The 10 Steps to Successful Real Estate Purchases in Costa Rica

If you are interested in finding a home or real estate investment in Costa Rica, StartAbroad strongly recommend Joshua and Miranda from Make Costa Rica Home and Buy Hotels Costa Rica. They have helped tens of clients secure their dream properties, and are experts at navigating the Costa Rican real estate market. Make Costa Rica Home offers excellent buyer’s agent services in Costa Rica, and specializes in the Central Valley, where you can find popular expat destinations like Heredia, Escazu, Atenas, and Grecia. If you’re interested in making an investment, Buy Hotels Costa Rica will help you find the right business for your real estate investment needs. They are a first rate service than can help find the right investment for you and help you navigate the legal process.

 

Written by: Miranda Abbott Wittman

I moved to Costa Rica over 12 years ago and I did so like many people, with no budget, no plan, and very little help. I put my finger on a map, sold as much as I could, and moved myself and the family to Playas del Coco, Guanacaste. Within my first year there, the Coco Beach Hotel was being built/remodeled and new store locations were going up quickly. I seized the moment and decided that if I were to stay in Costa Rica, starting my own business would be the way to do it.

 

Off I went down that path of figuring out new laws, regulations, taxes, and labor codes, with little Spanish, and even less experience. I knew nothing about running a clothing and jewelry boutique but my shop, which featured local fashion designers and artists, was open for about 5 years before deciding to combine it with my other passion of teaching yoga. I moved the shop into a loft above my teaching space. My long-term expectation, however, was that I would build my own retreat space once I found the land. With the small savings I had, I bought a piece of land 5 minutes from the main street with a peek-a-boo ocean view for about $13/meter. Sounds like a decent plan?! I was happy! I was also naïve.

 

So why am I telling you all of this in a blog piece about real estate in Costa Rica? Because I could have done it better had I known who to turn to, or how to ask for help. Now with over 12 years of experience living here, my husband, Joshua, and I have built an agency to assist those considering making Costa Rica home.

How We Started Our Journey in Costa Rican Real Estate

Getting to where we are now has been a fluid journey and has brought us to the central valley of Costa Rica where we now live. Our real estate life began with RE/MAX but we later branched off on our own to build the brands Make Costa Rica Home and Buy Hotels Costa Rica. We work together. I focus on lifestyle, residential, and the creative elements of our business. Joshua is the numbers-man, a former math teacher of 15 years who loves analyzing hotels, investment properties, and development projects.

 

After speaking with StartAbroad I knew that I needed to share my experience. I never opened my retreat center because I, like others, made mistakes while purchasing a property here. Things might have been different had I followed the 10 steps To Successful Real Estate Purchases in Costa Rica.

1. Short Term Experience vs. Long Term Living

Although I loved my 9 years on the coast, there was always a small part of me trying to make it work. It was an excellent detox from city life in Toronto. But looking back, if I were to be 100% honest with myself, I was happiest with my work-life balance for my first 5 years in Coco. After that, the difficulties of high-season and low-season business instabilities, the cost of living and making ends meet, the intense climate, the transient nature of beach town communities (saying goodbye to good friends every year), and the lack of educational resources or extracurricular activities for my children wore on me and made it difficult to feel like I was giving my family a stable lifestyle. Many ex-pats meet these same challenges and chose to leave Costa Rica.

 

We knew our time here wasn’t over and made the decision to move inland to the central valley. We chose to name our company Make Costa Rica Home because we wanted to solidify this as our intention when helping others find real estate. There is a difference between where you want to explore for 5 years and where you may want to call home. I suggest making a list of what is truly important to you for long-term living or short-term investing, because this will make a huge difference in where, what, and when you buy.

2. Get Help

When I moved to Costa Rica there were far fewer resources to help me. Facebook groups were not yet a thing and social media was not as easy of a place to reach out for help. We managed to find one YouTube Channel, which is still alive and well today, as well as a PowerPoint course about moving, which we purchased. I’m surprised we made it this long, but we’re easygoing. Joshua’s fluency in Spanish goes a long way as well. Today there are relocation specialists like StartAbroad who are ready to help streamline your move to Costa Rica with as fluidity and “pura vida” as possible. Getting help from experts who can give you the best intel and honest insight will leave you with fewer surprises, and more security while feeling better about the move. Working with a specialist will also save you time and money.

3. Do Your Research

This point goes hand-in-hand with my last point but is more specific to individuals who want to live and invest here. It’s a very different real estate market than where you may call home, and it’s a different business landscape as well. Each area has its own ebb-and-flow, its own high and low seasons, its own consumer base, and so on. If you are serious about your success, you won’t just jump in as I did, you’ll do proper diligence. Find experts in each area, and create a proper business plan with realistic projections. Don’t assume the beaches are the only place of opportunity. The central valley is where a vast majority of Costa Ricans live including business professionals and multinationals that provide a more stable consumer base. Have a clear plan and explore all possibilities.

4. Know Your Concept and Type of Property

I work alongside Joshua and therefore I’m privy to most of his early conversations with our clients. Through Buy Hotels Costa Rica, he works with both large and small investors, and the difference between the two may be as simple as those who have a concept and those who don’t. Hone in on specifics, “I want to start an Air BnB business” is not specific, “I want to start a luxury vacation rental business with a flagship location in Tamarindo, partner locations throughout the country, each focused on bird-watching” IS a concept. Be very clear about who you are buying for and why.

5. Find a Buyer’s Agent

This is an essential step in which we focus. As buyer agents, we know the value of our service. The vast majority of Costa Rica is a buyer’s market but the landscape is not as organized as you may think. Currently, Costa Rica has no official Multiple Listing Service (MLS) and therefore listing sites may be out of date or provide little analysis to market comparables. Properties could be listed by several different agencies and at different prices because signing open listing contracts with various agents is common here.

 

You do not need a license to become an agent in Costa Rica and some listing sites are only lead generators, which means they’re not an office but a funnel making money by passing leads. This can make it frustrating to look through listings or to connect with an agent who will give you the time and expertise your investment deserves. A buyer’s agent should not have a bias towards listings either. They should give you accurate market analysis and be willing to negotiate on your behalf. With your own team, you will be well on your way to closing a good deal, one that isn’t going to come back to haunt you. We are active and present with our customers through both the search and negotiating processes and beyond close. To quote Joshua, “After closing a property, our real service begins” helping clients find other resources and get settled into their new home. Furthermore, a professional buyers agent doesn’t request compensation from the customer, rather negotiates a commission split with the listing side, which means there isn’t an added expense for you to work with us.

 

Full disclosure: I DID NOT do this when I bought my first property. I worked directly with someone who called himself an “agent” who was actually just helping a friend. The property he showed me did not match what I had actually purchased and I spent 5 years figuring out water and electricity permits before I could even consider building or selling. I eventually sold at a profit once the mess was sorted but it was a long confusing journey.

6. Eliminate the Scarcity Mindset

This is another term I hear Joshua saying all the time. Many people come here in a rush because they are more attuned to a faster seller’s market and think they need to sink their teeth into the first property they like. There are a lot of opportunities here, you don’t need to rush! There are exceptions to this buyers market rule for example hot spots like Tamarindo if your searching for a 4-bedroom with a private pool, beach view condos, and certain styles in the luxury home sector. Generally, you likely have time to look around, and send an offer that will sit well with you long-term.

7. Every Investment Needs and Exit Strategy

As I’ve highlighted above, you are on a new playing field. You need to think of the entry into your real estate deal as much as your exit. You never know what life will bring you and therefore you should be prepared for change. Joshua always talks his clients through the exit strategy, part of that strategy is knowing the true cost of your purchase. Closing costs in Costa Rica are quite high, and one should expect to pay around 4% of the purchase price. A large part of this fee will be taxes and legal expenses, but likely will also include escrow services, and other expenses such as soil testing and inspections. Legal fees may vary with each firm, additionally with your specific needs, for example, should you require power of attorney, or if you are going to own assets under a corporation, etc.

 

Some fees are covered by the listing party such as the commission, however, any of these fees could vary through negotiations. Still, make sure you know exactly what you are spending on the way in and through the course of your ownership, in order to access if you are going to come out on top on the way out. Your property may have HOA fees, home insurance, and taxes which are 0.75% in Costa Rica. Keep in mind that there is a limited appreciation for the value of a home in Costa Rica, so your ability to resell should come into consideration. Make the appropriate plans if your property will one day become an inheritance, because this is easier done through an SRL holding company.

8. Legal Team, Escrow, and Other Experts

Many people will tell you, that you only need a lawyer to buy property in Costa Rica, and technically they are correct. However, a lawyer most likely will not give you a comparative market analysis, search for other options, or spend time qualifying your wants or needs or as we say, your “must haves” and your “nice to haves”. However, a good legal team is a necessity, especially in Costa Rica. You do not want to be played the fool in a purchase; a property could have many faults.

 

You will want to do everything in your power to make sure you are getting what you have been promised. You should have your own legal team, and consider the conflict of interest if that legal team is recommended by the seller. A legal team should be recommended on the basis of how they will perform due diligence. Ideally, with a secure purchase agreement, you can exit yourself from a deal at your discretion, and have your funds returned to you from escrow. Escrow is important and companies will vary in, prices, speed of delivery, and their international experience. Shop around and ask for quotes. Secure Title and Global Escrow Services and two escrow companies we’ve used in the past. During diligence, you may also want to hire specialists for well and water table evaluations, water lab testing, soil testing, topography, plant identification, structural engineers, etc.

9. Closing the Deal

Now that you’ve taken all the steps to make sure you have a good deal, you can proceed to close. It’s time to celebrate, you’ve purchased your first property here! The minimum closing time when an escrow service is involved is approximately 10 days. A typical clean-title, condo, or urban home will take a total of 2 weeks, at the discretion of your lawyer. The land is commonly a 2-week to 60 days close, once again, at the discretion of your legal team and the necessary specialists you may require. A hotel or development property needs a bit more time, generally around 90 days. This time is contingent on how much there is to consider on the property. A home with a clean title should be a straight and simple process, making sure the property has a clear title with no liabilities. A commercial investment may take months to affirm that the property is as the seller says it is, “buyers are liars and sellers are worse.”

10. Make Costa Rica Home

For us, this is the most important point when purchasing property in Costa Rica, and why we feel our services are so important. At the end of the day, and close of the deal, you need to “Make Costa Rica Home”. If you have purchased a property valued at over $150,000 you likely qualify for residency and can start your application process. It’s also the time to meet your neighbors, learn Spanish, explore new customs, and be willing to change your lifestyle.

 

Where We Are Now in Our Journey

This is a beautiful country with amazing people, who are different than you. Time is not of the essence, this is not Wall Street, and not everything is going to be perfect. A smile goes a long way in Costa Rica so settle in and explore the “pura vida” mentality. Your comfort in Costa Rica is essential to your real estate success because you should never feel pressured to buy or sell before the most opportune time has presented itself.

 

If you’d like to learn more about moving to Costa Rica reach out to Anna and Zach from StartAbroad. To start your real estate journey message me, Miranda, and Joshua from Make Costa Rica Home.

 
 

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