Why Real Estate In Costa Rica Is A Good Investment

With two properties and over 20% of our net worth invested in Costa Rican real estate, our actions and wallet have clearly answered Yes to the question, “Is real estate in Costa Rica a good investment.”

I’m not a financial advisor so I would never give another person specific investment advice anyway, and just because real estate in Costa Rica works for us doesn’t mean it will work for you.

For us, to be comfortable it made sense, we answered Yes to the following questions:

• Should we invest in real estate? (As opposed to something else)
• Should we invest in real estate in Costa Rica? (As opposed to somewhere else)
• Should we invest in real estate in Costa Rica now? (As opposed to another time)

Why Real Estate

Started Out With Traditional Savings Planning

We started out like the typical saver and investor you read about in the personal finance magazines off the newsstand. We went to college, secured corporate, management-track jobs, maxed out our 401k’s in equity investments, and expected to let compounding do its magic till we were 60 and could retire off of our paper assets.

However, by age 35 I had it with corporate life, and while Scott came to this realization later (at age 46), we realized that we wanted more flexible, entrepreneurial careers, and to retire earlier – i.e., the new retirement which is based on time not money.

Luckily, we had kids early in life. We would be empty-nesters by age 48, and a household of two can be more flexible than four IF we can figure out how to fund our new retirement.

Real Estate Solved Several Problems With Traditional Savings

Our traditional efforts to save money for an early retirement had several downsides, and tapping into our 401(k) assets before retirement age would come with early withdrawal penalties and the risk of outliving our assets, a gamble we don’t want to take.

To be able to leave your job before retirement age, you (a) need to have a source of cash flow, (b) unrelated to your day-to-day job, and (c) reliable enough that you would feel secure enough to leave your job behind.

Real estate emerged as a strategy for cash flow investing outside of our retirement plans. We started small by purchasing a second home after our 2nd child arrived, parlayed that a few years later into a few rental investments, and then with a few more years of experience under our belts, we accelerated our investing in 2013. (For a longer version of our financial independence / retire early story, subscribe to our newsletter).

Now with our younger child on the verge of attending college (empty nest = target new retirement date = next year), we have a real estate portfolio of 15 properties that provides cash flow every month. While there are occasional big repairs or evictions that dip into our monthly cash flow, our real estate income is reliable, and we could sit at home and do nothing going forward, and continue to receive that income.

Currently, I work (running a flexible coaching and consulting business) while Scott focuses on our real estate, because we choose to maintain a certain lifestyle and we are still supporting our kids. But we know that with the real estate portfolio we have built up and the dependable cash flow it provides, we could pick up today and live entirely off our real estate income in Costa Rica.

For us, investments in real estate, done slowly over time while educating ourselves, has proven to be the investment strategy to enable financial independence, and by the time we were ready to buy real estate in Costa Rica, we were very comfortable with real estate as our strategy.

Ask Yourself

You have to come to your own decision about the appropriateness of real estate as an investment in your portfolio:

• How much do you have to invest?
• Do you have special knowledge or skills that give you an advantage in reviewing real estate investments?
• What other options are you considering (e.g., equities) and what are the risk/ reward profiles of these other investment options?

Why Real Estate In Costa Rica

We own 15 properties now, and the first 13 of them were purchased within the United States, not Costa Rica. I would still build our portfolio the same way today, if I had to do it over again. I would start in a market I know (in our case, the United States) over leaping into something more complex (in the case of Costa Rica, with its different laws, language and economy).

Getting Comfortable With Real Estate Abroad

Once we had our 13 properties in the United States, we turned our attention abroad, primarily because:

• We knew we wanted to travel all over the world, and investing in real estate abroad would give us property we could use for fun and for investment.
• From a diversification standpoint, international real estate gave us exposure outside of the United States economy and currency.
• Given the rising costs of staying in the United States, we’ve seen new trends like the growing usage of platforms like AirBNB and the increase in US retirees settling in other countries, so international real estate investing is just becoming more common.

The first step was to narrow down to countries of interest. We focused on Costa Rica and the Philippines, and chose not to invest in the Philippines. Then we decided to focus on beach areas of Costa Rica, and picked the Gold Coast areas of Tamarindo and Langosta.

Getting Comfortable With Costa Rica Itself

We’ve heard a lot about Costa Rica over the years, and one of my friends settled there over 15 years ago, started her family there and has stayed!

Costa Rica also has a reputation for an easy going population, a huge emphasis on biodiversity and being eco friendly, and also has had no military since December 1948. Considering all factors, Costa Rica has landed the #1 spot in the Happy Planet Index, for the third time!

Here are some of the things we particularly like:

• Lots of Americans already  visiting and living in Costa Rica. In fact, according to this piece analyzing 2015 travel data from the Department of Commerce’s National Travel and Tourism Office, Costa Rica was the 11th most popular international country traveled to from the US.
• The weather is great. While hot, it can be reasonably cool in the mornings and evenings, and often times there is a nice breeze. The weather is simply amazing from November through April which is the dry season in much of the country, and even in the rainy months, much of it is limited to a stray heavy shower here and there rather than full day washouts.
• The location is very close to the United States. Direct flights from New York are about 5 hours, similar to trips across the country, and from Florida, where we intend to spend a lot of time starting next year, the flights are only 2-3 hours. Also, US Currency is readily accepted most everywhere, so Costa Rica is really an easy spot to get to and to spend money
• There are so many beautiful empty beaches. We’ve focused on the Guanacaste region, which has many beaches along the pacific coast, and while some are more tourist focused, even the crowded beaches are not very crowded. If you are willing to travel just a little bit, you’ll be able to find absolutely beautiful beaches that are virtually empty. Also, regulations in Costa Rica make it very difficult to build with 200 meters of the beach, so over development of beach areas is not likely.

Costa Rica can’t seem any more welcoming giving it’s unofficial motto of “Pura Vida” or “Pure Life.” In Costa Rica, Pura Vida seems to be more than just a saying, but more of a way of life, and we’ve already thoroughly enjoyed the time we’ve spent there.

Making Our Own Personal Connections To Costa Rica

We knew that there would be a steep learning curve – a new real estate market, different banking and tax laws, and a foreign language. However, we had pieces in place that made real estate in Costa Rica a good investment for us:

• A close friend of ours has been living as a US expat in Costa Rica for over 15 years and counting – she settled there so seamlessly, which was comforting.
• We quickly made key contacts in the real estate community that would make navigating the real estate market feasible for us, even from abroad.

Ask Yourself

You have to look at how Costa Rica fits into your portfolio and life:

• Do you have a specific connection to Costa Rica? Maybe you know people there or speak Spanish or have visited often.
• Is Costa Rica a place you’re willing to visit regularly to get your investment up and running? Since our first trip to Costa Rica in March 2017, we have visited 3 times together and Scott has taken 2 solo trips.
• What makes Costa Rica preferable to other geographies? You need a solid strategy for investing in a geography outside your home field.

Why Now Is A Good Time To Invest In Real Estate In Costa Rica

While we were looking at the practical steps of investing in Costa Rica, Costa Rica as a whole kept popping up in the media as a hot spot for tourism, medical travel, and retiring abroad. Costa Rica is increasingly getting positive attention:

• Forbes: Costa Rica is International Living’s #1 place to retire abroad in 2018 in their annual Global Retirement Index, up from #4 last year
• US News and World Report names Costa Rica the #4 location in South America for a vacation
• Huffington Post: Costa Rica is listed as one of the top 5 medical tourism locations, with a comparison of sample surgery costs in the United States and Costa Rica.

Personally, as we’re nearing the empty nest stage, we will be traveling significantly more as early as next year and having property in Costa Rica will make it easier to stay there for long periods of time. Also, we had enough in our investment portfolio that we could make cash purchases and not have to worry about financing international real estate but still have significant assets invested elsewhere. Finally, we simply found good value properties to buy when we started looking.

Our intention was to buy one property, gauge its performance for a couple of years, and then consider another international real estate investment, probably in another country. However, the second property we bought in Langosta way ahead of our initial schedule represented a unique value, an investment worth more than just the rent, so we ended up with two purchases within a few months of each other.

Ask Yourself

You have to look at your own timeline to see if real estate in Costa Rica is a good investment right now:

• Do you have the time, money and mental bandwidth to go to Costa Rica and scout for properties?
• Do you have a team in place in Costa Rica to help you with the purchase, legal, property management and other facets of real estate investing in Costa Rica?
• Are you seeing good deals?

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Real estate in Costa Rica can be a good investment depending on your situation and priorities.

For us, it has been an incredible experience. We have strongly performing investments. We have real estate business trips that feel like fun getaways – even visiting the bank is an adventure! It has only been a little over a year since we started our Costa Rica FIRE journey, and yet our story has already been featured in two media outlets.

So, is real estate in Costa Rica is a good investment? For us, the answer is an unequivocal yes!