Mar 122012
 

In 1838, Costa Ricans obtained “the right to own private property” or as it’s listed in their Constitution under Artículo 21, Derecho a la Propiedad Privada. One of the things I enjoy about being the parent of a 13-year old is discovering new things. It’s like being in the 7th grade all over again except now I find subjects like history and government much more compelling. I asked my son, “I wonder if Juan Mora Fernandez (Costa Rica’s 1st President) knew how much his land reform act (think-private property) would affect the lives of Costa Ricans and eventually dudes from Costa Rica?” His response was succinct, “Probably not. California wasn’t even a state yet.” He’s a smart kid.

REPUBLICA DE COSTA RICA

Shield of Costa Rica

Did you know that Costa Rica has been a democratic country since 1889? It’s true, and it is one of 22 countries to remain democratic throughout its inception. Oscar Arias Sanchez, the former president of Costa Rica and Nobel Prize winner in 1987, was one of the most influential and progressive leaders in Latin America over the past 20+ years. His retirement paved the way for Laura Chinchilla, Costa Rica’s first female president. By this point in the article, you’re probably wondering, “What does that preamble have to do with the current state of Costa Rica real estate?” Well, the answer is not much, but… it does relate to the quality of life in Costa Rica.

Last year, the Costa Rican government imposed Article 131, also known as, The (Ridiculous) Traffic Revenue Bill. Why “ridiculous,” you ask? Here are a couple of examples of how basic fines increased to an absurd degree—
• Speeding tickets went from 5,000 ($10) colones to 275,000 colones ($550).
• Driving without your seat belt fastened went from 15,000 colones ($30) to 237,000 colones ($474).
• Driving with an expired RTV (technical revision) increase from 10,000 colones to 205,000 colones ($410).

“CHiPs” of Costa Rica

I am personally familiar with the last one, because I had to pay that fine a couple of months ago when I misunderstood that the “10” on the sticker in the corner of my windshield meant 2010 not the month of October. It was an honest mistake that, and thanks to the repeal of Article 131 it only cost me $20.

Clearly, the dramatic increases were a money-grab by the government, and clearly the Costa Rican people were not having it. The flood of appeals from motorists locked up the court system.  Shortly thereafter, the Sala IV Constitutional Court declared Article 131 “unconstitutional and disproportionate” and made the government agencies reduce the fines to their original amounts.

Although Ben and I are focused on building our real estate business in the southern zone of Costa Rica, as residents, we also know that life here is more than great real estate deals in Dominical and ocean view property in Uvita. In fact, I doubt we would even be here if this country didn’t have a functioning democracy. So, now that justice has been served… back to the pura vida.

Nov 242011
 
Cars in Costa Rica
It is a well-known fact that the import duties, taxes, stamps etc… for bringing a car into Costa Rica are exorbitant. They run somewhere between 50% & 70% depending on how new the car is. They tax newer cars less than older cars, hoping that this will improve the quality of cars in Costa Rica.

When we foreigners first hear about the amazingly high tax rate on cars, we are shocked and wonder at how can that be? This is lunacy! There must be some way around it.

Cars in Costa Rica
First off: there is no way around it, and as for the lunacy part, perhaps.  But there is a rather twisted sort of logic that I’ll go into later that may help to explain this.

What kind of car to own?

In 1999, when I first moved to Costa Rica, the world was a very different place. Not many Ticos had cars and those that did were driving cars that were considered classics by Gringo standards.  I was a bit surprised to see a number of Datsuns on the road. Remember those?

I discovered that Costa Rica is extremely hard on cars.  So, whatever car you see a lot of here, that car is likely a very good, very well-built car. The hot tickets were the late ‘70s Toyota Land Cruisers and Land Rover Defenders. They were all over the place – and diesel no less!  These cars in the States go for a pretty penny.  Here, they are not so much fashionable, as reliable and affordable.

My first car in Costa Rica was a 1978 Diesel Toyota Land Cruiser. Every grown up boy’s dream.  I LOVED it.  My kids didn’t like it due to the rough ride and the sideways facing rear seats.   So we ended up getting rid of it and getting an early ‘90s Isuzu Trooper, another of the immortal cars at the time.

So, back then, at the beginning of my Costa Rica saga, the amazing cars were:

  1. Toyota Land Cruisers old & new
  2. Land Rover Defender (old)
  3. Toyota 4Runners
  4. Isuzu Trooper
  5. Mitsubishi Montero
  6. Suzuki Samurai
  7. Niva
Niva Russian made car.

Niva Russian made 4 wheel drive car

The Niva was an interesting car. It is from Russia and was built like a little coupe, but it was/is 4 wheel drive. I had some Tico friends that had one and they loved it.  I looked it up on the Internet and saw that there was some serious fever around this little car. There were clubs and some very souped up examples of the little vehicle around the country.

Now

I drive a 1998 Toyota 4Runner and I love it.  I am VERY hard on it, and it just purrs right along. This body style and 3.0 turbo diesel motor are a genuine classic here in Costa Rica, and you see lots of these cars around. Toyota continued this particular model until 2002. So, if I were to upgrade my Toyota, it would be for a 2002, but the problem is, I am quite happy with it the one I have now. I spent $16,000 on it 3 years ago. I am told that it would fetch $16,000 now.  I have a hard time believing that, but a quick check of what they are getting for them at crautos.com confirms that it has held its value very well.

I’m also a fan of the Suzuki Gran Vitara.  I don’t know if this car exists in the States, but here it is a long lived car, and so its presence is felt on the roads of Costa Rica. Concerns are: gas only, a little low on ground clearance.

The Mitsubishi Montero is a great SUV. There are 2 models, a Sport model and a larger, more deluxe model.  Both are good, but my preference still leans towards the 4Runner, mainly due to the larger 3.0 motor.  Although, you can get a 3.5 in the larger Mistubishi, but then you are in another price bracket.  Good clearance, stout, diesel.

Other popular makes & models are: Toyota Prado – very popular, most Nissan SUVs, Daihatsu BeGo is a small 4 wheel drive that is immensely popular.  Jury is still out on durability. I know that the back door starts to rattle almost immediately, but with their short wheel base, they seem to go anywhere. The smaller 4 wheel drive cars feel every bump in the road.

Samurai’s and Sidekicks hold a strong place in the mix.

You still see some of the older Landcruisers and Defenders around, but they are getting so old, and so beat up here in the Costa Rican life style that they are now starting to suffer from material fatigue. They seem to want to keep running, but even the raw material of the chassis is getting tired out. Still, there are some good examples around and you can have a lot of fun fixing one of these up.  I know of one right now for sale by my neighbor for $4,000, which I think is a decent example of their street value. Its in good condition and runs well.

Cars are the largest single expense in the Costa Rican lifestyle. Gas is running over $5.00 per gallon, and those taxes make just the buying of them painful, if not prohibitive.

Ridiculous Taxes Justified

So how is it that the high tax isn’t absolute lunacy?  The government of Costa Rica is saddled by an interesting challenge.  The land in the country has just recently, say in the last 15 years, started to have a value.  Up until then, all Ticos had land, land they didn’t have to pay for. For the most part, it was free!

Now people from all around the world are wanting some land in Costa Rica, so obviously the values on Costa Rica real estate have gone up. However, the government does not have the ability to raise the taxes on the land since this would impact a good sized majority of land owners in Costa Rica – subsistence farmers. So, I think without saying as much, and perhaps without even consciously recognizing that it’s what they do, they set out to tax the rich, and leave the poor alone.  This is done by high vehicle taxes, with exceptions being extended to common types of farm vehicles.

The government is now starting to look at other ways to tax the rich.  They are working on tax maps that will assign a tax value particular to certain areas ie. coastal areas would be taxed higher than inland farm territories and so on.

If you’d like to post your thoughts on cars in Costa Rica, please feel free to do so.

Oct 032011
 

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.

Walk-Dog-Beach

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.

Jun 082011
 

“Four percent of the sale price on top of your commission?!” exclaimed our client, a long time resident in The Zone. (In keeping with an old Guys’ tradition, I’ll refer to him as Mr. Zellbren throughout this article.) Ben and I first explained that we are currently dealing with a severely down market (approximately 50% off the peak value of three years ago) and an excellent time to wait for the market to rebound. Mr. Zellbren wasn’t interested in waiting, so we continued to explain the standard closing costs of a Costa Rica real estate deal. Some of the data he was familiar with; some of the finer points had to be clarified.

Traditional Closing Costs

Closing costs, when you add up the transfer tax, stamps, and legal fees, usually equate to approximately 4% of the sale price. Mr. Zellbren told us he would accept a $550,000 offer for his house equaling $22,000 in closing costs. In 99% of the deals we are part of, Buyers and Sellers split closing costs 50-50. It’s what we do here in Costa Rica. Additional costs—re-surveys, title insurance, new corporations—are typically paid by the Buyer.

Interestingly, there are a variety of stamps required to transfer a property in Costa Rica. They are– the Legal Bar Association Stamp (Timbre del Colegio de Abogados), the Municipal Stamp (Timbre Municipal), the Fiscal Stamp (Especie Fiscal), the National Archives Stamp (Timbe del Archivo Nacional) and the Agriculture Stamp (Timbre Agrario). Like everything else, your lawyer will take care of the licking and sticking of these stamps, which equate to roughly .05% of the sale price.

Legal fees, also known as notary fees here in Costa Rica, are calculated at 1.5% of the sale price. This is what is paid to the lawyer/notary for setting up the Sales and Purchase Agreement, as well as, researching and filing all of the necessary documents in the sale. These standard legal fees do not include any additional legal work (e.g., a new corporations, establishing an easement, etc.). One last point regarding lawyers that I would like to add is… you often get what you pay for. Continue reading »

Mar 052011
 
Who needs a pool when you have a river?

It’s one of the most popular questions we, the Guys In The Zone, field— “What’s been selling? We get this question from both buyers and sellers. Generally speaking, the answer is— great deals.

PRICE

Price is the #1 determining factor for a great deal, but there is another factor that is equally important— the living experience. Ben, my business partner in Costa Rica real estate, phrases it this way, “do any unique features of the property significantly affect the quality of the living experience?”

Who needs a pool when you have a river?

This gorgeous natural swimming hole sits below one of the nicer homes in Uvita.

There are very few remaining places on the planet where things are (1) inexpensive and (2) incredible.  During the boom years of 2004-2008, Costa Rica real estate was inexpensive and incredible.  Large farms were purchased $1.00/meter squared and nice ocean view lots were under $100,000.

Three years after the peak of 2008, property values across the border came down between 40-50%.  Many houses are now selling for replacement cost or less.  Once again, we have large farms for $1.00/m2.  The obvious reason was the global economic downturn and continual 10:1 ratio of sellers to buyers.  Basic economics tells us that price, or in this case property value, had to come down.  Our listing database is now filled with good properties in every category—houses, land, large parcels and commercial.

THE LIVING EXPERIENCE

For most people, buying real estate in Costa Rica isn’t just about getting a great deal.  You can move to Orlando, Florida if that is your only goal.  It is about the unique features that significantly enrich the living experience.  When Ben and I get a new land or house listing that has an ocean view and a trail to a nearby river… Continue reading »

Sep 072010
 

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

Feb 062010
 

Costa Rica Real Estate Listings

I just received an e-mail from a reader that shamed me into sitting right down and writing.

I have read your face book page and articles on the tax issue there.

I had been planning to take a trip in March in the hopes to travel to Domincal and Uvita nd look at some land that over looks (has view of) the playa. But with all this discussion of election and no tourism and the tricky tax factor it sort of puts a damper on it.  Was this a major blow to the real estate and tourism market, and did it blow you out?

I’m sorry but I’m not aware of the negative effect that the election could have on a land purchase in Costa Rica so I’m not able to address that.

As for tourism – well now that’s an interesting topic.

Tourism has been as hot here over this last holiday season as I have ever seen.  With the new road from Dominical to Quepos, I think that we’re really in for it here.  I understand that the status of tourism is currently anybody’s guess.  Around here it feels like we are in a growth mode. Granted, I haven’t read a lot of media recently and I don’t have a TV, so as a news source I’m limited to what I see and feel.

Over the holidays Uvita was caught by surprise.  The grocery shelves were bare and we spoke with people everyday looking for a place to stay.  I think that everyone found a bed and it felt like one big party around here. I think that it is notable that the beer supply seemed to hold despite what appeared to be a gargantuan demand.

Although the crowds have left, the festive feel continues with a good strong tourist presence.  So, without reading an article to the contrary, I’d say that tourism is alive and well in Uvita and Dominical Costa Rica, and that the prospects for the future are bright, especially with the two new segments of road making the drive from San Jose to Dominical a 2 hour and 40 minute affair now, instead of the former 4+ hours and some of that on teeth loosening dirt roads.

I have not seen an article written from your blog or website in February on your website so I want to know if you are still in business down there?

Well, I thank you for getting me off of my butt to get this article posted.  I sure don’t want to give the impression that we’re out of business.  Our lack of posting is a testament to our being busy.  Rod and I have been doing quite a bit of real estate business.  We’ve done some deals, and more are coming our way.  All of the agencies are reporting the same, some with best ever numbers – (I heard this last part through a third party, but I hope to confirm it shortly.) Continue reading »

Oct 142009
 

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 15th.  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.

Colon Value From Colon Value To Tax
From 1 to 100,000,000 0.0%
From 100,000,000 to 250,000,000 0.25%
From 250,000,000 to 500,000,000 0.30%
From 500,000,000 to 750,000,000 0.35%
From 750,000,000 to 1,000,000,000 0.40%
From 1,000,000,000 to 1,250,000,000 0.45%
From 1,250,000,000 to 1,500,000,000 0.50%
From 1,500,000,000 to 1,750,000,000 0.55%

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 (link no longer active). 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.

Interested in Costa Rica real estate as an investment. They primarily live somewhere else, but they own property in Costa Rica for the asset appreciation potential as well as possible rental income. Some just buy and hold (land-bank). For developed properties, the investor has a vacation home to visit as desired.

Migrators spend a regular amount of time in Costa Rica during each year.

Re-locators are those that are looking to move to Costa Rica from wherever they are. They will live full-time in Costa Rica.