of the other person, whether it be driving along a dirt road and passing a guy walking along, or in the grocery store as you walk past the stocker.

I think that my gringo, privacy-loving heart, is a little afraid that if I engage with this person, they will take a bunch of my time, or need something from me. I think that it was somewhere right about the 200th greeting – the 200th greeting that happened for the simple love of the greeting, I began to accept it. Touch base, say hello, share a good feeling and move on with your day. (more…)

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July 23, 2009

Directing Your IRA To Costa Rica

Filed under: How to buy, Relocation, Taxes — Tags: buy land in costa rica, investment, IRA, property, real estate, Relocation, retirement, Self-Directed IRA — Tigre @ 3:16 pm

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.

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June 28, 2009

Why Did You Move to Costa Rica?

Filed under: Just for Fun, Relocation — Tags: Personal, prices, Relocation — Ben @ 3:25 pm

“The chance to have a second life in the same body. A life immersed in nature, and immersed in culture. This would be to get involved in what is here as opposed to what I had already lived”.

To share your story, scroll down to the bottom of this post.

After reading my article in a new magazine here in the zone, Raven’s flagship Montañas al Mar, an old friend approached me and took exception to one of my comments. He was able to quote the article – the part where I mention how early land buyers here in Costa Rica’s southern Pacific zone were able to convert $1.00 invested in land into $120.00 by selling that land.

My old friend, who is seated squarely in the middle of the “early investors” group, made the point to me that the so called “early investors”, hardly had “investing” in mind. This wasn’t what they were doing. For some reason, this sparked my question: “Why did you move here”? And hence his answer as noted above, which I find to be profoundly beautiful, and the wisdom of which caused me to pause, and it set off a chain link series of memories as to my own reasons for moving here, none of which had to do with investing.

In my conversation with Old Friend, he talked about the day when you would buy a large piece of land, partly because that was all that was available and because that was the life that you wanted. There certainly weren’t the conveniences here that there are now, but there was the serenity and quiet, and a chance to live “a second life in the same body”. Granted, the thought of parceling off a piece of piece of that land in the future to reduce, or fully compensate one’s initial investment was present, but was not the key motivator.

Working in real estate in Costa Rica, one tends to get the viewpoint of valuing the land we work with in terms of “asset appreciation” and “investment potential”. This is indeed what a certain percentage of our buyers are concerned with. However, just like some of the early investors, a number of our buyers now are life-stylers, those who are looking to live life in a way that differs from the way they’ve lived it up till now, and that have placed “asset appreciation” low on the list of criteria that they are looking for.

“Why did you move here” is a great mental exercise for us expats and migrators. I suppose that there will be some that answer the question with: “I came to invest in land and make a lot of money”, but I think that they’d be in a minority among those that live here.

The beauty of buying land in an area such as this is that you can perhaps optimize your dreams in the buying of that land. The land itself becomes the means by which you can live in this beautiful area of planet earth. There are so many ingenious ways that expats find to support themselves here: vacation rentals, B & B’s, spas and retreats are all in full bloom here for this very reason. One couple I know have cabinas, a highly rated restaurant, a decorative iron works shop and a petting zoo on their property, even though the property is a little off the beaten path. Its hard to know if it’s a money maker, but it clearly allows them to live happily in Costa Rica.

There seems to be an irresistible push to make Costa Rica just like any other desirable destination, with all the services and conveniences of a Florida or a southern California. There are a couple of factors here which may affect this “push” from coming through to full fruition. One is the topography.

Costa Rica is a geologically young country. Pressed up by colliding plates, the country was thrown up by erratic tectonic pressures in an anything but orderly manner. After living here for over 10 years I still have to carry a compass with me to establish “north” in a given location, so abstract is the lay of the land. Even if pure lucre were given free reign to define development in the zone, it would be limited by the radical nature of the topography.

And then there is the matter of consciousness. Costa Rica news headlines are rife with reports of catastrophes and subsequent damage control that rampant development has caused in the earlier developed areas of Costa Rica. We here in the southern zone are benefitting from the mistakes made elsewhere. There is a genuine interest on the part of foreigners and Ticos alike to preserve this gem-like portion of Costa Rica, a consciousness that transcends the turning of a buck.

Well, we’re hoping so.

So much of how we’re doing here as a species, living in the finite space of this planet, is defined by our use of land. Just in the last week I’ve enjoyed the conversation mentioned in this article, and others with developers, house builders and residents alike that are focused on “green” and “sustainability”, in their truest sense.

There is a construction company taking shape in Dominical that is no less than visionary in its approach to the building materials that will be used to construct human habitat. There is a company in Canada that is about to make solar homes with thatched roofing affordable to land buyers here in the zone. There are efforts on the part of developers to employ ecological easements to definitively restrict the further subdividing of their lots, into perpetuity – all good.

We are about to see a major change here in the zone. More people are going to find their way here with the paving of the bumpy road that links Quepos in the north to Dominical, the gateway to the zone. Development and progress are going to happen. It seems to be an irresistible force in human society. More, bigger, better.

So, why are we here?

Perhaps it’s the differences as compared to where we come from. Perhaps it’s the value of quieting the inner dialogue that ran so rampant in our minds “back home” – freedom from media saturation – a connecting with nature and the spiritual side of things – an opportunity to “get involved in what is here as opposed to what I had already lived”.

How we answer this question may define how things look around here in the coming years.

If you would like to send us your answer to this question, please fill feel free to cut loose with your creative thoughts.

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February 3, 2009

Relocation – Surviving the Transition Financially

Filed under: Construction, How to buy, Info & How To's, Land For Sale, Relocation — Tags: budget, buy land in costa rica, commercial, Construction, costa rica conservation, Relocation, State of the Market, strategies — Tigre @ 5:32 pm

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…)

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February 3, 2005

Health Care: A Great Reason to Move to Costa Rica

Filed under: Info & How To's, Relocation — Tags: Relocation — Ben @ 4:59 am

The Seattle Times: Nation & World: Study links half of bankruptcies to illness: “‘Unless you’re Bill Gates, you’re just one serious illness away from bankruptcy,’ said Dr. David Himmelstein, the study’s lead author and an associate professor of medicine.

I get asked by nearly everyone that I talk to in our office, ‘who is buying land in Costa Rica?’ Everytime that I am asked, I pause a minute and think over the last sales that we have made here and I consistently come up with the same list. Investors, people nearing retirement age, young bucks that have some money… somehow and want to buy land. But no matter what category they fall into, nearly all want to, at some point, live in Costa Rica. Granted, the place is nice, really nice. Its like living in a big garden, with extremely nice people all around… but under the hood ain’t too bad either.

The article that I have reference above details one of the several major factors behind why United States-ians, in particular, are looking to get the heck out: the cost of medical insurance. Now, I’m no great source for health insurance information in Costa Rica, but I can tell you that it is a whole lot less here than in the states. (for information regarding insurance and the ability to dialogue with others that live here, I use the CostaRicaLiving newsgroup at Yahoo.)

The significantly lower cost of living here is a big draw. United States-ians have enormous monthly overhead. Before you even buy anything, a family of 4 or 5 must make thousands of dollars a month. Even for those that are living well in the States, it is a constant pressure. I suspect that one of the reasons that we are doing so well here in Costa Rica real estate is when people visit here, and see all the expats living here, and they take a look around, they consider what that would be like. “Could we really get by on $2,000 a month?”

A lot depends on the “car” issue here (fodder for another post), but we can definitely live here for a whole lot less plata (money) than we could up there. Take a minute and read the enlightening article that is linked to above.

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December 31, 2003

Webguy’s Story

Filed under: Relocation, Stories — Tags: Personal, Relocation — Ben @ 3:34 pm

Moving to Costa Rica in 1999 with my wife and my 3 kids, one of whom was married and was accompanied by her husband, we set up shop in an area of the country where there were very few North Americans, or “Gringos” as we are called here. We bought in San Isidro de Perez Zeledon after living here for about a year. We had felt that we should purchase something down on the coast, but were taken with a little finca, or farm, in San Isidro, and so with the acquisition went our funds for buying on the coast. How are we about the decision so many years later? Well… As real estate investments go, we have done well, but there is always that feeling of “would’a should’a could’a”. I find myself consoling a lot of people that visited here some years ago. They say “would’a, should’a, could’a,”, and I say (having lived through this myself), “if you had it to do all over again, you would make the same decisions. 10 years ago, Dominical was pure jungle, there was not a paved road in sight, electricity was episodic, phones non-existent, mud was ever-present”. I say ‘power to those guys’ that took what I feel was a huge risk.
We are in the process of looking into a coastal investment, but the huge profit deals are harder to find now than they were when we arrived. We are not complaining too much. We are happy here, have learned the language, and the culture.
I have been motivated to start this blog since I am a web developer. This has given me a unique perspective on the market in that, in the last year and a half I have seen a veritable explosion of real estate activity. Between my search engine optimization services, and my Dominical web site Dominical.Biz the topic of real estate in Costa Rica has come to occupy a rather sizeable place in my family’s life.

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