Buying Costa Rica Real Estate
Buying Real Estate
By Staff
Oct 25, 2004, 14:58

If you can’t afford to buy a house in the U.S. or Canada, prices of decent homes in Costa Rica begin at around $50,000 with financing available for new homes if you become a resident.

You do not have to be a resident of Costa Rica to own property and you are entitled to the same ownership rights as citizens of Costa Rica. Ownership of real estate in Costa Rica is fully guaranteed by the constitution to all foreigners. This means your purchase here can be fully secured and safe.

The value of beach property has skyrocketed over the last decade due to the country’s increased popularity. Many people want to realize their dream of owning a beachfront lot in a tropical paradise.

For most foreigners the main beach development areas that are worth considering for retirement and/or vacation homes can be found in Guanacaste areas such as Flamingo, Junquillal, and Tamarindo. The Central Pacific beach areas around the towns of Jacó Beach, Quepos and Manuel Anotonio are also attractive. This Central Pacific area has great potential, as it is much closer to the Central Valley and San José. The new Villa Colón-Orotina and Quepos-Dominacal highways will have a huge effect on real estate values in this area, as it will reduce driving time to the Central and South Pacific areas.

Unlike Mexico, some beachfront property may be purchased. However, the 200-meter strip of land along the seacoasts is owned by the government and for public use. It is prohibited to build anything within the first 50 meters of the high tide line.

This zone is for the public and cannot be turned into a private beach. Also, you can no longer build within the next 50 to 200 meters of the high tide line—this is called The Maritime Zone, or Zona Marítima, — unless there is existing housing or a new tourism project involved. If this is the case, you can lease the land from the municipality, which is overseen by the Costa Rican Tourism Institute.

In theory foreigners cannot lease this land, but there are loopholes in this law. One of the ways to circumvent this regulation is by obtaining a lease through a corporation that is owned mainly by a Costa Rican. Check with a lawyer to find out how this works.

For your information, beachfront property is being bought-up fast, and the price of this and other prime real estate is soaring.

Before you move to the beach, you should know that for some people the novelty of living at the beach wears off fast. Visiting the beach for a few days or weeks is very different from living there full-time. The humidity, boredom, bugs, lack of emergency medical facilities in a few areas and the occasional inconveniences of living in an often out-of-the-way area are factors which might deter some from moving to any beach area. However, in general the positives in beach living far outweigh any negatives. Due to Costa Rica’s increasing popularity and improving infrastructure, beach property can be an excellent investment.

Besides homes and beach property there are also condominiums, farms, lots and ranches for sale at reasonable prices, depending on their location.

You will be pleased to know that no capital gains taxes on real estate exist in Costa Rica, so it is an excellent investment. You do have to pay yearly taxes, but they are low by U.S. standards. Yearly property taxes are on a sliding scale up to .25 percent of the stated value of a particular property.

Purchasing property in Costa Rica is very different than making a similar purchase in your home country. The laws of Costa Rica and property registration process can be somewhat confusing to a foreigner. Your best bet is to work with a broker (not all brokers are licensed in Costa Rica) or real estate consultant when looking for property like the people we recommend in the section “Finding a Broker”. When you find a property your broker can help you negotiate the price and explain your financing options.

If you decide to buy real estate, an attorney is absolutely necessary to do the legal work. We strongly recommend that your lawyer do a thorough search of all records before you make your purchase and make sure there are no encumbrances (gravámenes) on it. One of the biggest errors made by foreigners buying real estate is not properly researching the title for liens. You can obtain information about property at the Registro de Propiedades (like our land title office) in the suburb of Zapote, about five minutes from downtown San José by car or taxi.

You can also find the status and ownership of a piece of property and get any title documents and surveys you may need at this office. If the property is registered in the name of a corporation, the legal representatives must be verified, since they have power of attorney to make the sale. Information may also be obtained from the registry’s website at: www.registronacional.go.cr.

If the property appears free and clear of encumbrances, the lawyer can then proceed. Your lawyer should then draft a transfer deed or escritura to move the ownership from seller to buyer. In Costa Rica the buyer and the seller usually share the closing costs which normally run about 4-5% of the total purchase. A small real estate transfer tax or 1.5% of the actual value is included, a registration fee, stamps, notary fees, which vary and depend on the price of the sale. Title insurance is optional but advisable. It is common practice with many lawyers in Costa Rica to lower the actual amount paid on a sale to a much lower sum on paper to reduce land transfer tax. This can be risky and problems may arise later on.

Buying and registering a property in a corporation has many advantages, mainly, asset protection in the event of a divorce or a lawsuit. When a corporation owns the property, the sale or purchase of the company can be negotiated so you don’t have to pay property taxes or stamp fees. All you have to do is change the Board of Directors, the legal representatives of the corporation and transfer the shares.

Do not hire the same lawyer used by the seller of the property. Also, don not forget to check that you are buying the land from its rightful owner. Some owners have sold their land to several buyers. You can protect your real estate investment further if you talk with neighbors about water shortages, safety and burglaries in the area.

Remember, always see the property in person and never buy sight unseen. Don’t forget to see if you need special permits to build. Be sure to check the comparative land values in your area to see if you are getting a good deal. If you are thinking of living in a remote area, check to be sure that roads, electricity and telephone service are available.

If you cannot live on your property year-round, then you will have to hire a guard, caretaker or a reliable housesitter to watch it for you. Make sure boundary fences and limit signs are well maintained and visible. Visit the land periodically to check for squatters. They can be a real problem.

Undeveloped land is a prime target for squatter invasions. Once they establish themselves on your land it is difficult to get rid of them. If they occupy the land for a certain period of time they can claim it as their own. The sooner you get them off the land the fewer problems you will have. If you have to be an absentee owner, you can also have a friend or attorney stop by to check your property periodically. There is a trustworthy professional housesitting agency in San José which will watch your home while you are away. They are bonded and will provide references upon request. You may contact them at 256-7890.

We suggest that in some cases you rent for at least six months. However, whether you rent or buy first really depends on your comfort level. Make sure to buy where it’s easy to rent or sell your home or condominium in case you change your plans or in the event of a personal emergency.

To find a house or land to purchase look for a well-recommended realtor who can identify true market value. If you want to save money, look in the local Spanish newspapers La Nación or La República because prices are more realistic. Also, look around; go door-to-door in areas you like; and talk to other expats. Keep in mind that housing costs are much higher in gringo enclaves like Escazú and Rohrmoser. Be sure to remember that the farther away you live from San José and other cities the more you get for your money.

To find a good buy you should study the market. It is also a good idea to negotiate in colones since you will come out ahead in the long run as the colón continues to devaluate. This will make your home appreciate over time. Don’t depend too much on the newspaper. Talk to as many people as you can. Nothing works better than word of mouth for finding good deals. Practice your negotiating skills. Ticos love to haggle. You may be better off having a trustworthy, bilingual Costa Rican search for you and do your negotiating. Your realtor or lawyer should also be able to assist you.

Recently the Costa Rica Realtors’ Chamber opened the country’s first out-of-court conflict resolution center specializing in property disputes. They specialize in solving property disputes for both sellers and buyers within six months. The same process in the courts can often take up to 10 years or more to get to trial. Anyone in need of their services may contact them at Tel: 011-(506) 283-2891, Fax: 011-(506) 283-0347, or E-mail: caccbr@racsa.co.cr.