Mar 092016
 

March 17, 2018: This article is primarily about how to buy property in Costa Rica with a limited budget, which is a timeless topic. However, there are a few dated points regarding available properties as well as my referencing one of my Tico Times articles, which has been moved or removed.

I’ve just submitted an article to Tico Times about the time we are in right now that is favorable for spec home building. Now let’s add to this another factor that is not as obvious. Well… it is actually every bit as obvious. It’s just that it is hidden, which is a gracious way of saying: neglected. And by virtue of it being neglected, it is a bit unknown.

Little House view

View from the “Little House”

The Zone is in an expansion period. There is a strong market here for existing houses. Many of these homes are in the $400,000 – $1,000,000 market and beyond. The realtors here are doing well selling these properties. When I get an ocean view house listing in the $350,000 range, I view it as solid gold, because this price point is in high demand, and relative to our market here, is in the low side of the range. It will likely sell quickly.

There is little to no financing on the purchase of a house in Costa Rica. This means that the buyer of a house needs to be liquid starting at right around $350,000. What about those that aren’t packing this amount of ready cash?

The Hidden Market:

One of my sellers of a $60,000 property has consulted with me about how he can sell his property. This man knows his way around The Zone’s real estate market. He has been involved in millions of dollars worth of property business during his time here. Why did he feel the need to consult with me? Answer: Because I took his listing.

He can’t get any of the local real estate guys out to his property to take the listing. They are not interested. Despite being low priced, his property represents a considerable amount of listing work. The real estate guy’s perspective is that he can spend his time taking a listing for, say, a $750,000 house, or for this man’s property that pays less than a tenth of the house. Duh!

I recently took a listing on a small, 1 bedroom, 1 bath house nearby to where I live in Playa Hermosa, which is a small Tico (Costa Rican) pueblo just north of Uvita. It had been refurbished by an investor. He had found an older Tico house that he fortified, re-tiled throughout, put in a small pool and generally fixed it up. The resulting house offered what many are looking for but are having a very difficult time finding: “Ocean view home, with pool for $129,000, 7 minutes from the grocery store”. Yowza! This took me less than 3 months to sell (quick by Costa Rica standards), and I continue to receive inquiries on the property. I wish that I had another dozen of these. Alas, I don’t. But, the same (or similar) effect of this property can be achieved in other ways.

Cracking the Hidden Market Nut: Buy one of the available lots on the market, build a modest but nice home on it, and you are in it for less than $300,000. You can then live in this house, or you can put it on the market in the under $300,000 range.

In my Tico Times article, I spell out a scenario where the house is priced at $429,000. Getting a house on the market for under $300k and that is well designed and well built, will result in a line at the door.

Properties similar to the Little House I had at $129k are nearly non-existent. These are so extremely rare that, even with the buy-and-build approach, are difficult to duplicate – difficult but not impossible. And this is the Hidden Market here.

If you’re reading this and wondering how you can bring a limited budget to the table and still own a home here in The Zone, you are looking into the Hidden Market. It may be that you’ve done some searching, and perhaps you’ve even found some properties that look like they’ll work for your budget. But then when you inquire, or look a little deeper into it, you find out why the property is priced as it is. It may be way out in the sticks, or the property itself may have some problems that explain why it is priced so low.

The caveat to solving the Hidden Market problem is that currently, all of the solutions I know of require buying raw land and then building. This is beyond what many are looking for or are willing to do. However, if you’ve got a limited budget, and you really want to own a home here in The Zone, consider buying and building. Your possibilities are: 1) wait for another Little House option to come on the market, or 2) buy one of the low priced, but good, raw land options and then build on it. If you are one of those that say “I can’t build in a foreign land”, then you are going to need to go with option #1. It may be a long wait.

The purpose of this article is not to go into the ins and outs of building here. That is for another article (or post your question below). Suffice it to say that there are some good options for doing so, and that some have even had good experiences building in absentia. I’m hoping that this information will help what I feel to be a rather large segment of the buying population who are frustrated by their inability to find a property in their budget.

Let’s get started. Here are a few properties right now that I feel qualify for the Hidden Market handle:

 

Uvita Costa Rica property for sale

The upper building site.

Town Uvita River Song

Ready to build, all services in, about 5 minutes to the grocery store and 10 to the beach. Ocean view, but in a very nice area.

Click to view

Inquire about this property

Price $99,000
Type Land
Size 2 Acres
Lot for sale in Uvita Costa Rica Town Uvita One half acre of nearly all usable land. Located about 4 minutes to the grocery store. Beautiful location. The services are in.

Click to view

Price $58,000
Type Land
Size 1 Acre

Ballena building site.

View of Roca Ballena from the $83,000 spec home lot.

Town Ballena South of Uvita:

Centrally located between Uvita & Ojochal. Looking straight out to the Roca Ballena configuration. This lot is ready to build. The water will need to be run from a neighbor’s well system. The electric is at the road the runs by the property. Ocean view including the Roca Ballena formation.

Price $83,000
Type Land
Size 1 Acre+
A sort of companion article with links just posted: “Disappearing Breed: Under $100k Ocean View Lots”

If you haven’t read the Tico Times article that I reference at the start of this article, do so. You can scale down the costs outlined there for construction to calculate if you can buy one of these properties and then build on it. Ah what the heck, I’ll do some of it here. (I’ve hit my 1,000 word limit. As a blogger I’m told that you, dear reader, have a declining attention span for reading such length. Let’s prove ‘em wrong.)

Let’s find you a builder who can build your house for $85.00 per foot. Let’s say that you want to build a 1,200 sq. ft. home. Your building costs will be $102,000. If you want a pool, add $15,000. And then let’s add another $10,000 for permits, landscaping and incidentals. So your costs are right around $130,000. Add the price of your property and you’ve got your Hidden Market home.

Fiddle with these numbers. Keep in mind that we are in Costa Rica for a reason. And this reason isn’t to be sitting inside watching the tele. Build your house cheap. This isn’t to say “low quality”. Just enclose & secure the bedrooms, bathrooms and (if you like) a media room. Go ahead and have plenty of areas under roof, but who needs walls? Your kitchen can even be open-air here. What we need is a place to sit, do yoga, talk with friends etc… that is protected from the sun and the rain.  That $85.00 per foot figure can be pushed down.

Or try this: buy that $60,000 property, build a decent abode on it for $70,000, and you’ve duplicated the Little House scenario, just without the ocean view.

 

Jan 092013
 

This question just in from a land owner in Uvita.

I have a question about owner financing of real estate property for sale, and do not really know anyone else, besides you, to trust with a realistic, objective and intelligent answer.

We just received an email from the real estate agent who brought the buyer today, asking us what our financing terms would be. As of this moment, I do not know any details about the offer price, what the buyer’s financial position is, how much they have in cash as a down-payment, but before putting our cards on the table, I wanted to ask you about usual and customary seller financing terms in Costa Rica.

Seller financing in Costa Rica

Is Seller Financing a good idea for a seller of property in Costa Rica? Definitely. However, there are a few questions to answer first.

What would be typical and reasonable financing terms?

  • Is asking a 50% down payment, with a 7-8% interest rate, maybe a balloon payment or 2, in a year or 2, reasonable?
  • How can we make the deal air-tight as far as security of the down payment, and if buyer does not meet balloon payments, we get the property back, with no hassle.
  • Is there some sort of legal process, escrow or trust vehicle here in Costa Rica to protect us, the seller, from default?

Quick answer (based on info provided): Continue reading »

Nov 272012
 
Geese metaphore for seaonal residents in Costa Rica

Migrators

Keeping a property “back home” and having a property in Costa Rica is a common device used by many here in The Zone (Costa Ballena). This is especially evident this time of year as we transition into the dry season and familiar faces that have not been seen for some months start to reappear.

Retirees: once again a mainstay of expat residents in Costa Rica. These have the financial wherewithal to keep a home here in Costa Rica, as well as “back home”. This is a rather common scenario for migrators.

Geese metaphore for seaonal residents in Costa Rica

Moving with the seasons.

Canadians: This group of migrators is in an almost enforced pattern of migration. Canada has a socialized medical system that seems to work pretty well. However, in order to qualify for this health care, they must spend (and this varies by province), roughly half of the year in their home in Canada.

Most provinces and territories also require residents to be physically present 183 days annually, and provide evidence of their intent to return to the province. (Click for reference)

I have some Canadian clients who had intended to fully relocate to Costa Rica. Upon discovering this fact about qualifying for health care, their plans changed and they became migrators.

Life-stylers: this flavor of migrators have the enviable status of being able to maintain a home here as well as “back home”. They come for the season of their choice, and then spend the rest of their time in whatever pursuits they have elsewhere.

Upside / Downside:

With a single visit, it becomes apparent that Costa Rica is popular for a reason. One can actually relax here.

Quieting down the internal dialogue, when once experienced, becomes important. Continue reading »

Nov 112012
 
Globe with arrows showing relocation paths from different areas.
 

I have dedicated much of the past 7 years of my life to working in real estate in The Zone, now commonly known as the Costa Ballena. Despite having closed our office, I would like for the accumulated experience of those years to continue to be of service to those looking to move, live or simply invest here in Costa Rica. It turns out that my toe is indeed staying in the industry, and interestingly, in a rather passive way.

Globe with arrows showing relocation paths from different areas.

People move to Costa Rica from various areas of the globe.

I have not yet announced my new consultation service, but it has begun, simply due to e-mails and phone and Skype calls from people who read this blog, or word of mouth publicity.

The sub-text to this article comes from a phone call that I received 2 days ago from a young couple in Oregon. I had worked with the man’s parents, showing them property a couple of years back. They make up an interesting and growing demographic for The Zone: people moving to Costa Rica that want to simplify, and lessen their dependence on utility companies, grocery stores, and even the government. In other words: off the grid-ers.

I love the way he put this. I think that this one line “not looking to reform the system, but instead create a parallel” to the existing one, typifies what so many feel in today’s world. His call resulted in an initial Skype consultation that lasted more than an hour between his wife, himself and me and dealt with topics ranging from finding a re-location property, getting residency, cost of living, bringing a family-member-dog, buying versus bringing a car, home-schooling, health care and so on.

In my recent visits to the States, and also in discussions here in The Zone with visitors and expats, I observe a trend away from reforming the existing system.In one statement, he effectively voiced a sentiment that seems to be gaining ground these days. The feeling that the current system is in a state of decay. What I appreciate about this statement is that this is not a defeatist position. Instead, he wishes to create a parallel way of living. Well put man! And I think that living in Costa Rica offers a viable option for this strategy. Continue reading »

Apr 242012
 

We had an inquiry recently that concluded in a remarkable way. This gentleman said, “I will accept defective land due to lack of funds. (I was ripped off 5 times!).” I had to ask myself, how does one experience being “ripped off 5 times” in a country where the process of buying land it quite simple?

Sky's the limit... but buy smart.

The answer I came up with is… he didn’t have a good realtor.  I understand that there is this idea that you don’t need a realtor in Costa Rica.  It’s not a regulated industry.  The CCBR certification, which both Ben and I obtained in 2009, only means the agent is a resident and sat through four 8-hour days of Costa Rica real estate 101.  I understand the allure to buying direct– from a Tico, or from Craig’s List, or direct from a developer—as a way to save money.   In some cases that strategy works.  In other cases, like the original example above, it ends up costing you much more than the 6-8% a realtor earns in commission.

Your Purpose For Buying

You’d be surprised how many people don’t have a clear idea why they are investing in Costa Rica real estate.

The prospective buyer says, “We’re looking for a house.”

Ben and Rod ask, “Great.  Are you going to use it as a vacation rental?”

The prospective buyer responds, “Oh…. we didn’t consider that.”

The same clarity is required when looking for a raw land, be it residential or commercial.  I’m not going to talk specifically about commercial in this article, as most buyers are looking for a home or a lot to build a home. If you’re going to build a house, you should really have an idea of when you are going to build, and what the area and neighborhood will look like in 5-10 years.  And once again, are you planning on retiring in this new house or probably going to use it as a second home/vacation rental?  Are you going to have a caretaker/gardener/security guard?  Where is that valuable employee going to live?

Usually, these questions are asked and answered before our prospective buyer arrives in Costa Rica. Once they are here, we take them out to view property. I’m going to make a long story short and simply say, when buyers stand on the right property… it resonates with them.  Most of the time, they feel it even before they get out of the car.  This phenomenon is the product of clarity prior to driving around.

The Zone is small, and by that I mean it has a small town feel. News travels fast.  Like a few realtors in this area, we have accumulated a vast database of fact and fiction over our 20 years, collectively.  This is one of the biggest benefits to using an experienced realtor.  We know the history of X or Y development or property, and we disclose it. In fact, there are some developments that we simply do not represent and for good reasons. Also, we don’t over-hype things like the International Airport to get you to buy.

Contracts and Lawyers?

Ok, so you find your dream property. The next step is to write up an Offer to Purchase or a Letter of Intent.  These documents signify the buyer’s desire to purchase the property and outlines the price, deposit, due diligence period, escrow, and contingencies.  A contingency is the fulfillment of specific condition (e.g.- clear title, legal access to water, stable soil determined by a soil test, etc.). If a contingency cannot be satisfied or resolved, the buyer can get their deposit back.  The seller reviews the Offer Letter and often makes a Counter Offer.  Eventually you agree on a price, and we present the Offer Letter to your lawyer. Only problem is… you don’t have a lawyer yet.

This is one of the ways your realtor can save you money.  We recommend experienced, bilingual lawyers that actually return your email and/or phone call in a timely many. I sleep well at night knowing my clients are taken care of by one of these local legal professionals, because I have years of positive experience supporting this recommendation.

The lawyer then turns the Offer into a Purchase and Sale Agreement.  It is usually written in English, and then translated to Spanish to be submitted into the National Registry. All of the details are included in the document and it is reviewed by Ben and I, the seller’s lawyer, and seller.  Once the contract is signed, an escrow account is established.  I will be writing a separate article on escrow in the near future, but this is now required for all property transactions especially for those transferring monies from outside of Costa Rica.

Finally, the lawyer starts on the “due diligence” or discovery phase of the process.  If there is a problem with the title or an easement registered against the property, this is the point in which the lawyer will uncover it. Most of the time these discoveries are either acceptable or can be resolved by the seller.  (In the event that the problem is a deal-breaker, the buyer receives their deposit back.) Once everyone is clear and desirous to move forward, the final deposit (usually a wire transfer to the escrow account) is made. It usually takes 3-5 business days for monies to arrive in the escrow account.

A final closing statement is generated by the closing lawyer.  For more information on closing costs, click here.

Corporations

There is one intermediary step involved in the Costa Rica real estate process that is missing in a U.S.-Canadian-European real estate transaction– setting up a corporation. Virtually everyone owns their property (and automobile) in a corporation in Costa Rica. It’s a legal entity, recognized by the government, that stands on its own. There are two main types of corporations used for real estate in Costa Rica— the Sociedad Anonima (S.A.) and the Sociedad de Responsibilidad Limitada (SRL).  They are similar in function, but here are the main differences–

The S.A. has multiple uses and is a bit more flexible. It must have a Treasurer, Secretary, and President, who are separate people. It must have three registered directors and a controller, who is often the attorney who set the S.A. up and manages the associated protocol books.

The structure of a SRL is similar to the S.A except the shares cannot be transferred to a third party without the consent of the other shareholders who can have first right to buy those shares. An SRL can only have one manager administrator which is very appealing if you don’t want your name to appear in the registry, as it will on the S.A. This is the popular choice for investors who do not have more than 3 partners.

Our favorite part... the closing!

Closing

The last step in the process is my favorite part; the closing.  You, the buyer, fly down to Costa Rica and arrive at the lawyer’s office and sign the final deed and protocol book that gets logged into the National Registry.

Congratulations!  With your solid team of professionals supporting your clear desire, you are the proud owner of property in Costa Rica.

We have great deals in every property category, so please feel free to browse our listings.  The Guys… are here to help.

Feb 192012
 

Ben Vaughn, co-owner of Guys In The Zone Real Estate, explains the three listing options available to Costa Rican property owners. There is no Multiple Listing Service in the southern Pacific zone of Costa Rica, which expands the listing possibilities– the Open Listing, the Exclusive Listing, and the (new) Modified Exclusive Listing. Please visit Ben and Rod at www.guysinthezone.com and explore our current properties listings, our Talk Show, and general information about the greater Dominical area. Thanks for watching!

Dec 302011
 

The inspiration for this post came from a recent article fed from LinkedIn. The title was “38% of Homes Purchased in 2011 Bought with Cash.” I thought to myself, 38%?! That number seemed high, so I did I little more research. According to another article in USA Today, that number was as low as 12% just three years ago thus confirming a significant jump in cash purchases. According to the article, investors in the U.S. are keenly tuned into yield or ROI. That return on investment is realized through improving and flipping properties or some variation of a rental/income strategy. The latter has become increasingly popular for those foreign retirees and families who are looking to relocate here.

Cash Is King

Got Financing?

All of that got me thinking about our Costa Rica real estate market.  Land purchases financed through a Costa Rican bank (at least in The Zone) was virtually unheard of when I started back in 2006. For a variety of reasons, most buyers had cash before the downturn.  Four+ years later, the picture is very clear.  Property values around the world decreased (dramatically in some areas), and buyers couldn’t use the equity in their homes, not to mention the banks tight grip in their purse strings.

Recently (think- the past two years), we’ve seen an increase in the number of buyers who only have a portion of the purchase price.  These new buyers, typically foreign investors, need the seller to carry paper.  For those new to real estate investing, carry paper means the seller is willing to finance part of the purchase price and receive payment (often with interest) over time.  This legal arrangement is completed by a lawyer in the form of a trust or a mortgage here in Costa Rica. If the buyer defaults on the terms of deal (e.g., misses payments), a legal process can be initiated by the seller… just like a bank in a foreclosure process, although quicker. For more information on this topic, check out our article on Seller Financing Opens The Door To Home Buyers.

I don’t have a number, but I’d bet the number of non-Tico bank-financed purchases in the area is less than 1%.  Interest rates on Costa Rican bank loans, when you can get them, are more than double what you currently find in the States.  There are various reasons for it, but I’ll leave that for another article.

The good news is… buyers need financing and some sellers need to sell, so seller financing continues to increase in The Zone.  Some deals don’t even include interest, simple an extended term to complete the sale.  When there is interest and an extended term involved, the number of years almost always tops out at 5 years.  There are real estate transactions taking place in The Zone primarily because (1) land values are now around half of peak values and (2) both parties are getting creative, as described above.

There are a select few (and I mean few) who are flipping houses here in The Zone, however, many investors are looking for income generating properties, both hotels and vacation rentals.  The yield varies greatly, but there is opportunity to make a nice living in the hospitality here in The Zone.

But, What Does All Cash Mean For Buyers?

It means you need to think of Costa Rica, at least for the time being, as a place to land bank or move your cash. There are economies and currency (think- Europe and the Euro) with a cloudy future.  The current wave of concern is so real, we have recently seen an uptick in European investors and relocators contact our office.  Without getting metaphysical, I also wonder how much 2012 is playing into people’s decisions. We call this group “End Of The World Buyers.”  Good and abundant water sources, good environments for growing crops, and pleasant temperatures throughout the year draw these type of buyers to Costa Rica and our area in particular.

Whether this trend continues or declines remains to be seen.  Simple put, Costa Rica, especially the Costa Ballena, is a wonderful place to relocate for both economic and lifestyle reasons.  There are many, happy foreigners living either full time or part time in Costa Rica.  If you are interested in why so many expats are buying and relocating to The Zone, this article Why Buy Property In The Zone offers a few of the top reasons.

Dec 072011
 
2012 promises to be an interesting year.

November 28th, 2011 marks the start of the high season, speaking from the perspective of the Guys In The Zone here. However, in the few inquiries that I have made, it is apparent that there was a definite up-tick in sheer numbers of people in The Zone starting on that day, just a little over a week ago. Here’s what we’re seeing around the Guys office.

Costa Rica Real Estate

We'll see what the year 2012 brings to Costa Rica's southern pacific zone.

Lots of Sellers

We were focused on getting our property data based fleshed out over the last couple months of the rainy season.  Rod & I thought we were doing pretty well, taking advantage of the rains, and the quiet time in Uvita and Dominical to get all of our properties in order.  We have come to discover that there is no room for being smug on this front. We are nowhere near caught up with our sellers. We have quite a number of sellers that come down to Costa Rica every six months or so to visit, play, unwind and take care of property matters. This influx of sellers coming by our office, and working with them in various matters pertaining to selling their property has clearly indicated to us that we are in a Buyer’s Market here in Costa Rica. We have LOTS of excellent properties for sale at great prices.

Lots of buyers

The problem with all of these sellers coming in, is that we also are experiencing lots of buying activity. This is great for the coffers of the Guys In The Zone, but it makes for the need for Rod & I to get ourselves cloned, which we are not inclined to do, so we are simply running as fast as we can to be able to accommodate.

Buyers Profiles

Profile 1The global economic crisis seems to have inured to our benefit.  People are saying “I’ve had it” with wherever they may live (lots of Europeans in the mix, as well as Canadians and US’ians) and making the move to Costa Rica. A rather new buyer’s profile for us are the younger families that are not in the financial condition to move to Costa Rica, at least in the old “retiree” manner. These younger folks are coming here as a direct result of unpleasant conditions “back home”. So, they are looking for income generating properties.  Over the last month or so, Rod & I have dealt with about 3 of the following type requests.  These buyers are looking for:

  • An income generating property
  • Room to build several cabinas
  • Room for a small restaurant
  • Room for a main living abode for the buyers
  • Budget of $200,000

The Esquinas property sold, removing from the front window what was clearly the most talked about property in our office.  We now have another couple of options for these requests, but this is a VERY tall order. We are expecting what properties there are that can satisfy these criteria to be gone by season’s end. Here is the new HOT relocators, income generating property: Pequena Luna

Water at the End of the World

Profile 2 End of The Worlders Last week I worked with prospects that want 100 hecs, lots of water, land to farm, and big view. Their budget is 1,000,000 Euros ($1,350,000 USD). They are looking to being self-sufficient, to the point of providing their own food, water and electricity.  We may have hit pay dirt with some amazing ocean view property up in the mountains around Uvita.

Profile 2b This next one doesn’t fit in the End of The Worlder’s category, but they are certainly an interesting indication of market conditions. There aren’t enough of them to credit them with their own profile, so they are abbreviated. An investor’s group from Europe, looking towards doing an interesting, very green hotel with some activity attached to the hotel, like a golf course, or some other. The budget on this one is multi-millions.

Old Standard Property Buyer Profile In addition to these rather impressive profiles, the old standard is still there – the retirees looking to move to Costa Rica and enjoy a lifestyle with less of the frenetic pace and media saturation of the “developed world”.  It seems that the economic downturn has had an effect on this seemingly bullet-proof group of prospects.  Whatever plans they made in their lives for retiring: 401K, IRA, market portfolios etc… things have simply changed, and now the thought of generating a bit of income with what they do here in Costa Rica is of interest.

Rod is currently working a deal in progress on an amazing listing that we just got here in Uvita that is just a short ways up the hill behind Uvita. The property measures just under an acre and has a gorgeous and expansive ocean view. $90,000 on this one.  Even if this first round of negotiations doesn’t go through to close, I have little doubt that it will go quickly.

Rod is also working a gorgeous ocean view lot down in La Perla Ballena, which is south of Uvita about 5 – 10 minutes. The asking price on this one is $165,000 (back to business as usual). The buyers offered $115,000, the sellers have countered at $150,000. The buyers are cogitating on this.

We’ll see where it all goes. I include these rather mundane details of our lives here because I think that these points help you, dear reader, to know how it is here now. What the feel is here in U-town and in the southern zone. There is more, and it would seem, serious, talk about the international airport having its funding. This may actually be a reality about to happen. Heaven knows why people need to fly into the southern zone of Costa Rica, but it would seem that this is what “they” want to do. The implications of this to land values is interesting.

I’m getting close to my self-imposed blog-limit of 1,000 words so I’ll leave you with this. I went out to the San Buenas Golf Resort today, and I’m blown away.  More to come on that front.

Aug 122011
 

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!

 

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.