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Owning a Piece of Paradise

by Auriana Koutnik

The property experts agree: Real estate in Costa Rica is a good investment, and the market is heating up.

"Where else in the world can foreigners come to a country with no soldiers, a government that caters to investors and fee-simple real estate with no restrictions and where foreigners are entitled to the same ownership rights as Costa Rican citizens," points out Chaud Oskar Byers, a licensed realtor in Costa Rica for the past 31 years.

According to Robert F. Davey, Century 21 Marina Trading Post owner with offices in Flamingo Beach, Tamarindo, Jacó Beach and San José, "Costa Rica has proven attractive to investors for its relatively open investment and trade policies, as well as for being the most politically stable country in Latin America."

This peaceful little country, sandwiched between the Pacific and Caribbean coasts, offers potential buyers a wide range of choices: Developed and undeveloped mountain and coastal properties, forests and ranches, hotels and eco-lodges, city apartments and country cabins, beachfront condominiums and farms producing vanilla, pepper, coffee, orchids and lumber...even European-style castles are available to those with the means.

"Real estate prices have been flat for several years now, making it a great opportunity to take advantage of the investment potential of Costa Rica," Davey said, adding the country is currently recovering from a three-year recession in the wake of a tourism and development boom in the early 1990s.

Davey, a veteran 10-year realtor in Costa Rica, said signs of the market turnaround began in early 1998, and continue on the upswing. "Pre-bookings for hotels and rental properties are in the upper 80-percent range for all of 2000. The aggressive marketing plan of the former tourism minister is showing strong results, and the new international airport at Liberia on the Gold Coast region of Northern Guanacaste is busy with commercial and charter aircraft traffic," he said.

"Many North Americans and Europeans have relocated to and or invested in Costa Rica, and the signs of a strong reemergence of investors is here now," Davey added.

What's Available
"The biggest change in the real estate market during the past decade," said Chaud Byers, "is that prices dramatically increased as Costa Rica became more and more an international community...prices have doubled, or tripled, from 10 years ago."

Property prices range considerably. A 1/4-acre beachfront home-site ranges from $40,000 to upwards of $200,000. Beachfront homes range from $165,000 to more than $3 million, and seaside condominiums range from $54,000 to $250,000 or more, depending on size and location.

"Just inland, maybe a 10-minute walk to the beach, two-bedroom, two-bath homes start at $35,000 and single-family lots start at $6,500," Davey said. "View lots start at $25,000 and view homes at $85,000."

But the inexpensive land deals Costa Rica was once known for are a thing of the past, although particularly good deals on property may still be found at the public land auctions announced in the official publication of the Costa Rica government, "La Gaceta," Byers said.

Other inexpensive deals can be found in more remote areas, such as the northern Osa Peninsula in Costa Rica's southern region.

Alexander Del Sol, who owns property and has been living in the southern zone for more than five years, says: "Down here, some areas have already seen property values go up by 300 percent! Not in the northern Osa Peninsula, however. The pressures are building, fincas are going up—and selling—but you can still get a fabulous piece of property with public electricity, year-round spring water, ocean views and sometimes even a house for less than it would cost you for a one-bedroom condo in California," he points out.

"For example," says Del Sol, "Fifty acres of rainforest/open-field mix, entrance on the main road with electricity, two streams, level building sites on a bluff and on the beach, panoramic gulf views, etc. How much? $120,000. But the seller is hungry..."

Popular Places
Most realtors agree that the best turnover and fastest-selling properties are generally located in the Central Valley, and along the Pacific coast.

Although the Central Valley covers only about five percent of Costa Rica's land mass, it contains the bulk of the country's population. Thus, it should come as no surprise that property prices around the greater metropolitan area (including San José, Alajuela, Heredia and Escazú), where many of the country's businesses and services are located, tend to be some of the highest in the country.

"A standard rule of thumb is the farther away from town you go, the lower the price of property," says longtime resident Christopher Howard, author of The New Golden Door to Retirement and Living in Costa Rica.

The exception to this rule, of course, is the central and northern Pacific coast, where a number of major developments are underway.

Coastal Properties
"Beach property along the Gold Coast where we work has proven to be a sound investment," says Donna Osborne, vice president of marketing for Coldwell Banker Affiliates of Central America. Osborne and her husband Jack own Coastal Properties Coldwell Banker offices in Flamingo, Tamarindo and San Jose. They have worked full time in real estate and development in the western Guanacaste area for the past 11 years.

Many foreigners come to Costa Rica wanting to buy beachfront property, a little piece of tropical paradise they can call their own. They should be aware that coastal properties are governed by different, and more complex, regulations than other properties.

The area comprising the first 200 meters above high tide mark along Costa Rica's coastlines is called the Maritime Zone. The first 50 meters are owned by the public, overseen by the government, and are inalienable.

The remaining 150 meters of land is known as Concessions Property, and can be leased from the corresponding Municipality. Foreigners who are not residents are restricted to a maximum of 49 percent ownership of leased beach properties. The remaining 51 percent must belong to a Costa Rican national or resident, or a Costa Rican corporation," Byers said.

Davey said about 95 percent of Costa Rica's coastal properties are land that comes under this law. An elite five percent or so of coastal land has ownership dating back as far as the era of Spanish land grants. This small percentage is fully titled and not subject to concession law or regulation.

"This five percent, obviously, has a higher value and is highly sought after," Davey said.

If you purchase a concession property within the Maritime Zone, you must make payments to the local Municipality, who also governs the coastal zoning and building regulations, along with the Costa Rican Tourist Board (ICT), the Ministry of Public Works and Transportation (MOPT) and others.

Real Estate As An Investment
"Buying real estate in Costa Rica can be a rewarding experience, on both a financial and personal level," Davey said. "As a property owner in Costa Rica, I personally have enjoyed the benefits of numerous different properties."

Byers agrees. Purchasing property in Costa Rica is "always a good investment," he said.

"The big fluctuation in property prices that you see in the United States, for example, doesn't happen in Costa Rica. Prices either go up, probably at least 10 percent per year, or at worst stay the same, and when the market's bad, property doesn't go down in value, you just have a harder time selling. The turnover slows down," Byers added.

In the last decade land prices have probably skyrocketed the most along the country's Pacific coast, tripling in some areas. In northwestern Guanacaste, Osborne has watched it happen.

"If you look at records from our office, they show that 10 years ago a quarter-acre beachfront lot on Playa Grande, for example, could have been purchased for $45,000 (U.S. dollars). Today, the same lots range between $140,000 and $175,000," Osborne said.

To increase the success of your investment, Osborne says, you must "define what you are looking for...a vacation home, a return on your investment, etc. Most investment properties where Jack and I work are income-producing rentals for owners who are not using the property. These will work well as long as you have good property management."

Davey agrees. "It is crucial to make informed decisions about your proposed investment. If, as a buyer, you have made a decision to invest in property in Costa Rica, it is in your best interest to work with a well-established and reputable firm, preferably one with affiliation in the United States, Canada or Europe."

In Costa Rica, there is no financing available to foreigners as there is in North America or Europe, for example.

"Banks traditionally do not loan money to foreigners for the acquisition of fee-simple properties, unless they are residents," Byers said. "If we had financing down here the way we do in the States, with a good interest rate, for foreigners I'd probably be selling 100 houses a day!"

Foreigners can opt to buy property with an existing mortgage and assume the mortgage payments, and foreigners who have legal residency generally qualify for bank loans if they can provide evidence of a job and adequate income.

According to Osborne, the best type of financing available is owner financing. "The local banks here are starting to step up to the financial plate, but the interest rates are still high according to U.S. standards," she said.

Interest rates will depend on whether the loan is in colones or U.S. dollars, and whether the lender is a public or a private institution. Current rate ranges between 25 and 29 percent in colones, and between 12 and 15 percent in dollars.

Legal Concerns
"The best advice I can give anybody doing any kind of business transaction here is to cross your t's and dot your i's," says Byers.

Leading realtors in Costa Rica say the law requires an attorney to complete the land transfer. The lawyer must perform a title search at the Public Registry to make sure the property is available for sale, check its boundary lines and other specifications and ensure it is free of liens.

Davey said the attorney is required by law to perform a title search, but you can also check the public records independently, Davey said, adding the National Registry's computerized system for properties is considered the most advanced in Central America,

"This means your purchase here can be fully secured and safe," he adds. "Ownership of real estate in Costa Rica is fully guaranteed by the constitution to all people, including foreigners," and very importantly, full title guarantee is also supplied by Stewart Title, which is fully backed by the parent U.S. company."

The only company of its kind in Costa Rica, Stewart Title Insurance also performs title searches and offers insurance coverage. "Title insurance is optional but advisable," Davey said. "As always, take good legal advice on any purchase, investment or transaction."

Osborne pointed out that Stewart Title "gives prospective buyers confidence by working with an American standard in the title business."

Using An Agent
A good real estate agent can offer client protection and attorney referrals, point out good buys and investments, negotiate the purchase price and terms and explain pertinent regulations and legal concerns. A bad agent could leave you wishing you'd never set foot on Costa Rican soil.

Be aware the real estate industry in Costa Rica is not regulated as it is in the United States, although this situation is steadily improving.

"Now, with the U.S. franchises opening in Costa Rica, there is a push for realtors in Costa Rica to clean up their act and handle business in a clearly professional manner. By doing business in accord with legal standards and procedures you do nothing but raise the integrity of real estate in this country," Osborne said

Compulsory licensing for real estate brokers is not required in Costa Rica, but using a licensed broker may help protect your interests.

"Personally, I wouldn't work with an agent who is not licensed," Byers said.

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