We closed on our first property, Condo Boom, in October 2017 and then on our second property, Casa Salita, just under two months later. Why two investments so close together?
Having expanded our real estate portfolio from two rentals in our first eight years of investing to two or three per year since then, we’ve seen the benefit of volume. When you have two properties and one goes vacant, you feel that 50% drop in income. When you have 10 properties and one goes vacant, your income drop is only 10% — not insignificant but much easier to sustain.
Now, volume doesn’t fully explain our interest in buying two in Costa Rica specifically, since we already had other rentals in the United States providing a cushion. You don’t need multiple properties to be in the same place to get the benefit of volume, so reaching for volume is a general reason that could explain buying anywhere. We bought in Costa Rica specifically for three reasons:
- We found the right property
- We specifically wanted to diversify our real estate internationally
- We wanted to complete our FIRE Escape Plan B
The Right Property
If there wasn’t a property that fit our investing criteria, we wouldn’t have invested. Don’t fall in love with any one place or property or idea. Decide your criteria in advance, and definitely before you look at anything and get excited.
For us, the property must cash flow and have strong prospects for appreciation. This particular property also had some interesting features where we could generate some additional revenue.
This property was also diversified from our first property – different type of structure, different town, different rental profile – so it was right for us on its own, and in relation to our portfolio.
International Diversification For Real Estate
We feel pretty diversified with our investments overall – we have some paper assets and some real estate; and our paper assets are spread across the world. However, our real estate, except for Condo Boom, is concentrated in the United States.
Sure, we have four states represented in three different parts of the country, but it’s still all in a single country. Frankly, the US market worries me. I’m not sure why the stock market keeps going up when I look at the underlying economics. The real estate markets we are already in have been good to us, but they seem pretty frothy as well.
We wanted to readjust our portfolio, and the idea of investing even more money in the United States – whether paper or real estate – made us nervous. Staying in cash and waiting for inflation to just diminish its value also didn’t make sense.
International real estate felt right, but we also didn’t want to take on a whole new country.
Completing Our FIRE Plan B
Our first Costa Rica purchase was not just an investment, but also an escape hatch for us. If we decide to leave the country, we have a place we can readily move into.
Now, with our second purchase, we have a source of income to support us that is completely separate from our business, real estate, and paper assets in the United States. We can live in one property and live off of the other. Of course, since we don’t need a Plan B at the moment because we’re happily working and living in New York City for now, we are able to just bank the income from both places!
There is no financing in Costa Rica, so we don’t have mortgages on either property. Property taxes in Costa Rica are low – a quarter of one percent of the purchase price. Insurance isn’t cheap because these are fully furnished rentals, but still not as high as in the United States. Utilities are also not cheap but these costs tick up when there are renters, so there is income to support the costs.
We can easily carry both of these places with a conservative number of rental stays. So now we have our two to support full financial independence if needed or desired – one to live in, and one to live off of!
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This post is part of a series on the purchase of our 2nd property in Costa Rica:
- Why We Timed Two Investments So Close Together (current post)
- Why This Rental Property Is Worth More Than Just The Rents
- Using A Self-Directed Retirement Account To Buy Real Estate
We are Scott and Caroline, 50-somethings who spent the first 20+ years of our adult lives in New York City, working traditional careers and raising 2 kids. We left full-time work in our mid-40’s for location-independent, part-time consulting projects and real estate investing, in order to create a more flexible and travel-centric lifestyle. 
Financial independence and early retirement is not something we originally focused on, but over time realized it was possible. Our free report, 
