Properties in Costa Rica Blog

As the pandemic peaked and businesses stopped, many experts said that the real estate market would be one of the last to return to normal. After the pandemic, it surprised everyone with how well it had done.

The road to wealth is frequently meandering and investing in real estate does not come with a map. However, you can take steps to set yourself up for success and place yourself on the correct path. A wonderful place to start is by paying attention to the best tips for investing in real estate from experts and prosperous investors.

We got thirteen property investment advice or tips from professionals in the industry. It doesn’t matter if you are new to the industry or buying your third rental property, you must follow these steps to succeed in this industry or get a property investment service. Without further ado, let us get started.

Why Invest in Real Estate?

Risk and preparation are involved in real estate investing, but the payoff can be substantial. Some of the most compelling arguments in favor of buying property are listed here. (Remember, growth in value and income is not assured. The more you know about the houses and areas you are considering, the better your odds of making a profit). Here are a few reasons people invest in real estate.

Continual Cash Flow

Owning a property increases what you receive monthly. It does not matter if you want to invest in a commercial or residential area, the potentials are high. You can lease your property to tenants. You get rent payments monthly.

Excessive Profit

You can sell your rental properties for significant profit if their value rises with time. You must choose the right real estate business to get those high profits.

Stability over Time

You can hold a property for several years while waiting for it to appreciate because it is a long-standing investment. As you wait for the property’s value to increase, you may also make a monthly income by renting out your real estate.

Tip 1 – Find rental homes in areas that are growing

Rental properties are a fantastic way to become engaged with real estate investments. Look for them in new neighborhoods. Developing communities provide tax breaks and room for growth for prospective buyers. Those who invest in real estate in upcoming areas increase their profits and ensure their revenue matches their costs.

Tip 2 – Diversify your investment portfolio

People often say that the best property to invest in is the one you already own. Even though it is essential to know the area where you are investing, you limit your opportunities to make money when you look for small areas.

If you think about investing in other cities and states, you will have a broader range of options and, in the end, better chances. Investing in a wide area also gives you more ways to spread out your money and protects your portfolio from the fluctuation of local markets.

Tip 3 – Don’t overstretch yourself

You can be highly profitable for an extended period and still go bankrupt if each rental is heavily mortgaged. You will have a decent mix of safety and stretching resources if you maintain some of your rental homes for free. If you execute it correctly, a few longer-than-expected openings or cash flow dips do not have to spell the end of your career.

Tip 4 – Conduct your research

Your reputable and compensated experts may advise you to avoid holding real estate in your portfolio altogether in many situations. They frequently offer the same stale justifications, such as being “illiquid” or “very management-intensive.” Depending on your circumstances, they may have merit, but that is not the primary justification they want you to avoid real estate.

You do not pay stockbrokers to invest in real estate. They have no incentive, no commissions, and no work to do. That is, except they wish for you to buy a pricey, non-traded REIT, in which case you will immediately understand their genuine motives. You must conduct your own research to determine the future cash flow in the real estate industry.

Tip 5 – Consider renting a single-family home

Your best chance of finding the right tenant is with single-family homes. Everyone would like to have a home of their own. Some people cannot or do not want to own property.

Tip 6 – Have several escape routes in mind

Another tips for investing in real estate is to never purchase a home unless you have several departure options. Consider flipping as an example. By purchasing properties with substantial quality numbers, you can reduce your risk factors if you are starting or do not have much spare money.

If you are investing in flips and the market collapses, but the property might generate a negative or level cash flow if rented out, you will lose a lot of money. You can either create wealth by maintaining them as rentals or reduce your risks when things go wrong by flipping starter homes.

Tip 7 – Contact escrow to complete your deal

When you start escrow, the deal is not yet finalized. If you are purchasing off-market, the seller may be a little worried about the transaction and if everyone involved is a real estate agent.

Introduce yourself and let them understand that you will draft the paperwork as soon as the escrow/title firm contacts them. The seller will feel more secure because of the third-party confirmation.

Set the anticipation up front that you would check in on the situation regularly during the escrow term and be sure to do so.

Tip 8 – Learn about your market

It is crucial to research and get expertise in your chosen market before making a real estate investment. You can recognize the current market situation and make plans if you are well-informed on current trends, including any drops or gains in average rent, crime rates, income, and interest rates.

Constantly estimating and anticipating market changes will make you a more successful real estate investor.

Tip 9 – Expect vacancies

You want to prevent a vacancy gap in your cash flow unless you have significant finances. The only way to achieve this is to add it to the cost of transporting the asset. Most property owners must assume that not every month of the year will bring in money.

For some, that translates into a 2% decrease in sales, while for others, it may represent a 10% decline. The trick is to evaluate the property and the renter type and then account for the revenue shortfall you should anticipate yearly.

Tip 10 – Think about investing in non-traditional real estate

Never forget that buying single-family houses or apartment complexes can both be profitable real estate investments. You might make investments in warehouses, industrial space, storage facilities, and office buildings. These all bring in rental income.

With a triple-net lease, where the tenant is responsible for basic insurance and paying the property taxes and upkeep, you might be able to lower total costs when renting offices and industrial facilities. Your investment then generates consistent cash flow with minimal out-of-pocket costs.

Tip 11 – Think of your investments as businesses.

Investing in real estate is a business; like any other business, it needs to be carefully planned, carried out, and managed. People who are good at every level run the best companies. It is one property investing tips you should never forget as a newbie.

Those who do not realize this will have trouble or even fail. No matter how big or small you want to do your real estate investment service, you must run it like a business to succeed.

Tip 12 – Create a budget and a timetable 

A general rule of thumb to apply if you are a new investor is to reserve at least 50% of your budget. When you renovate properties, one problem can often lead to another, and your expense usually ends up being greater than you had planned.

A leaky pipe, for instance, might need to be replaced, the mold damage cleaned up, and the drywall replaced. The same rule applies regarding timeline: if you have a 60-day deadline, plan on the project taking 90 days. Additional costs result in additional time.

Tip 13 – Buy cheap

A dividend-paying stock and real estate investing are comparable. The return on investment depends on how inexpensive you purchased the item. However, you must consider the return on investment. 

You can spend little money to purchase a modest home in a dangerous area, but you will not make much money from it either. Therefore, focus on acquiring land or an off plan rather than a house. As the year progresses, you buy cheaply, save money, and get more.

Conclusion

Those who are serious about their financial futures would consider real estate an efficient portfolio. One of the best ways to get the financial independence you want is to become a successful real estate investor.

Real estate investing tends to yield more cash flow than the stock market. However, you must exercise caution and listen to real estate investment advice from professionals. With these tips for investing in real estate, you can get started without becoming a statistic of those who have filed for bankruptcy.

Author Name: Liran Koren

Real estate is a popular and often safe way to start investing, and when it comes to real estate investments, a vacation home can offer a lot of personal and financial benefits. With current housing rates being at an all-time low in an incredibly active market, it may be the perfect time to consider investing in a vacation home to rent out. From creating another source of income and building equity, to simplifying your getaways and planning for retirement, owning a vacation home rental has great potential for rewards. If you’re considering adding a new property to your real estate portfolio, here are the top reasons why you should consider buying a vacation home rental as your next real estate investment.

Great Income Potential

When you buy a vacation home and rent it out, you can easily create a short-term rental revenue stream. The income from your rental home can supplement your normal salary, allowing you greater income potential. Short-term vacation rentals also typically have a higher return on investment than long-term rentals in metropolitan markets. While the cap rate for a long-term rental is usually around 4-5%, short term rentals often have a cap rate of 10% or higher, making a vacation home a potentially lucrative real estate investment.

Home Appreciation

As with most smart real estate investments, your vacation home is likely to appreciate in value over time, especially if you make smart choices when it comes to renovations and refurbishing that can increase the value of your home. That way if you do decide to eventually sell your home, you have the potential to make a hefty profit.

Personal Getaway

Owning a vacation home allows you to have your own personal getaway home. While you may want to rent your home out most of the year, you can carve out time to visit while it’s empty for an easy and affordable vacation that can even save you money. 

Market Opportunity is Endless

While successful long-term rentals usually exist near major cities, vacation homes can be scattered all along with the globe, even in more secluded areas with vast income potential. Whether you’re looking to invest in a beach home, mountain home, or a cabin in the woods, there are endless opportunities and bound-to-be renters who will likely find your vacation home the perfect getaway. 

Build Equity and Reduces Homeowner Costs

Having multiple revenue streams and building an income property portfolio is an important investment goal for the majority of second homeowners. However, owning a home can come with many expenses such as mortgage payments, utilities, insurance fees, property taxes, HOA fees, and maintenance costs. Owning a rental property has great potential at counterbalancing these homeowner costs from the very beginning, even for first-time buyers. Consistent rental income can cover these monthly homeowner expenses and even help pay off the home in a shorter time than if you had chosen to live in it, allowing you to eventually create a nice profit from the rental. Vacation rental owners may also be eligible for specific tax deductions which can also help increase your potential income. 

Plan for Retirement

Whether retirement is a few years away or a few decades, owning a vacation rental can help you plan for a stress-free future. When choosing a vacation home to rent out, it’s important to think about where you may want to retire — a beach, in the mountains, or in your favorite city. As you move closer to retirement, the amount you may owe on your vacation home will be smaller or may even be completely paid off, allowing you to eventually make it your own home.

The dry season is known as high season in Costa Rica and as the buzz of the Christmas holidays and New Year’s eve winds down, the second week in January starts the best time of year to visit Costa Rica. The overcrowding has died down as the snowbirds traveling on winter holiday return home and peak prices drop making it an ideal time to visit the country. The weather is perfect with highs around 86-94 degrees Fahrenheit and lows in the 70s. In the Northwest the “Papagayo” winds from the cooler air moving down from North America displace the moist, warm, tropical air creating an ideal climate. When rain does strike, it is brief late afternoon shower and for the most part, the weather is ideal.

The Central Valley and Pacific beaches are booming this time of year and it’s also the peak time for tours and outdoor activities. There are festivals, vibrant fiestas, bullfights, dancing and live music at different events all over the country. Wildlife is abundant and active making it one of the best time of year for an ecotourism adventure. From wildlife spotting to whale watching to hiking to kayaking through the mangrove forests, it really is an ideal time of year for the outdoor enthusiast to travel. You can also catch the turtles making their way to shore to lay their eggs.

If the beaches are not for you, you can venture to Costa Rica’s breathtaking rainforests and hike the volcanoes. Arenal is a popular spot to visit for volcanoes, explore caves, horseback ride through the lush terrain, and soak in geothermal hot springs. Take a canopy tour through the wondrous cloud forests or go white water rafting or explore one of the many wildlife preserves. Eco-adventures are a plenty for the nature enthusiasts.

For surfers, up and down Costa Rica’s Pacific and Caribbean coasts are some of the best breaks in the world. Both beginners and pros can catch waves here. There are also many resorts offering yoga and mindfulness retreats for those seeking a wellness vacation. Visitors looking for a cosmopolitan beach vacation can travel to popular Tamarindo or one of the nearby surrounding communities where there is a Four Seasons and world-class golf nearby. Boaters can also find paradise here traveling up and down the coast.

January through February are seven of the best weeks to travel to Costa Rica. It’s a peak time but still not overrun with tourists. It’s Costa Rica’s summer. The weather is perfect with plenty of opportunities to relax and have fun. The weather during this peak tourist season makes it ideal for exploring rainforests and relaxing on beaches too. There is also a good selection of rental properties available during this time of year. If you are considering buying a property, it’s the perfect time to explore the country to find the perfect match.

The magic of the Costa Rican lifestyle is being discovered by people from all over the world, recent graduates, retirees, and families included. The laid back lifestyle found here is desired by many, but possibly even more desirable are the tax advantages of living here.

Income Taxes

Here only those earnings made by an individual within Costa Rica are subject to taxes. This means income taxes concern only those who have a job or business in the country. Please note, that a vacation home rental is considered a business and will be prone to taxation. Pensioners, social security collectors, freelancers, telecommunicators, and online business owners all have the advantage of not having to pay taxes on their income. Those individuals working in Costa Rica must pay a 15% progressive tax based on their monthly earnings. The tax is levied on both employment source income and non-employment source income. For self employed parties the taxes are anywhere between 10 and 25%.

Business’s income tax is determined on the difference between the gross income and allowable deductions. For businesses making under $25,000 the rate is 10%, under 50,000 is 20%, and more than 50,000 is 30%. Businesses in free trade areas are exempt from paying taxes.

Sales Tax

When a property is purchased there is a 1.5% transfer tax on the value of real estate purchased, typically paid by the purchaser. This tax must be paid at any point where the property is transferred to a new owner. Sales tax is 13% and is levied both at importation and at the sale. It is levied on all goods with the exception of food products, medical products, and a number of other items. Sales tax must be collected by all business owners from their customers and transferred to the government.

In Costa Rica investors are exempt from paying capital gains taxes on real estate investments. Costa Rica has the maximum tax rate set around 30 percent with no city or state taxes and low property taxes.

When to Pay?

Taxes are assessed provisionally based on the previous year’s results and payable each quarter. The fiscal year runs from Oct 1 to September 30th of the next year. The balance of due taxes is then payable on December 31st.

While Costa Rica has excellent tax regulations in place, US citizens are required to pay income taxes wherever they are living. US income tax returns must be filed yearly through the American Embassy. All income earned abroad must be declared, but you can claim a tax exemption up to $78,000 on foreign-earned gross income. Married couples can claim up to $144,000 of foreign income, but you cannot combine the two exemptions. While this may be a downer, the US gives all citizens living abroad a 2 month extension to file their taxes. Be sure to contact your account for further information and help in ensuring you file your taxes properly.

Costa Rica is known for its sustainable initiatives and for having a lifestyle which is close to nature.  Throughout the country one will find 27 protected national parks, with wild secondary and primary rainforest, mangrove lined waterways and protected cloud forests.  Solar powered homes, fresh water sources, organic farming and off the grid land parcels, make up a variety of properties which are integrated into the local communities. The country is one of the first in the world with the goal of carbon neutrality and residents share like-mindedness toward conservation of the countries natural beauty.

In July and August of 2016, Costa Rica ran on 100% renewable energy from a combination of hydro-electric power, wind, solar, and geothermal. Homes which are living off the grid are becoming an easier and more economic option with constantly evolving energy storage and institutional support. The movement towards living in an ecologically sustainable way dominates much of the country’s culture and community initiatives are constantly growing to meet the needs of local towns.

The options for construction of sustainable homes is also evolving, with focus on using materials like bamboo, earth and locally resourced hardwoods, optimization of natural airflow, orientation with the sunlight and minimization of toxic materials.  Building in tune with the natural forest and terrain with little impact on the surrounding ecology is not only “eco-friendly“, but it allows an owner to truly experience all the jungle flora and fauna have to offer, proving a living experience which is rarely found in this world.

Throughout the country, there are thriving sustainable communities where people can purchase land and build a home. One of the many examples is Finca Bellavista, which is a sustainable treehouse community. This is a reflection of one type of construction one can utilize here in Costa Rica.  Through the use of natural materials and focusing on the integration with nature, one creates an unforgettable retreat.  Not only that, this Finca covers 600 acres in the Southern part of Costa Rica’s lush rainforests, protecting the natural resources found within.  The best thing about Costa Rica is there are many opportunities for a private property which encompasses these same values.

For investors who see the value in protecting nature, there are properties which can generate a return.  Green hotels, yoga retreats, or eco-adventure destinations, these businesses tend to thrive in a country focused on ecotourism.  In 2015, an estimated 2 million tourists generated over $2.45 billion in revenue and accounted for 12% of the country’s GDP.  Sustainable rural tourism is an example of ecotourism which is growing in popularity due to its environmental initiatives and support of local economies.  Private wildlife refuges which can provide guests with an unforgettable experience and put them up front and center with the wildlife of Costa Rica in their natural environment are a priceless commodity in this world.

The beauty of investment in this country is; if you are looking for something that meets luxury standards while also supporting carbon neutrality, we have it. If you are looking for something a little more rustic, truly immersed in nature, you can find it here as well. Costa Rica in all its diversity supports a wide variety of preferences and lifestyles. The country and its people strive to remain in balance with the natural world and if you share this philosophy, you too will find a place in this important movement.

Costa Rica commercial real estate continues to perform well in 2016. Non-residential buildings grew at an annual rate of 18%. The widespread expansion and new construction of commercial buildings in beach communities and San Jose is driving much of the growth of the commercial real estate market. Costa Rica’s economy is also performing well. While most of the world is experiencing a dramatic slowdown or economic turmoil, Costa Rica’s economy is expected to grow 4.2% in 2016. This positive forecast is tied to record high demand. Throughout San Jose, new buildings are going up to meet the demand. Vacancy rates are low and rents are rising. Costa Rica’s economic that make Costa Rica very attractive to North American and European expats.

The real estate market is also being driven by the increasing number of foreign companies with offices in Costa Rica. Five foreign owned companies are expanding their operations in Costa Rica this year. A total of 39 foreign investment projects in service industries and manufacturing technology already created an estimate 12,000 new jobs in 2016. An additional 2,000 jobs are expected to be created by the end of the year. Sykes, Amazon, Pfizer and Manpower are among the corporations expanding their operations. The commercial real estate market continues to benefit from this economic expansion through foreign investment, which not only creates demand for more office space but also restaurants and local businesses.

Beyond a strong commercial sector in San Jose due to the recent job growth and corporate expansion, the beach towns are also thriving as increasing numbers of expats purchase property in these towns. Guanacaste, Papagayo, Arenal, Puntarenas, Manuel Antonio, Dominical on the Pacific Coast, and Puerto Viejo, Punta Uva, Cocles and Manzanillo in the Caribbean side are the most popular towns. These local towns are big gathering places for the surrounding residents and tourists who can come together to enjoy music, dine or shop as needed. As the population expands, the commercial market demand continues to grow with it. Costa Rica is also one of the few Latin American countries experiencing rising immigration levels. The increase in the number of people living in Costa Rica with disposable income is a big factor driving the Costa Rica commercial real estate boom.

All this said, Costa Rica is an excellent investment choice at this time. The commercial real estate market is strong. There are 30 retail shopping centers scheduled to be built this year. With rental values rising, commercial property owners are well positioned to take advantage of the market. At this point, the market does not show signs of a slowdown making it a good investment opportunity.

The Southern Zone is known for its laid back vibe and three of the most magical towns in Costa Rica: Dominical, Ojochal, and Uvita. Rainforests, legendary surf spots, long stretches of beaches, an abundance of rich terrain and a laid-back atmosphere define this area. It’s a rare place on earth. While development has picked up recent years due to improved roadways and access to the area, the development and conservation regulations ensure this area will never become a noisy resort town with overbearing skyscrapers.

Along the Costa Ballena lie Dominical, Uvita, and Ojochal. These three Southern Zone coastal towns are off the radar hot spots. Dominical is a legendary surf spot. Uvita is a commercial center. Ojochal is a small village in the jungle. Deep blue waters meet the towering mountains and green jungles forming a breathtaking landscape that is raw, pure and clean. This is a place for adventurers and those seeking a more laid back lifestyle.

Dominical

Dominical attracts surfers from around the world each year to its legendary waves. The waters here are not for swimming and the waves are legendary. Making the trek to Dominical is a surfer’s pilgrimage. This haven beyond its legendary surf is an attractive laid back village with a few restaurants and shops. Surrounded by estuaries, mangroves, and marshes, the area has an abundance of wildlife. It’s now home to an estimated 700 residents. The pristine environment and warm culture draw surfers and eco-tourists. With lots of yoga and various types of holistic health practitioners mixing with the local culture harmoniously, it is a beacon for wellness. Vegan, raw food, and juicing are common here. Those seeking to live a more sustainable lifestyle flock here. In Dominical, there is time to reflect and just be.

Ojochal

Ojochal is a popular landing spot for expats from North America and Europe. It has grown into a culinary hot spot too. This coastal town is just 30-minutes south of Dominical. With hotels, restaurants, bars, doctors’ offices and a supermarket, it is a low-key Costa Rica town complete with the conveniences of modern life making it an ideal place to visit. With ATV tours, canopy tours, bird watching and mangroves to explore, there is no shortage of adventures and activities. For surfing, there is Playa Ballena and Playa Uvita nearby.

Uvita

Nestled in between Dominical and Ojochal along the Costa Ballena is magical Uvita. This town has a large supermarket and is probably the most developed area of the three places. Scuba diving, horseback riding, canopy tours and wildlife tours are all nearby. Uvita has grown famous for the hosting the annual music festival, the Envision Festival, which celebrates art, culture, yoga and sustainability each year in February. People flock to this small town in Costa Rica each year for the festival, which draws large crowds.

The magic and charm of these three towns lie in the quiet sustainable development, which protects the pristine ecosystems while also providing a level of comfort. The culture is laid back, health conscious and committed to wellbeing. There are few places left in the world that can match what the Southern Zone offers as a quiet refuge from the modern world for adventure, fun, and restoration.

As one of the most biologically intense countries in the world, Costa Rica has long been known for attracting people craving a more self-sufficient way of life. As one of the first countries in the world to be 100% powered by renewables, it serves as a mecca for those seeking to live in harmony with nature. The natural environment and climate is conducive to a sustainable lifestyle. Year after year people who want to grow their own food, be energy independent and have their own independent water supply move here. This trend shows no sign of slowing down anytime soon either.

From farms to eco-retreats to to permaculture to micro farms, there is a large, enthusiastic, committed community for sustainable living and green design here. The country is known for its eco-tourism, and it’s a major industry for this small country. As a country, Costa Rica was the first in the world to run 100% on renewables. What this trend reflects is a desire among the locals as well as incoming expats to simplify their lives. It’s about downsizing, simplifying in style, and living in harmony with nature. People crave a high quality life at a slower pace and Costa Rica delivers on that desire. The country’s commitment to the environment and protecting biodiversity means it supports the sustainable lifestyle new residents seek.

Costa Rica’s climate makes it conducive to living sustainably and the year round near perfect weather simplifies energy needs because the country does not experience large fluctuations in temperatures throughout the year. In addition, the climate also supports year round agriculture, which makes it easy for locals to grow and produce much of their own food. There is a lot of rich land available, and the relatively young housing stock means that homes tend to be simple yet built with current materials, and can easily be adapted.

Self-sufficiency is part of the culture. People purchasing property and homes here want to take more control of their lives and be able to manage their resources for a number of reasons. For some it’s simply about reducing cost of living, and for others, it’s forged through a deep commitment to living a more sustainable lifestyle, and for others, it’s about a lifestyle choice that allows for more independence. The available housing inventory offers plenty of attractive options for those seeking partial self-sufficiency to those seeking 100% self-sufficiency.

The fact remains there are a number of issues attracting North Americans and Europeans to Costa Rica. Self-sufficiency is a rich part of the culture and history; it’s not an idea people are struggling to grasp and adapt to as is the case for much of North America.These expats seek a simpler more balanced life, and Costa Rica is conducive to a self-sufficient lifestyle. It’s a top international destination when it comes to living a sustainably and finding a home to achieve that goal.

Costa Rica is known as the green country. As the country that has the majority of it’s rainforest protected and some of the happiest people in the country. As all countries Costa Rica is not perfect and if they had one crutch in their system it would have to be the Central Valley sewage system. The good news is that they are now in the works to bring a state of the art sewage treatment plant into the country between 2010 – 2030.

For those of you in the business world this might sound like a dirty investment but it happens to be one of the best investments you will find in these times. One option would be to look for a nice piece of land in Costa Rica and build your retirement home and after that you can invest in Costa Rica’s new sewer treatment plant. They are expecting this project to cost around 2.5 billion dollars.

The numbers are not out yet but over the next 20 years having an investment in this might be one of the most solid things to think about along with investing in some land in Costa Rica.