Investment in Costa Rica
October 31, 2023
Safety and Security in Costa Rica. In an era of global unrest and uncertainty, finding a haven of safety and peace is an aspiration for many. One country that often finds its name in discussions about such havens is Costa Rica, for which it was recognized this week as “the most peaceful country in Central America and the Caribbean”
May 13, 2023 in Buying Process, Real Estate in Costa Rica, Tips for Buyers
Why are expats buying rental property in Costa Rica in 2021? Read on to find out about income, future planning, and the other reasons why Costa Rica rental properties are hot this year! A trend that we have seen in recent years is the rise of the income property. More often than not, Costa Rica property buyers are looking for something they can use for rentals. More than 50% of the buyers who have come through our real estate office this year are buying rental properties in Costa Rica that they can use for at least part of the year, or possibly live on the property and have rental cabins. Is this the right choice for you? Here is a list of questions that our rental property buyers ask us all the time. Can Americans and other foreigners legally buy property in Costa Rica? Absolutely! The great part about Costa Rica is that foreigners and locals have the same ownership rights when buying property. Foreigners can purchase property on a tourist visa without the need for residency or citizenship. Any foreigner, resident, or non-resident has the same rights as a citizen in Costa Rica, except for voting rights in presidential and municipal elections and can, therefore, purchase and own Costa Rica real estate legally. However, the one exception is that a foreigner can only own 49% shares in a property in a Maritime Zone (within 200 meters of the high tide line). In our experience of working with Costa Rica real estate buyers in 2021, this year, people are looking for a back-up plan. They have been thinking for some time about getting out of their current scenario of stress and overconsumption, and the Covid pandemic has presented a few new opportunities and reasons to want to branch out somewhere less crowded and more beautiful. These people may be close to retirement age but the majority of rental investors in Costa Rica are still working and raising families. They are looking to secure a safe investment and a possible place to live outside of their country while they keep working. Those who are able to work remotely tend to look for properties with multiple housing options so that they can live on the premises and rent out the vacant spaces. Life coaches, yoga instructors and practitioners of all types of therapeutic modalities are finding that Costa Rica provides powerful settings to host healing retreats. Many have chosen properties where they can grow food and invite guests into a beautifully organic living experience. There may not yet be any large, all-inclusive hotels in our South Pacific region of Costa Rica but there are an increasing number of investor groups who are scouting our region for income property opportunities to meet the growing demand. Expats generally want to be near other expats. This is not the case for everyone because there is a significant population of foreigners who move to Costa Rica to get away from everyone and enjoy living a simple life in a small Tico community. However, the majority of people want to live near people who are familiar to them in language and values. Towns that are populated with expats will attract more products and services that cater to expats, with international products, cuisines, and high-end services. Coastal communities like the Costa Ballena towns of Dominical, Uvita, and Ojochal are popular with expats who love nature, adventure, and peaceful living. There is not much traffic here and life is generally slower, which brings in a growing amount of local and international tourism from people looking for that type of escape into nature. Costa Rica is frequently ranked in the top 10 fastest growing tourism markets for a variety of reasons that include politics, environment, ease of travel, wildlife, and friendly people. All types of people are looking to spend time in this enlivening part of the world whose message of ‘pura vida’ (pure life) draws people in like magic. Digital nomads are a growing group of visitors to Costa Rica. The country’s government has recently passed a new law that allows Digital nomads to stay in Costa Rica for up to two years if they earn a foreign income of at least $3000 USD per month. Young entrepreneurs and families love this part of Costa Rica because the individualized rental opportunities have many value adds that make renting here unique. Maybe it’s a yoga pavilion, a five-star ocean view from bed, or a private waterfall on the property - these extras wow guests into wanting to stay as long as possible. When people first start thinking about buying property in Costa Rica, they will typically book a trip to visit. Oftentimes, people will visit more than once before committing to a location and a property. And those who have been visiting in recent years will note that rental prices in Ballena have gone up and rental availability is more and more scarce. Rental properties in Costa Rica can and do generate a net income but it is important to note that the return on investment doesn't typically happen right away. Unless you are buying a turnkey rental property at a premium price, you can expect to spend money on renovating to your standards and taste as well as upgrading the property’s amenities to current rental standards. We are in a strange time in the rentals market in Costa Rica because at a point in the year when it would normally be quiet, most rental homes in Costa Ballena are filled. They are, however, filled with long term tenants, most of whom are looking to stay for a while. Recent buyers who have purchased homes in Costa Rica are making 0.5% to 0.9% monthly return (6%-10% annual return on investment) on their purchase price at this time. One home recently bought for $450,000 is renting for $4000 per month to long-term renters. Another home purchased for $285,000 is charging $1500 to long-term renters. These rentals would normally cater towards short-term renters but because the pandemic has put a damper on international travel, rental home owners are not counting on intermittent traffic and would rather secure long-term renters for a lesser monthly income. When borders finally open, many rental home owners are likely to switch back to focusing on short-term renters. In recent years, rental property owners have netted an average return from long-term rentals. These figures can easily climb as high 8 – 10% ROI or more in the premium short-term rentals market. Although there are a few ambitious property buyers who want to build their dream property, most foreigners wanting an income property in Costa Rica are looking to buy something that they can use right away. A lot of homes on the market in the $200,000 - $400,000 USD price bracket will be looking at some renovations but you can still find ocean view homes with a pool in this price range if you are willing to put in some elbow grease. Simple cabina properties without too many frills can also be found in that bracket. When you move into the $400,000 - $600,000 USD bracket, you will find the conventional family vacation rentals that have a decent view, large and airy rooms, and a nice terrace with a pool. These types of homes are the bread and butter of our market today. From $600,000 USD and up, you start to get into the luxury property market. These are the fully-equipped homes with lavish amenities like a spa bath, infinity pool, gorgeous floral landscaping, and ocean views from every room. As you scale up the price ladder, the finishes become more refined, the spaces more grand, and the sky's the limit for how much luxury you can pack into a Costa Rica property. Most turnkey hotel properties start at over $1 million USD in Costa Ballena. Vacation rentals in Costa Rica come with many common expenditures that are important to take into consideration when investing. When it comes to Costa Rica taxes for Expats, both residents and non-residents are subject to taxation on the income they earn within the country. This means that any rental income you earn from a rental property in Costa Rica is subject to a 13% VAT tax. You will also have to declare your income in Costa Rica to the IRS or any other foreign revenue body that you are subject to. Income from foreign sources is not subject to Costa Rican taxes. Annual taxation on a property in Costa Rica includes the not high payment of property tax which is calculated at only 0.025% of property value. To learn more about taxes in Costa Rica for U.S. citizens, click here. Owners will quickly discover there are two roles that need to be filled—the property manager and the rental manager. Often, they are one in the same. The property manager deals with daily life on-site. They coordinate with the cleaning crew, the gardener, the pool service, the maintenance man, and everything else house related and local. The rental manager deals with the online listing across various vacation rental websites, the inquiries (the most important component), booking reservations, receiving funds, and potentially offering luxury services like organizing a personal chef and a masseuse. They may also arrange shuttle services and book excursions and tours. Many semi-retired owners or remote workers manage their own rentals in Costa Rica. It is easy to live comfortably on a Costa Ballena property and share it with renters and many people opt for this style of living to earn additional income. Those who choose to own a condo over a private residence in Costa Rica are looking for ease of ownership. They want to minimize maintenance costs and to have increased security. Many renters enjoy staying in a condo; however, this type of property is less popular with buyers who envision themselves eventually moving into the property. Condos simply are not representative of what makes life in Costa Rica extra special, which is primarily about living surrounded by nature. Costa Rica offers a program that grants residency through overseas investment, whether or not you plan to live here full-time. With an investment of at least $150,000 in local assets (this number decreased from $200,000 in 2021), foreigners can easily qualify for residency. This investor status also allows you to import up to two cars and a one-time shipment of household goods tax free. The short answer is no. The long answer is yes, but it’s not as straightforward as people are used to. Savvy investors will use a cash-out refinance, which involves pulling money from other investments they own to buy property in Costa Rica property. Others choose to use self-directed IRAs. These options are not available to everyone and require a large amount of preparation but they are successful. You may be anxious about not knowing the local culture and the language. But when you work with a great real estate team, you can expect that the process will be smooth and easy and that all of the most challenging parts will be explained thoroughly by your realtor who will guide you through the entire process. Buying property in Costa Rica is not the best kind of investment for highly leveraged and cash poor buyers. However, it can be a very good long and medium term investment for a more experienced and economically-stable buyer looking for rental income, long term price appreciation, and a lovely tropical family getaway or retirement home to sweeten the deal. Costa Rica is a very credit poor country and real estate therefore favors cash deals. Cash buyers with patience have access to rewarding investment opportunities with potentially high yields and value appreciation through renovation and remodeling. Pros Cons“Can expats own property in Costa Rica?”
“Who else is buying rental property in Costa Rica?”
“Where do most Americans buy rental property in Costa Rica?”
“Who rents property in Costa Rica?”
“Is owning rental property in Costa Rica actually profitable?”
“How much profit can I earn by owning a rental property in Costa Rica?”
“How much does it cost to buy a house in Costa Rica?”
“What are the common expenses when owning a rental in Costa Rica?”
“Do expats pay taxes in Costa Rica?”
“What regular tasks need to be done when owning a rental property in Costa Rica?”
“Should I buy a condo in Costa Rica or a house to use as a rental?”
“What are my options for residency if I buy a rental property in Costa Rica?”
“Can I get financing to buy property in Costa Rica?”
“Is it hard to buy and own property in Costa Rica?”
“Is investing in Costa Rica vacation property a good idea?”
“What are the pros and cons of owning rental property in Costa Rica?”
May 12, 2023 in Life in Costa Rica, Real Estate in Costa Rica, Tips for Buyers
Chontales, Costa Rica is a community with the common denominator of shared experiences among expats. It is evocative of what makes the Southern Zone of Costa Rica different, with its extensive green zones, filled with mountain springs and rivers, and its impeccable ocean and mountain views. Areas like Chontales are why we love it here. This is a community unlike anywhere else in the world and you are unlikely to find real estate elsewhere that looks like this. The international residents of Chontales have chosen this location with purpose. Having visited everywhere else in Costa Rica, those who find this remote-feeling community immediately know that they have found their home in Costa Rica. These people have decided that they don’t want to be anywhere else. They have stayed in Ojochal. They have friends in Uvita. And they vacation in Guanacaste regularly. But these are the people who are more adventurous and value their privacy and peace enough to travel that little bit further than everyone else. Vacation home renters love coming to Chontales, too. They fall in love from the moment they arrive and instantly feel their everyday tensions melt away. The Southern Zone of Costa Rica is not a place with a commodified cultural history. Most of the souvenirs that visitors to this region come away with are memories. And the sensory-rich memories that people create in Chontales keep them coming back again and again. Homes in Chontales are representative of the high-end clientele that find there way here, who are seeking a uniquely impressive experience. The houses built here tend to be well-constructed and detailed with high-end features. Since this is a relatively new community, most homes are designed in a modern style and include many of the luxury amenities that selective buyers and renters are looking for in the best vacation homes. The delightfully warm weather in Chontales invites outdoor living and many homes feature large, shaded terraces and infinity pools facing the fantastic ocean views. Visitors cannot get enough of this lifestyle that truly feels like the ‘pure life’ message that Costa Rica shares with the world. Accompanied by the development of the surrounding regions, tourism is very strongly positioned to continue a fruitful period of growth that has been trending now for five-years. Those who are adventurous enough to make it to Chontales, Costa Rica know that the journey is worth the destination. Chontales is a three-and-a-half-hour coastal drive south from San Jose’s International Airport, Juan Santamaria. Or you can head to the domestic terminal next door to the main airport and take a 30-minute flight to Palmar or Quepos. Traveling to Chontales is nowhere near as difficult as some people might imagine. The main development of Chontales is situated at an elevation that averages around 800 feet above sea level. It takes about 10 minutes to drive from the entrance of Ojochal to the entrance of Chontales. From there, it is a closer drive up to the homes in Chontales than it is in most of Ojochal and you’ll be traveling on impeccably-maintained roads. You can reach almost anywhere you need to go to in the Costa Ballena within a 30 minutes’ drive from your place in Chontales. Chontales is also located 15 minutes north of the commercial hub, Palmar. Palmar is among the oldest towns in the region and was once the site of the United Fruit Company’s vast banana plantations. There are still relics of this era in Palmar, such as the colorfully-painted heritage buildings leftover from those running the plantations, as well as the mystery that they uncovered when clearing the land. Costa Rica’s mysterious stone spheres are possibly the most ancient cultural treasures found in this country, and some have even been uncovered in the lushly forested hillsides of Chontales. The village of Chontales exists among a functional network of communities in what is locally known as the Southern Zone. Much of the community is made up of migrants from the United States, Canada, and Europe. Neighbors frequently take turns organizing get-togethers, hosting whoever is around at the time. Vacation renters, snowbirds, and full-time residents all get into the close-knit vibes of this welcoming community, which has every feeling at home as soon as they arrive. There is no crime in the community and no need for police to patrol the streets as a deterrent. The main deterrent is the location and its remoteness from most other communities in the area. Everyone knows everyone and they look out for one another. As a result, there hasn’t been a single crime in the 6 years since the community has been christened. Those adventurous enough to make it south to Chontales feel that they have earned the peaceful relaxation that this natural paradise offers. This is a place where fresh mountain air abundantly caresses the jungle’s canopy, bringing relief from the heat to the region’s hillside homes. The weather in Chontales is warm and fresh, with prevalent breezes alternating from the mountains and the sea. Those who are more sensitive to the cold may need a long-sleeved shirt in the mornings and evenings, although the temperature heats up to the mid-80s on most days of the year. As you arrive here from the first world and all of its daily stressors, Chontales offers a space away from humanity’s noise. There is no highway pollution and no road or air traffic. But you will find all of the amenities that you need nearby. You are as close to lost in the wilderness as is comfortable while living in a modern home that was built to host you in harmony with the elements. Wonders abound here, where you can watch as a family of scarlet macaws flies past a three-toed sloth hanging in the trees. Or peer from a distance as an ocelot or jaguarundi crosses your path. This is a wilderness paradise within a functional network of communities and an awe-inspiring location for a true getaway. Those who choose Chontales don’t need everything to be paved or for the roads to be illuminated by streetlights. Driving on the local highways is great, even at night. Lines are painted on flat pavement and reflectors keep traffic in bounds. But within the community of Chontales, the well-maintained dirt roads are just that, nothing more. That means that at night time, you can rest in the peace of complete darkness. Or you can stay up and see incredible starry skies on clear nights. Those who choose Chontales also don’t need to have a supermarket around the corner. When living in Chontales, day-to-day shopping is most often done in Palmar. Even people from Uvita travel to the Palmar BM Supermarket for better prices and selection. Shopping in Palmar averages around 20% less than Uvita’s BM in price, mainly because there are more local and less expat clientele. Palmar’s variety store, Hermanos Mora, also has the best selection of produce in the region. And the two full-service gas stations and banks make Palmar an all-in-one errands destination. International travel has also become faster and simpler for those living near Palmar, thanks to the newly-expanded domestic airport. The recent additions of an air-conditioned terminal and an illuminated runway will allow for more scheduled daily flights to take-off and land between the Southern Zone and the capital, San Jose. Many people choose to travel by domestic flights, which cost around $110 per person to fly from San Jose to Palmar and takes only 20 minutes (the cost is less if you are a resident of Costa Rica). This regional upgrade means that getting to the airport in San Jose from your home in Chontales can take less than an hour in total. Palmar is also the gateway to Sierpe and the Osa Peninsula — two of the region’s most important biodiversity zones. Sierpe’s extensive mangroves are home to an enormous ecosystem that includes crabs, dolphins, caymans, crocodiles and hundreds of bird species. Boat tours along the Sierpe river are a popular way to relax and take in the sights of the fascinating wildlife. The Sierpe river flows into the Pacific Ocean and daily boat tours can be organized to Caño Island for snorkeling or Drake Bay for sport fishing. Divers around Caño Island can swim near humpback whales during their mating season between July and October. Visitors enjoy how close Chontales is to adventure activities. It is almost easier to be in Chontales than Uvita, which is where many of the local tour companies have their offices but end up traveling south past Chontales for zip lines and boat tours. Chontales is the fastest-growing community in all of the Southern Zone. Development in Chontales began around six-and-a-half years ago in 2013 and since then, five or six new homes are constructed every year. Prior to that, there was very little foreign investment in this region. The first people to purchase property in Chontales arrived in an area with nothing but newly-carved roads and jungle. They had to hike through the bush to choose their favorite location. There are now around 35 homes in Chontales, with more being built on a regular basis. Thanks to recurring visitors and new recommendations, nearly half the homes in Chontales are regularly used as vacation rentals. According to local property managers, there aren’t presently enough rental properties available in Chontales to meet the international demand for vacation rentals in this area. Frequent visitors know to book three years in advance for their favorite properties because they want to be in Chontales. Once you arrive in Chontales, the distance to anywhere else no longer matters. The feeling of being immersed in nature is monumental here and just coming here has inspired different choices and changed many lives. And yet, because it is relatively unknown to the wider world, the prices for homes and properties in Chontales still reflect the growth of this region. Chontales’s jungle-covered mountain valley landscape feels wide open with its many green zones between properties. Chontales was planned in such a way that property views are not closed in by the mountain roads and almost every subdivision has excellent views of the Pacific Coast and the Talamanca Mountains. So hop in your four-wheel drive, head up the sleek mountain roads and travel past the expansive Mamon Chino farm that shines red between July and November. You have arrived home. 
Location
Community
Nature
Amenities
Investment
Welcome Home to Chontales, Costa Rica
May 12, 2023
Financial independence and early retirement (FI/RE) are two linked dreams that have become a reality for many who choose to retire early in Costa Rica. When you think retirement age, you probably think of someone in their late 50s or 60s. While this has been the standard age for decades, people who strive for FI/RE retire much earlier, usually in their 40s, 30s, and even 20s. Imagine for a second that you are able to afford your dream life in Costa Rica, no matter your age. Creating your plan for financial independence and early retirement can involve kicking back on the pristine beaches of the Costa Ballena most afternoons with a cooler of beer, warm friends and a colorful sunset. Perhaps learning how to surf on Costa Ballena's consistent breaks might be your way of maximizing the extra hours offered by our early morning, vivid blue sky sunrises. You, too, can live your most vibrant life by focusing on your health while managing your wealth from within a growing real estate and rentals market. Economies are changing all over the world. Resourceful people are choosing to be more self-sufficient. When it comes to obtaining lasting financial fulfillment from a long-term career at one company, our trust is waning. Instead, people who FI/RE are choosing to focus on building investments and passive income streams so that we can live our best lives as early as possible. Financial independence is typically defined as having enough income (from investments, passive businesses, real estate, etc) to pay for your reasonable living expenses for the rest of your life. You have the freedom to do what you want with your time (within reason). Working (full or part-time), hobbies which generate income, or other activities are optional at this point. There are three main paths for achieving FI/RE: “Financial independence ultimately means that you can shape your life without taking money into consideration,” said Tanja Hester, a recent FI/RE graduate and founder of the website Our Next Life. “Most of us have to consider our finances in nearly every decision we make or maybe even make decisions solely based on money. But once we reach financial independence, we get the freedom not to be bossed around by what we earn or what we have saved.” Retiring overseas can provide a more fulfilling and less expensive lifestyle. Compared to some of the more popular retirement destinations within the United States, Canada, and Europe, South Pacific Costa Rica can be much less than half of the cost of living with the right FI/RE strategy. There are a number of reasons to FI/RE in Costa Rica. Our South Pacific region, locally known as the Costa Ballena (Whale Coast) is a great example of a growing real estate and rentals market. Just in the last 5 years, tourism has grown by nearly half a million visitors. For a country of only 4 million to receive over three million foreign visitors last year is impressive and the trends in ecotourism are pointing to continued growth. To accompany this growth in tourism, there are increasing examples of entrepreneurs who have chosen Costa Rica as a part of their investment strategy. Below, we will focus on our top three reasons why we recommend Costa Rica as a safe financial plan for financial independence and early retirement (with caveats). Residing in Costa Rica is not the least expensive place that you can choose to live abroad. But if you are from any major city in Canada, the United States or Europe, you will likely pay significantly less for property taxes in Costa Rica. The average three-bedroom ocean view home situated in the gorgeous mountain communities above Uvita, Costa Rica costs around $700,000 (this number skews high because the incredible view lends itself to high-end luxury homes). Regardless, this works out to around $1800 annual property taxes for a beautiful, modern home with a dazzling ocean view. Compare this to paying $8100 USD in annual taxes for a similar property in the popular retirement communities of Lagos, Portugal. Or nearly $10,000 USD for a standard three-bedroom home in Orange County. Ouch. Reduce your living expenses on everyday things like healthcare, food, water, and electricity. Many couples who live in Costa Rica spend less than $25,000 annually while renting a home in Ojochal, Costa Rica. Learn self-sufficiency by spending more time doing things for yourself. Our Costa Ballena communities are still growing and so it is not always possible to find that part of that person who can help in a pinch. It is often that we end up waiting or finding solutions for ourselves. Many who FI/RE in Costa Rica end up becoming more resourceful and growing their skills in daily maintenance and typical repairs. Our growing Costa Ballena communities are seeing significant increases in expats and tourists over the last five years. This means that real estate can be a truly viable option for achieving FI/RE with the help of your investments in Costa Rica. Most real estate investors who FI/RE will want to sell their real estate investment after growth of around $100-$150k. Despite seeing a few inflated prices in the local real estate market, our recent sellers who have also bought their properties in the past few years have seen considerable growth in quality property value over the last five years. Those entrepreneurial enough to build can expect to pay around $125/sq.ft for today's beautiful modern builds (blueprints, building permits, pool and landscaping installations, furnishings and appliance costs are additional). Place that lovely new home on a gorgeous, two-acre, ocean view lot in Dominical and you have yourself a recipe for real estate investment growth in our Costa Ballena real estate market. Our Costa Ballena rentals market is thriving with many of the regions best offerings seeing an average of 70% annual occupancy rates. Some recent buyers of ours are seeing immediate rental returns of 8-10%, which is comparable to the US stock market average returns for a far more fun investment opportunity. Imagine receiving a steady rental income from a place that you truly enjoy visiting, too (in the off-season, if you don't want to impede your maximum FI/RE pace). Many investors prefer investing in real estate because it is a tangible asset you can use. The purpose of moving to Costa Rica for a vast majority of us was to enjoy a healthier lifestyle. Here, you can experience more travel, adventure, and fun within your neighborhood. There are numerous natural wonders to visit in and around the Southern Zone of Costa Rica. This is a place where life can feel like you're on holiday every day thanks to the warm sun, fresh air and plentiful, beautiful wildlife. In the Costa Ballena, we live in a part of the world where it is easy to feel inspired; to wake up and seize the day, every day. We live in a community where small business people feel supported by their local community. Many have turned their hobbies and passions into fruitful entrepreneurship. Handy gardeners may turn their crops into successful small businesses by selling jams, pickles, cheeses, and bread. And skilled craftspeople have found a sizable market of people looking for something new and exciting. No matter your passion, Costa Rica is a place that welcomes you to explore your potential. Not every financial plan is a good plan, no matter the location. Every investment decision requires careful consideration. There are often the right ways and wrong ways to invest your money. Expert advice is essential for those who are not educated in an investment market and Costa Rica is unfamiliar ground for most people. Talk to our knowledgeable agents who are also experienced investors in Costa Ballena real estate. Please contact our office to learn more about our local real estate and rental market trends and the full cost of living in the Southern Zone. Stay tuned for next week’s article about a few Osa Tropical Properties clients who have found FIRE in Costa Rica. What is financial independence (FI)?
Why choose Costa Rica for FIRE?
Spend less/save more
Earn more
Boost your quality of life (while cutting your budget)
Caveats to achieving FIRE in Costa Rica
May 11, 2023 in Real Estate in Costa Rica, Tips for Buyers, Tips for Sellers
In December of 2018, the Costa Rican government approved a new tax law that includes the addition of a capital gains tax in Costa Rica. According to the law, the new capital gains tax will be implemented on July 1, 2019. This tax will incur a 15% charge on the capital gains generated when selling a property in Costa Rica. In the event someone had bought a property before July 1, 2019, there is a possibility of only incurring a one-time, reduced tax of 2.25% of the total sales price, instead of 15% on the capital gains. It is up to the seller to work out which is a better deal in this one-time scenario. In many cases, 2.25% will result in a lower payment. If you sell before July 1, 2019, your sale will not incur a capital gains tax. In this scenario, the buyer will also eventually be able to apply for the 2.25% alternative if it was more beneficial financially speaking than the 15% capital gains tax. Below are some key points to help you understand how the capital gains tax in Costa Rica may affect you: Our lawyers are advising that clients properly back up their land acquisition value by making sure their deed of purchase corresponds with the real purchase price. You will need to be able to back this up with official receipts of all costs and expenses incurred while making improvements to the property. This includes any remodeling, expansions, new constructions and so on. Your property costs will need to be formally approved as the “cost basis” so that the tax authorities only charge the 15% Capital Gains tax over the difference between a future total sale amount and the seller’s total cost basis. Our goal is to keep buyers and sellers of property in Costa Rica informed and updated. Subscribe to our newsletter to stay on top of everything you need to know about Costa Rica real estate in the Costa Ballena region. Thanks to Alberto Sáenz Roesch, from Invicta Legal Costa Rica, for supplying our office with the facts that went into this article.Special Cases
Avoiding the Capital Gains Tax in the Short Term
October 31, 2023
Safety and Security in Costa Rica. In an era of global unrest and uncertainty, finding a haven of safety and peace is an aspiration for many. One country that often finds its name in discussions about such havens is Costa Rica, for which it was recognized this week as “the most peaceful country in Central America and the Caribbean”
May 13, 2023 in Buying Process, Real Estate in Costa Rica, Tips for Buyers
Why are expats buying rental property in Costa Rica in 2021? Read on to find out about income, future planning, and the other reasons why Costa Rica rental properties are hot this year! A trend that we have seen in recent years is the rise of the income property. More often than not, Costa Rica property buyers are looking for something they can use for rentals. More than 50% of the buyers who have come through our real estate office this year are buying rental properties in Costa Rica that they can use for at least part of the year, or possibly live on the property and have rental cabins. Is this the right choice for you? Here is a list of questions that our rental property buyers ask us all the time. Can Americans and other foreigners legally buy property in Costa Rica? Absolutely! The great part about Costa Rica is that foreigners and locals have the same ownership rights when buying property. Foreigners can purchase property on a tourist visa without the need for residency or citizenship. Any foreigner, resident, or non-resident has the same rights as a citizen in Costa Rica, except for voting rights in presidential and municipal elections and can, therefore, purchase and own Costa Rica real estate legally. However, the one exception is that a foreigner can only own 49% shares in a property in a Maritime Zone (within 200 meters of the high tide line). In our experience of working with Costa Rica real estate buyers in 2021, this year, people are looking for a back-up plan. They have been thinking for some time about getting out of their current scenario of stress and overconsumption, and the Covid pandemic has presented a few new opportunities and reasons to want to branch out somewhere less crowded and more beautiful. These people may be close to retirement age but the majority of rental investors in Costa Rica are still working and raising families. They are looking to secure a safe investment and a possible place to live outside of their country while they keep working. Those who are able to work remotely tend to look for properties with multiple housing options so that they can live on the premises and rent out the vacant spaces. Life coaches, yoga instructors and practitioners of all types of therapeutic modalities are finding that Costa Rica provides powerful settings to host healing retreats. Many have chosen properties where they can grow food and invite guests into a beautifully organic living experience. There may not yet be any large, all-inclusive hotels in our South Pacific region of Costa Rica but there are an increasing number of investor groups who are scouting our region for income property opportunities to meet the growing demand. Expats generally want to be near other expats. This is not the case for everyone because there is a significant population of foreigners who move to Costa Rica to get away from everyone and enjoy living a simple life in a small Tico community. However, the majority of people want to live near people who are familiar to them in language and values. Towns that are populated with expats will attract more products and services that cater to expats, with international products, cuisines, and high-end services. Coastal communities like the Costa Ballena towns of Dominical, Uvita, and Ojochal are popular with expats who love nature, adventure, and peaceful living. There is not much traffic here and life is generally slower, which brings in a growing amount of local and international tourism from people looking for that type of escape into nature. Costa Rica is frequently ranked in the top 10 fastest growing tourism markets for a variety of reasons that include politics, environment, ease of travel, wildlife, and friendly people. All types of people are looking to spend time in this enlivening part of the world whose message of ‘pura vida’ (pure life) draws people in like magic. Digital nomads are a growing group of visitors to Costa Rica. The country’s government has recently passed a new law that allows Digital nomads to stay in Costa Rica for up to two years if they earn a foreign income of at least $3000 USD per month. Young entrepreneurs and families love this part of Costa Rica because the individualized rental opportunities have many value adds that make renting here unique. Maybe it’s a yoga pavilion, a five-star ocean view from bed, or a private waterfall on the property - these extras wow guests into wanting to stay as long as possible. When people first start thinking about buying property in Costa Rica, they will typically book a trip to visit. Oftentimes, people will visit more than once before committing to a location and a property. And those who have been visiting in recent years will note that rental prices in Ballena have gone up and rental availability is more and more scarce. Rental properties in Costa Rica can and do generate a net income but it is important to note that the return on investment doesn't typically happen right away. Unless you are buying a turnkey rental property at a premium price, you can expect to spend money on renovating to your standards and taste as well as upgrading the property’s amenities to current rental standards. We are in a strange time in the rentals market in Costa Rica because at a point in the year when it would normally be quiet, most rental homes in Costa Ballena are filled. They are, however, filled with long term tenants, most of whom are looking to stay for a while. Recent buyers who have purchased homes in Costa Rica are making 0.5% to 0.9% monthly return (6%-10% annual return on investment) on their purchase price at this time. One home recently bought for $450,000 is renting for $4000 per month to long-term renters. Another home purchased for $285,000 is charging $1500 to long-term renters. These rentals would normally cater towards short-term renters but because the pandemic has put a damper on international travel, rental home owners are not counting on intermittent traffic and would rather secure long-term renters for a lesser monthly income. When borders finally open, many rental home owners are likely to switch back to focusing on short-term renters. In recent years, rental property owners have netted an average return from long-term rentals. These figures can easily climb as high 8 – 10% ROI or more in the premium short-term rentals market. Although there are a few ambitious property buyers who want to build their dream property, most foreigners wanting an income property in Costa Rica are looking to buy something that they can use right away. A lot of homes on the market in the $200,000 - $400,000 USD price bracket will be looking at some renovations but you can still find ocean view homes with a pool in this price range if you are willing to put in some elbow grease. Simple cabina properties without too many frills can also be found in that bracket. When you move into the $400,000 - $600,000 USD bracket, you will find the conventional family vacation rentals that have a decent view, large and airy rooms, and a nice terrace with a pool. These types of homes are the bread and butter of our market today. From $600,000 USD and up, you start to get into the luxury property market. These are the fully-equipped homes with lavish amenities like a spa bath, infinity pool, gorgeous floral landscaping, and ocean views from every room. As you scale up the price ladder, the finishes become more refined, the spaces more grand, and the sky's the limit for how much luxury you can pack into a Costa Rica property. Most turnkey hotel properties start at over $1 million USD in Costa Ballena. Vacation rentals in Costa Rica come with many common expenditures that are important to take into consideration when investing. When it comes to Costa Rica taxes for Expats, both residents and non-residents are subject to taxation on the income they earn within the country. This means that any rental income you earn from a rental property in Costa Rica is subject to a 13% VAT tax. You will also have to declare your income in Costa Rica to the IRS or any other foreign revenue body that you are subject to. Income from foreign sources is not subject to Costa Rican taxes. Annual taxation on a property in Costa Rica includes the not high payment of property tax which is calculated at only 0.025% of property value. To learn more about taxes in Costa Rica for U.S. citizens, click here. Owners will quickly discover there are two roles that need to be filled—the property manager and the rental manager. Often, they are one in the same. The property manager deals with daily life on-site. They coordinate with the cleaning crew, the gardener, the pool service, the maintenance man, and everything else house related and local. The rental manager deals with the online listing across various vacation rental websites, the inquiries (the most important component), booking reservations, receiving funds, and potentially offering luxury services like organizing a personal chef and a masseuse. They may also arrange shuttle services and book excursions and tours. Many semi-retired owners or remote workers manage their own rentals in Costa Rica. It is easy to live comfortably on a Costa Ballena property and share it with renters and many people opt for this style of living to earn additional income. Those who choose to own a condo over a private residence in Costa Rica are looking for ease of ownership. They want to minimize maintenance costs and to have increased security. Many renters enjoy staying in a condo; however, this type of property is less popular with buyers who envision themselves eventually moving into the property. Condos simply are not representative of what makes life in Costa Rica extra special, which is primarily about living surrounded by nature. Costa Rica offers a program that grants residency through overseas investment, whether or not you plan to live here full-time. With an investment of at least $150,000 in local assets (this number decreased from $200,000 in 2021), foreigners can easily qualify for residency. This investor status also allows you to import up to two cars and a one-time shipment of household goods tax free. The short answer is no. The long answer is yes, but it’s not as straightforward as people are used to. Savvy investors will use a cash-out refinance, which involves pulling money from other investments they own to buy property in Costa Rica property. Others choose to use self-directed IRAs. These options are not available to everyone and require a large amount of preparation but they are successful. You may be anxious about not knowing the local culture and the language. But when you work with a great real estate team, you can expect that the process will be smooth and easy and that all of the most challenging parts will be explained thoroughly by your realtor who will guide you through the entire process. Buying property in Costa Rica is not the best kind of investment for highly leveraged and cash poor buyers. However, it can be a very good long and medium term investment for a more experienced and economically-stable buyer looking for rental income, long term price appreciation, and a lovely tropical family getaway or retirement home to sweeten the deal. Costa Rica is a very credit poor country and real estate therefore favors cash deals. Cash buyers with patience have access to rewarding investment opportunities with potentially high yields and value appreciation through renovation and remodeling. Pros Cons“Can expats own property in Costa Rica?”
“Who else is buying rental property in Costa Rica?”
“Where do most Americans buy rental property in Costa Rica?”
“Who rents property in Costa Rica?”
“Is owning rental property in Costa Rica actually profitable?”
“How much profit can I earn by owning a rental property in Costa Rica?”
“How much does it cost to buy a house in Costa Rica?”
“What are the common expenses when owning a rental in Costa Rica?”
“Do expats pay taxes in Costa Rica?”
“What regular tasks need to be done when owning a rental property in Costa Rica?”
“Should I buy a condo in Costa Rica or a house to use as a rental?”
“What are my options for residency if I buy a rental property in Costa Rica?”
“Can I get financing to buy property in Costa Rica?”
“Is it hard to buy and own property in Costa Rica?”
“Is investing in Costa Rica vacation property a good idea?”
“What are the pros and cons of owning rental property in Costa Rica?”
May 12, 2023 in Life in Costa Rica, Real Estate in Costa Rica, Tips for Buyers
Chontales, Costa Rica is a community with the common denominator of shared experiences among expats. It is evocative of what makes the Southern Zone of Costa Rica different, with its extensive green zones, filled with mountain springs and rivers, and its impeccable ocean and mountain views. Areas like Chontales are why we love it here. This is a community unlike anywhere else in the world and you are unlikely to find real estate elsewhere that looks like this. The international residents of Chontales have chosen this location with purpose. Having visited everywhere else in Costa Rica, those who find this remote-feeling community immediately know that they have found their home in Costa Rica. These people have decided that they don’t want to be anywhere else. They have stayed in Ojochal. They have friends in Uvita. And they vacation in Guanacaste regularly. But these are the people who are more adventurous and value their privacy and peace enough to travel that little bit further than everyone else. Vacation home renters love coming to Chontales, too. They fall in love from the moment they arrive and instantly feel their everyday tensions melt away. The Southern Zone of Costa Rica is not a place with a commodified cultural history. Most of the souvenirs that visitors to this region come away with are memories. And the sensory-rich memories that people create in Chontales keep them coming back again and again. Homes in Chontales are representative of the high-end clientele that find there way here, who are seeking a uniquely impressive experience. The houses built here tend to be well-constructed and detailed with high-end features. Since this is a relatively new community, most homes are designed in a modern style and include many of the luxury amenities that selective buyers and renters are looking for in the best vacation homes. The delightfully warm weather in Chontales invites outdoor living and many homes feature large, shaded terraces and infinity pools facing the fantastic ocean views. Visitors cannot get enough of this lifestyle that truly feels like the ‘pure life’ message that Costa Rica shares with the world. Accompanied by the development of the surrounding regions, tourism is very strongly positioned to continue a fruitful period of growth that has been trending now for five-years. Those who are adventurous enough to make it to Chontales, Costa Rica know that the journey is worth the destination. Chontales is a three-and-a-half-hour coastal drive south from San Jose’s International Airport, Juan Santamaria. Or you can head to the domestic terminal next door to the main airport and take a 30-minute flight to Palmar or Quepos. Traveling to Chontales is nowhere near as difficult as some people might imagine. The main development of Chontales is situated at an elevation that averages around 800 feet above sea level. It takes about 10 minutes to drive from the entrance of Ojochal to the entrance of Chontales. From there, it is a closer drive up to the homes in Chontales than it is in most of Ojochal and you’ll be traveling on impeccably-maintained roads. You can reach almost anywhere you need to go to in the Costa Ballena within a 30 minutes’ drive from your place in Chontales. Chontales is also located 15 minutes north of the commercial hub, Palmar. Palmar is among the oldest towns in the region and was once the site of the United Fruit Company’s vast banana plantations. There are still relics of this era in Palmar, such as the colorfully-painted heritage buildings leftover from those running the plantations, as well as the mystery that they uncovered when clearing the land. Costa Rica’s mysterious stone spheres are possibly the most ancient cultural treasures found in this country, and some have even been uncovered in the lushly forested hillsides of Chontales. The village of Chontales exists among a functional network of communities in what is locally known as the Southern Zone. Much of the community is made up of migrants from the United States, Canada, and Europe. Neighbors frequently take turns organizing get-togethers, hosting whoever is around at the time. Vacation renters, snowbirds, and full-time residents all get into the close-knit vibes of this welcoming community, which has every feeling at home as soon as they arrive. There is no crime in the community and no need for police to patrol the streets as a deterrent. The main deterrent is the location and its remoteness from most other communities in the area. Everyone knows everyone and they look out for one another. As a result, there hasn’t been a single crime in the 6 years since the community has been christened. Those adventurous enough to make it south to Chontales feel that they have earned the peaceful relaxation that this natural paradise offers. This is a place where fresh mountain air abundantly caresses the jungle’s canopy, bringing relief from the heat to the region’s hillside homes. The weather in Chontales is warm and fresh, with prevalent breezes alternating from the mountains and the sea. Those who are more sensitive to the cold may need a long-sleeved shirt in the mornings and evenings, although the temperature heats up to the mid-80s on most days of the year. As you arrive here from the first world and all of its daily stressors, Chontales offers a space away from humanity’s noise. There is no highway pollution and no road or air traffic. But you will find all of the amenities that you need nearby. You are as close to lost in the wilderness as is comfortable while living in a modern home that was built to host you in harmony with the elements. Wonders abound here, where you can watch as a family of scarlet macaws flies past a three-toed sloth hanging in the trees. Or peer from a distance as an ocelot or jaguarundi crosses your path. This is a wilderness paradise within a functional network of communities and an awe-inspiring location for a true getaway. Those who choose Chontales don’t need everything to be paved or for the roads to be illuminated by streetlights. Driving on the local highways is great, even at night. Lines are painted on flat pavement and reflectors keep traffic in bounds. But within the community of Chontales, the well-maintained dirt roads are just that, nothing more. That means that at night time, you can rest in the peace of complete darkness. Or you can stay up and see incredible starry skies on clear nights. Those who choose Chontales also don’t need to have a supermarket around the corner. When living in Chontales, day-to-day shopping is most often done in Palmar. Even people from Uvita travel to the Palmar BM Supermarket for better prices and selection. Shopping in Palmar averages around 20% less than Uvita’s BM in price, mainly because there are more local and less expat clientele. Palmar’s variety store, Hermanos Mora, also has the best selection of produce in the region. And the two full-service gas stations and banks make Palmar an all-in-one errands destination. International travel has also become faster and simpler for those living near Palmar, thanks to the newly-expanded domestic airport. The recent additions of an air-conditioned terminal and an illuminated runway will allow for more scheduled daily flights to take-off and land between the Southern Zone and the capital, San Jose. Many people choose to travel by domestic flights, which cost around $110 per person to fly from San Jose to Palmar and takes only 20 minutes (the cost is less if you are a resident of Costa Rica). This regional upgrade means that getting to the airport in San Jose from your home in Chontales can take less than an hour in total. Palmar is also the gateway to Sierpe and the Osa Peninsula — two of the region’s most important biodiversity zones. Sierpe’s extensive mangroves are home to an enormous ecosystem that includes crabs, dolphins, caymans, crocodiles and hundreds of bird species. Boat tours along the Sierpe river are a popular way to relax and take in the sights of the fascinating wildlife. The Sierpe river flows into the Pacific Ocean and daily boat tours can be organized to Caño Island for snorkeling or Drake Bay for sport fishing. Divers around Caño Island can swim near humpback whales during their mating season between July and October. Visitors enjoy how close Chontales is to adventure activities. It is almost easier to be in Chontales than Uvita, which is where many of the local tour companies have their offices but end up traveling south past Chontales for zip lines and boat tours. Chontales is the fastest-growing community in all of the Southern Zone. Development in Chontales began around six-and-a-half years ago in 2013 and since then, five or six new homes are constructed every year. Prior to that, there was very little foreign investment in this region. The first people to purchase property in Chontales arrived in an area with nothing but newly-carved roads and jungle. They had to hike through the bush to choose their favorite location. There are now around 35 homes in Chontales, with more being built on a regular basis. Thanks to recurring visitors and new recommendations, nearly half the homes in Chontales are regularly used as vacation rentals. According to local property managers, there aren’t presently enough rental properties available in Chontales to meet the international demand for vacation rentals in this area. Frequent visitors know to book three years in advance for their favorite properties because they want to be in Chontales. Once you arrive in Chontales, the distance to anywhere else no longer matters. The feeling of being immersed in nature is monumental here and just coming here has inspired different choices and changed many lives. And yet, because it is relatively unknown to the wider world, the prices for homes and properties in Chontales still reflect the growth of this region. Chontales’s jungle-covered mountain valley landscape feels wide open with its many green zones between properties. Chontales was planned in such a way that property views are not closed in by the mountain roads and almost every subdivision has excellent views of the Pacific Coast and the Talamanca Mountains. So hop in your four-wheel drive, head up the sleek mountain roads and travel past the expansive Mamon Chino farm that shines red between July and November. You have arrived home.
Location
Community
Nature
Amenities
Investment
Welcome Home to Chontales, Costa Rica
May 12, 2023
Financial independence and early retirement (FI/RE) are two linked dreams that have become a reality for many who choose to retire early in Costa Rica. When you think retirement age, you probably think of someone in their late 50s or 60s. While this has been the standard age for decades, people who strive for FI/RE retire much earlier, usually in their 40s, 30s, and even 20s. Imagine for a second that you are able to afford your dream life in Costa Rica, no matter your age. Creating your plan for financial independence and early retirement can involve kicking back on the pristine beaches of the Costa Ballena most afternoons with a cooler of beer, warm friends and a colorful sunset. Perhaps learning how to surf on Costa Ballena's consistent breaks might be your way of maximizing the extra hours offered by our early morning, vivid blue sky sunrises. You, too, can live your most vibrant life by focusing on your health while managing your wealth from within a growing real estate and rentals market. Economies are changing all over the world. Resourceful people are choosing to be more self-sufficient. When it comes to obtaining lasting financial fulfillment from a long-term career at one company, our trust is waning. Instead, people who FI/RE are choosing to focus on building investments and passive income streams so that we can live our best lives as early as possible. Financial independence is typically defined as having enough income (from investments, passive businesses, real estate, etc) to pay for your reasonable living expenses for the rest of your life. You have the freedom to do what you want with your time (within reason). Working (full or part-time), hobbies which generate income, or other activities are optional at this point. There are three main paths for achieving FI/RE: “Financial independence ultimately means that you can shape your life without taking money into consideration,” said Tanja Hester, a recent FI/RE graduate and founder of the website Our Next Life. “Most of us have to consider our finances in nearly every decision we make or maybe even make decisions solely based on money. But once we reach financial independence, we get the freedom not to be bossed around by what we earn or what we have saved.” Retiring overseas can provide a more fulfilling and less expensive lifestyle. Compared to some of the more popular retirement destinations within the United States, Canada, and Europe, South Pacific Costa Rica can be much less than half of the cost of living with the right FI/RE strategy. There are a number of reasons to FI/RE in Costa Rica. Our South Pacific region, locally known as the Costa Ballena (Whale Coast) is a great example of a growing real estate and rentals market. Just in the last 5 years, tourism has grown by nearly half a million visitors. For a country of only 4 million to receive over three million foreign visitors last year is impressive and the trends in ecotourism are pointing to continued growth. To accompany this growth in tourism, there are increasing examples of entrepreneurs who have chosen Costa Rica as a part of their investment strategy. Below, we will focus on our top three reasons why we recommend Costa Rica as a safe financial plan for financial independence and early retirement (with caveats). Residing in Costa Rica is not the least expensive place that you can choose to live abroad. But if you are from any major city in Canada, the United States or Europe, you will likely pay significantly less for property taxes in Costa Rica. The average three-bedroom ocean view home situated in the gorgeous mountain communities above Uvita, Costa Rica costs around $700,000 (this number skews high because the incredible view lends itself to high-end luxury homes). Regardless, this works out to around $1800 annual property taxes for a beautiful, modern home with a dazzling ocean view. Compare this to paying $8100 USD in annual taxes for a similar property in the popular retirement communities of Lagos, Portugal. Or nearly $10,000 USD for a standard three-bedroom home in Orange County. Ouch. Reduce your living expenses on everyday things like healthcare, food, water, and electricity. Many couples who live in Costa Rica spend less than $25,000 annually while renting a home in Ojochal, Costa Rica. Learn self-sufficiency by spending more time doing things for yourself. Our Costa Ballena communities are still growing and so it is not always possible to find that part of that person who can help in a pinch. It is often that we end up waiting or finding solutions for ourselves. Many who FI/RE in Costa Rica end up becoming more resourceful and growing their skills in daily maintenance and typical repairs. Our growing Costa Ballena communities are seeing significant increases in expats and tourists over the last five years. This means that real estate can be a truly viable option for achieving FI/RE with the help of your investments in Costa Rica. Most real estate investors who FI/RE will want to sell their real estate investment after growth of around $100-$150k. Despite seeing a few inflated prices in the local real estate market, our recent sellers who have also bought their properties in the past few years have seen considerable growth in quality property value over the last five years. Those entrepreneurial enough to build can expect to pay around $125/sq.ft for today's beautiful modern builds (blueprints, building permits, pool and landscaping installations, furnishings and appliance costs are additional). Place that lovely new home on a gorgeous, two-acre, ocean view lot in Dominical and you have yourself a recipe for real estate investment growth in our Costa Ballena real estate market. Our Costa Ballena rentals market is thriving with many of the regions best offerings seeing an average of 70% annual occupancy rates. Some recent buyers of ours are seeing immediate rental returns of 8-10%, which is comparable to the US stock market average returns for a far more fun investment opportunity. Imagine receiving a steady rental income from a place that you truly enjoy visiting, too (in the off-season, if you don't want to impede your maximum FI/RE pace). Many investors prefer investing in real estate because it is a tangible asset you can use. The purpose of moving to Costa Rica for a vast majority of us was to enjoy a healthier lifestyle. Here, you can experience more travel, adventure, and fun within your neighborhood. There are numerous natural wonders to visit in and around the Southern Zone of Costa Rica. This is a place where life can feel like you're on holiday every day thanks to the warm sun, fresh air and plentiful, beautiful wildlife. In the Costa Ballena, we live in a part of the world where it is easy to feel inspired; to wake up and seize the day, every day. We live in a community where small business people feel supported by their local community. Many have turned their hobbies and passions into fruitful entrepreneurship. Handy gardeners may turn their crops into successful small businesses by selling jams, pickles, cheeses, and bread. And skilled craftspeople have found a sizable market of people looking for something new and exciting. No matter your passion, Costa Rica is a place that welcomes you to explore your potential. Not every financial plan is a good plan, no matter the location. Every investment decision requires careful consideration. There are often the right ways and wrong ways to invest your money. Expert advice is essential for those who are not educated in an investment market and Costa Rica is unfamiliar ground for most people. Talk to our knowledgeable agents who are also experienced investors in Costa Ballena real estate. Please contact our office to learn more about our local real estate and rental market trends and the full cost of living in the Southern Zone. Stay tuned for next week’s article about a few Osa Tropical Properties clients who have found FIRE in Costa Rica. What is financial independence (FI)?
Why choose Costa Rica for FIRE?
Spend less/save more
Earn more
Boost your quality of life (while cutting your budget)
Caveats to achieving FIRE in Costa Rica