Do you want to know what are the benefits of owning real estate in Costa Rica? Perhaps you are about to retire and considering your plans. You may be wondering about your options for a second home, or an investment property. Buying real estate is always a big step, especially when you are purchasing property in a foreign country, as many who buy property in Costa Rica are doing. There are additional factors to consider, such as property taxes, insurance, and transporting any possessions out to your new home. At Peninsula Papagayo, Central America’s foremost luxury coastal retreat, we have abundant experience in helping expatriates from around the world, in particular North Americans, with the purchasing process necessary to invest in Costa Rica’s real estate market. We can share with you all the advantages that Costa Rican property owners enjoy.
What to Know About Owning Real Estate in Costa Rica
Costa Rica is a country featuring incredible biodiversity. Its territory is only the size of Lake Michigan, yet it contains striking volcanoes, crystal clear lakes, and verdant jungles. The beautiful landscape is both a major selling point and a cause for pride among the native Ticos. The country has twice been ranked best in the world for environmental sustainability by the New Economics Foundation Happy Planet index, and it was ranked as the greenest republic in the world in 2009. It’s also an incredibly content country, happiest in Central America and second only to Canada in the whole Western Hemisphere. All of these factors contribute to the country’s desirability, as does the general friendliness of the property market and regulations to foreign investment. With that said, there are a couple of factors that must be considered when purchasing or developing property in Costa Rica:
- Both foreigners or citizens face legal restrictions known as the Maritime Zone Law on purchasing or developing a property within 200 meters of the coastline at high tide. The first 50 meters adjacent to the coast are completely unable to be built upon, bought, or sold. The next 150 meters are more complicated. Some municipalities will lease this land for 20 year periods, with the possibility of renewal. However, foreigners cannot lease this land by themselves. They must split the lease with a Costa Rican citizen. In certain areas of Costa Rica, such as Tamarindo or Potrero Beach, foreigners can purchase beachfront properties within the 150 meter zone by themselves.
- Property titles are important in Costa Rica. Untitled land ‘for sale’ can be a scam, or at best, difficult to legally establish a legitimate claim over. Costa Rican law permits claims against untitled properties for up to 10 years after initial registration. It is best to purchase land that has a title that is fully registered, and save time, effort, and legal fees.
- Costa Rica is one of the most lucrative property markets in Central America: economically and politically stable, with a climate that lends itself to year-round tourism. These combined factors mean that a property can make profits in excess of its purchase price quite easily.
- It is rare for foreigners to be able to gain financing in Costa Rica. The most common ways foreigners finance their property purchases are home equity loans on prior property purchases, retirement funds, or simply direct savings. There are private financing options available in the country, but banks are strict in their requirements for foreign debtors.
- Costa Rican law requires that all parties purchasing property make a ‘due diligence report’: legal documentation to verify that your purchase is above board, including proof that back taxes for the property have been paid in full, that existing liens or mortgages on the property are known, and that the registration of the title for sale has been verified.
- Don’t forget about closing fees! While it is typical for buyer and seller to split the total closing costs, you should check that both of you are in agreement on this before completing the transaction. Closing fees may include deed transfer taxes (around 2.3%) and attorney fees (around 1.5%). Expect to pay around 3-4% of the property’s sale price in closing fees.
- One advantage of owning and managing property in Costa Rica is that property taxes are low, some of the lowest in the area: around 0.25% a year. Other ongoing costs are also very reasonable: HOA fees, utilities, security, landscaping and maintenance, maid/pool services, even luxury taxes. If you aren’t living in the property full-time, be sure to enquire about management companies that can shoulder the responsibility of protecting your investment for you. At Peninsula Papagayo,