Financing

Financing real estate in Costa Rica is not always an easy task, but possible.

Bank financing is similar to that found in other countries. However banks will only finance up to about 60% of their appraised value of the property and there are restrictions if the property is your home, a rental or commercial.

The down side to bank financing are the interest rates. Current interest rates on real estate loans are very high, 20% to 25% per year. Sometimes banks overstate the value of the real estate, allowing for possibly more than 60% loan financing.

An option used here is to obtain an interest only loan for 3 to 5 years. The interest is paid and a final payment is made for the principal amount.

Many United States and Canadian Banks have branch banks here. The possibility exists to arrange for a secured loan in the US or Canada and use the funds to make a "cash deal" here in Costa Rica.

One viable option, and one of the better ones, is to arrange for the seller to carry the mortgage on the property. Many sellers will, some will not. Your attorney or realtor can offer advise during the pre-search, qualifying process. One thing, do not look for 25 or 30 year loan terms. The normal is 5 to 10 years. GOOD NEWS…the interest rates can be much lower.

Taxes

MORE GOOD NEWS! Here's one of the real perks. Real Estate taxes here are painless. Taxes on a $250,000.00 home are about $250.00 per year. A full time gardner costs about $200 per month , a live-in maid is about the same.

Closing costs

The government collects a 2.5% transfer tax on all Real Estate transfers. The total taxes levied on a purchase are about 3.8% of the declared value. Neverthelss, a lot of homes are held as a corporation, so simply buying the corporation includes the Real Estate and no transfer tax, just a small attorney fee. The cost for setting up a new corporation, called a Sociedad Anonima, is about $500.00 Attorneys will usually charge $50.00 or less for a title search. Title insurance is also available here through Stewart Title Latin America,  your attorney or realtor can advise on this option.

 

People

Costa Rica has about 4 million inhabitants and an annual growth rate of about 2%. About 60% live around San José and in the central highlands. There are 75 people per square kilometer, which is the third highest in Central America. The majority of the population is mestizo, of European and indigenous heritage. The Caribbean region has a large percentage of African descendants which make up about 2% of the total population and originate from the Jamaican workers that came to work on the railroad in the late 19 th century. They were actively discriminated against in the beginning of the 20 th century and didn't earn equal rights until the new constitution of 1949. About 60,000 people are of indigenous heritage, which is not even 2% of the population. Most are living in the area of Talamanca on the southeastern coast or in any other of the 22 Indigenous Reserves that exist in the country. Additionally, about 1% of the population is North Americans, Europeans and Chinese that have decided to settle in the country, attracted to the Costa Rican lifestyle and culture.

What is the weather like?

Costa Rica lies in the tropics, between 8 and 11 degrees north of the equator. You can expect moderate temperatures but the rugged mountain chains' effect on factors such as wind and rain create many microclimates. Most people are surprised to learn that frost and ice can settle on some of the loftier peaks, such as Chirripó. Temperatures are somewhat higher on the Pacific side than on the Caribbean at the same elevation because clouds are more frequent. At sea level on either side, the annual average is always above 75°F (24°C). Some of the highest peaks average 54°F (12°C), though temperatures there can fall below freezing.

There is no spring or fall in Costa Rica. The seasons are called “verano” (summer) and “invierno” (winter). Summer is also called the dry season and stretches from December to April while the rainy season, or winter, lasts from May to November. However, temperatures vary from night to day more than between seasons. The difference in daily temperatures averages 14°F to 18°F (8°C to 10°C). From November to January, cool breezes from the north funnel through the mountains of North America causing a small drop in temperature. This is one of the few countries in the world in which polar air gets this close to the equator. The warmest months are March, April, and May, and the wettest months are September and October. Rainfall varies from less than 59 inches (1,500mm) to over 190 inches (4,800mm) during these months. The country's average rainfall pattern is in the range of 79 to 158 inches (2,000 to 4,000 mm). Precipitation can come in the form of a tropical downpour with impressive lightning and thunder (“aguacero”), steady rain or, the least common, continuous light rain for several days (“temporal”).

Even in the rainy season, it does not rain all day, every day. The rain usually begins in the early afternoon in the Central Valley and other highland areas and later in the afternoon it reaches the Pacific lowlands. Each season has its own beauty and unique characteristics. In the rainy season the wealth of flora is plentiful and copiously vibrant. The dry season witnesses the flowering of orchids, bougainvilleas, “reina de la noche” (queen of the night), as well as beautiful colorful trees that only flower at this time.

Rentals?

We can assist you with finding the right rental property.

What Is A Field Agent/Buyers ?

In Costa Rica, there is little governmental regulation of the real estate industry. In general, a good agent performs a more critical role than stateside agents as the system in Costa Rica is far less sophisticated. This puts more responsibility on the agent. For example, all listings must be thorougtly researched before a property can even be considered, especially in rural areas. In some cases, a field agent will not only show you property, but also work directly with the lawyer, the surveyor, the bank, the property owner, the national registry, the local municipality, and follow up on a host of details until the transaction is completed. The field agent sometimes represents both the buyer and seller so that when it's time to draw up the sale document, all issues are discussed and agreed upon before closing. Agents commissions are normally paid by the seller, but in some cases, the buyer and the seller may split the commission if agreed to in advance.

Should I Form a Corporation?

Many foreign individuals starting a business in Costa Rica or merely purchasing real estate for investment purposes decide to use a corporate entity as the owner of such. This decision is a very wise one, and it is what we highly recommend to our clients as the first choice to be followed.

Ownership through a corporation allows one to have flexibility and more predictability in areas ranging from estate planning (if share ownership is properly structured the investor can avoid his heirs a painful and lengthy long-distance probate procedure), tax management (as an example, rules on corporate expenses are more flexible than the ones on personal ones), and representation (shareholders meetings can facilitate granting special powers of attorney or other types of authorizations for many actions thus not requiring local presence in the country).

The first question often asked by our clients is whether to use (or form) a Costa Rican corporate entity or use one already existing and controlled by such individuals abroad. Our advice is, in most cases, the use of a local entity. Although foreign corporate entities can own land and engage in business activities in the country, registration procedures (both at the Public Register and with government entities) as well as negotiation of contracts with private parties can get complicated, delayed and/or find obstacles when they are involved.

In any event, if a foreign entity will be used, note should be taken that we normally recommend registering the foreign entity in the Costa Rican Commercial Register as a branch or at least to register specific powers of attorney for such also in the Costa Rican Commercial Register. Both cases require a special and formal procedure that may take several weeks.

As mentioned before, in the great majority of cases, the use of a local corporate entity is preferred. Although Costa Rican commercial law contemplates many types of corporate forms, only two of them offer the investor the comfort of having structures similar to the limited liability companies to which he or she may be used to in their countries of origin.

Such corporate forms are the “Sociedad de Responsabilidad Limitada” and the “Sociedad Anónima”. In both cases, shareholders are only responsible for their participation on the company's social capital and their own personal assets are fully protected and out of reach from any potential creditor the company may have.

Is There Good Insurance Available?

Yes and we recommend that you contact Garrett and Associates, www.segurosgarrett.com

Will I Find Good Health Care?

Costa Ricas public health system is guaranteed for every citizen and the quality of care is one of the highest in Latin America. Tourists will always be admitted in an emergency. Veterans can contact; www.healthvisionscostarica.com and their are several very good private hospitals; www.clinicabiblica.com and www.hospitalsanjose.net Dental work and cosmetic surgery to US standards can be found at a fraction of the cost.

Immigration and Residency

Costa Rica offers different ways to legalize your status: -temporary resident -pensioner – Rentista - Foreigner government mission For more legal information contact the costarican consulate or consult with an attorney who specializes in Residency.

If I decided to stay longer, can I get a visa while I am there?

You just have to leave the country for 72 hours, upon returning to Costa Rica the permit will be renewed automatically for 90 more days.
What is The Maritime Zone?

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 coastline in called the ‘Maritime Zone.' The first 50 meters are owned by the public, overseen by the govt. and are inalienable.

The remaining 150 meters of land is known as Concessions Property, and can be leased from the municipality for consecutive 20 year terms. Foreigners who are not residents are restricted to a maximum of 49% ownership of leased beach front properties. The remaining 51% must belong to a Costa Rican national or a resident, or a Costa Rican corporation. Check with your lawyer. About 95% of costal properties come under this law. An elite 5% or so of 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. It obviously has a higher value and is highly sought after.

Can I drink the water?

Yes you can. But bottled sping water is available in all grocery stores, big and small, and is recommended around the coast and in remote regions.

Will I be safe?

The fact that more than one million tourists visit Costa Rica each year does not happen by chance. Nevertheless, as in any other country, always use caution and good judgement. The Costa Ricans are a very friendly and helpful people but some types take advantage of this reputation and get tourists and residents to lower their guard. Avoid carrying large amounts of cash or important documents. Leave your passport in the hotel safe and make a copy. Stay alert, thieves usually distract their victims. Never leave luggage, cameras, bags or other possessions unattended in public places, restaurants, taxis or buses. Never leave anything of value in a parked car, even if it's locked.