Top 10 “Do’s and Don’ts” of Buying a Home in Costa Rica

Top 10 “Do’s and Don’ts” of Buying a Home in Costa Rica

Are you dreaming about purchasing your next home in Costa Rica?  Before you make your move, check out these 10 crucial tips from venerated expert Sarah Breitlander, co-owner of top-ranked KRAIN Luxury Real Estate, which has four offices across the country.  Breitlander is arguably Latin America’s most widely recognized residential real estate agent, regularly appearing on leading broadcast programs including HGTV’s House Hunters International.

  1. DO consider ease of access to and from your new residence. It doesn’t matter how beautiful it is.  If you are struggling to get there  -- or even to spend time in your new home  -- you are not going to use it regularly.  What makes Costa Rica so appealing to U.S. and Canadian homebuyers, in particular, is that Costa Rica is, for the most part, in the same time-zone, making it easier to call or connect with loved ones back home, conduct business remotely, avoid jetlag, etc.  There are also numerous direct flights to and from major cities, including Miami, Dallas, Houston, Toronto, Chicago, and New York…many of which are three to three-and-a-half hours long (Costa Rica is closer than many people think!).  Even if you end up having one connection, you can get to almost anywhere you want to be in no time.  Another logistic to consider is how far you would like to drive from the airport once you arrive in Costa Rica.  Most of our clients prefer to be, at most, one hour to one-and-a-half hours from the airport to their new property.
  2. DO own your home in fee simple title. Just like in the U.S. and Canada, there are no leases or fractional ownership.  Here, you can own in fee simple title outright.  Also, the government does not differentiate between a Costa Rican owner and a foreign owner, so you are not going to pay more for a property or be saddled with higher taxes just because you are from another country.  The only instance where fee simple title does not apply is among beachfront properties.  Throughout Costa Rica, these listings are heavily restricted and only about 3% can be owned in fee simple title.  The rest are owned by the government.
  3. DON’T own the property in your personal name (you can, but shouldn’t). By following this advice, you’ll own 100% of a Costa Rican corporation that owns 100% of the asset.  This makes it considerably easier to make decisions about your property  -- everything from renovation work to changing your cable provider -- without having to physically be present.  If you own your home in a corporation, all you’ll need to do is sign a special and limited power of attorney to your property manager or attorney’s office…and you won’t have to fly here to make decisions about your property.  
  4. DO know that cash is king. The vast majority of our clients cannot take out a loan in Costa Rica from a Costa Rican bank because they are not area residents.  That said, these individuals either need to be liquid and have the cash on hand, or secure their financing wherever they are from and bring that cash down here to make a purchase. (Remember: All Costa Rica real estate transactions are made in U.S. dollars.)  Another wonderful service that many of our homebuyers are using to make their property purchases is a home equity line of credit on an existing U.S. or Canadian home.  Asset-based lending is also a prevalent choice as JPMorgan Chase and other banks can lend on your stocks or portfolio of assets.  Another resource not as well-known is a redirection of a 401k or an IRA.  There are a few caveats, however, including the amount of paperwork that’s involved, so start the process well in advance of traveling here to look for real estate.  Remember that companies in the U.S. specialize in the redirection of 401ks, so lean on these experts to avoid any issues.  And finally, keep in mind that by using this “redirection” option, you cannot live in Costa Rica full-time. The home purchase is meant to be treated as an investment asset (i.e., distinctly separate from your primary residence).
  5. DO know there are exceptions to every For instance, there are cases where cash is not quite king.  Only about 20% of homebuyers will consider seller financing, and that’s when the seller says: “I’m willing to sell my home to a buyer, and with half down at close, I’m willing to carry paper or finance the other half.”  If a seller agrees to this, the interest rate is negotiable, just like the price.  However, it’s a short-term loan.  Most homeowners will only want to carry paper for one to two years.   Another exception is pre-construction.  Often with pre-construction, you’ll need to make a deposit or a reservation, and then make incremental payments based on various benchmarks laid out by the developer.  The third exception to the “cash is king” rule is that we have some very new financing products in Costa Rica.  For instance, we recently had our first transaction in which a U.S. client was able to secure a loan from a Costa Rican bank and purchase a home here.  These options also have longer financing lengths, which could be perfect for some of our buyers.
  6. DO know that you will likely need a property manager. Many of our clients are not living here full-time and need someone to look after and protect their assets – everything from paying property taxes and utility bills to ensuring that the pool is being cleaned and the landscaping is being tended to.  You also want to ensure that your property manager is SUGEF-registered (Superintendencia General de Entidades Financieras or Financial Institution Superintendency), which is the law in Costa Rica.
  7. DO rent out your home on Airbnb or Vrbo, if you’d like. Your home can absolutely double as a short-term vacation rental in Costa Rica.  There are no restrictions imposed by the government or local municipalities.  A condominium development or HOA may limit those rights, but it’s quite rare.
  8. If you rent out your home, DO pay your income taxes! As mentioned in bullet No. 3, you are not the taxpayer, your Costa Rican “corporation” is the taxpayer.  We register you in Hacienda (Costa Rica’s IRS) as a taxpayer, collect the sales taxes, and pay that back to the government.  And if you are renting out short-term, you will need to file your income taxes on a monthly basis vs. a yearly basis.  At KRAIN Luxury Real Estate, we have an entire accounting department that can assist with this. 
  9. DON'T stress about learning Spanish before you move here. Many Costa Ricans are bilingual, so you can get by just fine without being fluent. We also have a number of clients who take virtual Spanish classes in their downtime (even over their morning coffee!) and become more and more comfortable speaking with each and every visit.  A second language isn’t for everyone, and it’s tougher for some to grasp than it is for others, so don’t be too hard on yourself!
  10. DO be mindful of residency status. If you live here, but don’t have residency status, you are on a three-month visa and will need to exit the country every three months.  You don’t have to go all the way back to your home city, but you will need to cross the Costa Rican border.

In short, Costa Rica is a vibrant destination with a seemingly endless list of possibilities for prospective homebuyers and their families.  KRAIN Luxury Real Estate looks forward to being a one-stop-shop for all of your property-purchasing needs and welcoming you to your new home. 

Want to see the video of Sarah’s advice?  Click here – and be sure to subscribe to our YouTube channel!

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