Investment Strategy Development

• Define your primary investment goal (appreciation, rental income, personal use, retirement)
• Establish your timeframe (short-term flip, medium-term hold, long-term investment)
• Determine your usage plans (full-time residence, vacation home, pure investment)
• Set your total budget (property + transaction costs + reserves + improvements)
• Define your risk tolerance and required return on investment

Regional Research

• Research climate patterns across different regions (rainfall, temperatures, seasonality)
• Investigate infrastructure quality (roads, utilities, internet, healthcare access)
• Analyze rental demand patterns in target areas (high/low seasons, typical occupancy rates)
• Understand regional price trajectories and recent market trends
• Research the expat/foreign owner community in potential areas
• Plan an exploratory trip to experience your target regions firsthand

Financial Preparation

• Establish a currency exchange strategy (timing, methods, accounts)
• Research international wire transfer options and associated fees
• Understand tax implications in both Costa Rica and your home country
• Prepare liquid funds for deposit (typically 10-30% of purchase price)
• Establish a reserve fund for unexpected expenses and carrying costs
• Consider forward currency contracts if investing substantial amounts

Expert Tip: Costa Rica has distinct microclimates that can vary dramatically even within short distances. The Central Valley offers year-round spring-like temperatures, while coastal areas are warmer with more defined wet/dry seasons. The Caribbean coast has different rainfall patterns than the Pacific side. Visit potential investment areas during both dry and rainy seasons if possible to experience the full climate cycle.

Important Note: Costa Rica has introduced more stringent beneficial ownership reporting requirements in recent years. All Costa Rican legal entities must now register their ultimate beneficial owners in the Central Bank’s “Registro de Transparencia y Beneficiarios Finales.” Non-compliance results in significant penalties. Ensure your legal advisor keeps your entity compliant with these requirements.

Banking Setup

• Opening a Costa Rican Bank Account: Possible but increasingly challenging due to FATCA/CRS compliance. Requirements typically include:
  • Valid passport and second form of ID
  • Proof of address in your home country
  • Reference letters from existing banks
  • Proof of income source or employment
  • Local telephone number and sometimes local address
  • Minimum deposit (varies by bank)
• Major Banks: Banco Nacional, BAC San José, and Scotiabank have the most experience with foreign clients, though all have tightened requirements
• Alternative Approach: Many investors use their attorney’s client trust account for closing and international payment services like Wise or OFX for ongoing expenses

Financing Options

While most foreign investors purchase with cash, some financing options do exist:

1. Costa Rican Bank Mortgages: Available but challenging for foreigners
   • Typically requires Costa Rican residency
   • Maximum 70% loan-to-value ratio
   • Interest rates 1-3% higher than for citizens (7-10% USD, 10-15% Colones)
   • Extensive income documentation and local credit history
   • Terms typically shorter than in North America (15-20 years maximum)
2. Seller Financing: More common and accessible option
   • Typically 3-10 year terms
   • Usually requires 30-50% down payment
   • Interest rates around 6-9% for USD-denominated loans
   • Secured by the property through a mortgage or trust
   • More flexible qualification requirements
3. Developer Financing: Common for new construction and pre-construction
   • Often structured as construction progress payments
   • Typically requires 20-30% initial deposit
   • May continue as short-term financing after completion
   • Less formal qualification process than banks
4. Home Equity or Investment Loans: Many investors leverage equity in their home country
   • Usually offers better rates than local financing
   • Familiar qualification process and terms
   • Potentially tax-advantaged in home country
   • Removes currency risk from the loan

Currency Considerations

Costa Rica has a dual-currency system with most real estate transactions conducted in US dollars:

• Property Pricing: Higher-end and investment properties are almost always priced and sold in USD
• Currency Exchange: The Colón (CRC) fluctuates against the USD, but with managed bands
• Transaction Approach: Most foreign buyers maintain funds in USD throughout the transaction
• Ongoing Expenses: Property taxes and utilities can be paid in either currency
• Banking: Costa Rican banks offer accounts in both USD and Colones
• Strategic Consideration: Monitor exchange rate trends when converting larger amounts

Working with specialized currency transfer services like Wise, OFX, or XE can save substantial fees compared to traditional bank wires, particularly for larger transactions.

Property Search Resources

• Online Platforms:
  • encuentra24.com – Largest Costa Rican listing platform
  • realtor.com/international – International MLS listings
  • crproperties.com – Specialized in higher-end properties
  • point2homes.com/CR – English-language Costa Rica listings
• Real Estate Agencies:
  • Regional specialists (different agencies dominate different areas)
  • International franchise offices (RE/MAX, Century 21, Keller Williams)
  • North American-focused boutique agencies
• Property Tours: Organized viewing trips in specific regions
• Direct Developer Relationships: For new construction and pre-construction
• Local Networking: Expat communities, social media groups, relocation consultants

Unlike the United States and Canada, Costa Rica does not have a unified, country-wide MLS system. Listings are often fragmented across different platforms and agencies, with exclusive listings common. Working with multiple agents or a buyer’s representative can help ensure comprehensive market coverage.

Property Viewing Trip Planning

Organize an effective property viewing trip:

1. Pre-Trip Research: Narrow down regions and property types before arrival
2. Trip Duration: Plan 10-14 days minimum to account for travel and thorough exploration
3. Agent Selection: Identify and contact reputable agents in your target areas before arrival
4. Regional Exploration: Allow time to experience neighborhood amenities, beaches, restaurants
5. Scheduling Buffer: Costa Rican timing can be more relaxed than North America; build in flexibility
6. Transportation: Arrange reliable vehicle rental to access properties (4WD recommended for many areas)
7. Environmental Conditions: Experience the climate, roads, and amenities in person
8. Second Visits: Plan return visits to top contender properties at different times of day

Property Evaluation Criteria

Assess potential investments using these key criteria:

• Location Fundamentals:
  • Proximity to amenities (beaches, shopping, restaurants, medical facilities)
  • Road quality and accessibility (especially important during rainy season)
  • Views and natural features (ocean views command significant premiums)
  • Neighborhood security and community feel
  • Future development plans and infrastructure improvements
• Physical Property Attributes:
  • Construction quality and materials (particularly important in tropical climate)
  • Drainage and erosion management (critical in high rainfall areas)
  • Orientation for natural cooling and energy efficiency
  • Water supply reliability (municipal vs. well vs. shared system)
  • Internet connectivity (quality varies dramatically by location)
  • Maintenance history and condition of systems
• Legal Considerations:
  • Verified property boundaries with registered survey (plano catastrado)
  • Clear title without encumbrances or easement issues
  • Proper zoning for intended use
  • Building permits and compliance for all structures
  • Water rights and access documentation
  • Environmental restrictions and protected areas
• Investment Potential:
  • Rental demand in the specific area (research seasonal patterns)
  • Comparable sales trends over the past 3-5 years
  • Planned infrastructure improvements affecting property value
  • Potential for property improvements or expansion
  • Exit strategy options for the specific property type and location

Expert Tip: In Costa Rica, road access and quality can vary dramatically and significantly impact property values and rental potential. During rainy season (May-November), some roads may become challenging without 4WD. Always personally drive the roads to a potential property during your viewing trip, and if possible, visit during or just after heavy rain to assess drainage and accessibility issues that might not be evident during dry season.

Legal Due Diligence

• ✓
  Property Registry Study: Comprehensive title search at the National Registry (Registro Nacional)
• ✓
  Boundary Verification: Confirm registered survey (plano catastrado) matches actual property boundaries
• ✓
  Entity Verification: If purchasing from a corporation, verify corporate standing and authority to sell
• ✓
  Encumbrance Check: Verify no liens, mortgages, easements, or annotations affecting title
• ✓
  Encumbrance Check: Verify no liens, mortgages, easements, or annotations affecting title
• ✓
  Tax Status: Confirm property tax payments are current at the municipal office
• ✓
  Zoning Verification: Check municipal zoning plan (Plan Regulador) for property use restrictions
• ✓
  Maritime Zone Check: For coastal properties, verify distance from high tide line and concession status if applicable
• ✓
  Water Rights: Verify legal water access and availability (critical in many areas)
• ✓
  HOA/Condominium Rules: Review regulations, fees, and financial status of any community association

Physical Due Diligence

• ✓
  Professional Inspection: Hire qualified inspector to evaluate structure, systems, and potential issues
• ✓
  Boundary Verification: Physical confirmation of property boundaries with surveyor
• ✓
  Water Testing: Quality and pressure testing for well or municipal water supply
• ✓
  Septic System: Inspection of septic tank and drainage field condition (most properties use septic)
• ✓
  Electrical Systems: Verify proper wiring, capacity, and grounding (often substandard in older properties)
• ✓
  Drainage Assessment: Evaluate property drainage during or after rain, particularly on slopes
• ✓
  Internet Service: Test actual connection speeds and reliability at the property
• ✓
  Road Access: Verify condition, maintenance responsibility, and easements for access roads

Environmental Due Diligence

• ✓
  SETENA Check: Verify environmental viability permits for developed properties
• ✓
  Protected Area Verification: Check for overlap with wildlife refuges, forest reserves, or wetlands
• ✓
  Building Setbacks: Verify compliance with river, stream, and protected area setback requirements
• ✓
  Topographical Issues: Assess erosion risk, landslide potential, and flood vulnerability
• ✓
  Construction Permits: Verify all structures were built with proper environmental and municipal permits
• ✓
  Future Development Impact: Research planned projects that could affect views, access, or environment

Expert Tip: Costa Rica has strict environmental regulations with setbacks from rivers (15-50 meters), streams (10-15 meters), and ocean (50 meters public zone plus additional restrictions). Buildings constructed within these setbacks, even if they’ve existed for years, may face potential removal orders or complications during property transfers. Always verify all structures comply with current environmental regulations, regardless of when they were built.

Purchase Agreement (Offer to Purchase)

This legally binding document outlines the terms and conditions of the sale:

• Key Components:
  • Property details with legal description and folio real (title number)
  • Purchase price, currency, and payment terms
  • Deposit amount (typically 10% of purchase price)
  • Due diligence period (typically 30-60 days)
  • Closing date and closing cost allocation
  • Contingencies and conditions
  • Default remedies
• Deposit Handling: Typically held in escrow by a third-party escrow company or attorney trust account
• Due Diligence Period: Your opportunity to perform all necessary inspections and investigations
• Customization: Agreements can and should be tailored to your specific concerns and needs

Unlike some Latin American countries, Costa Rica does not typically use a separate “Promise to Purchase” as an interim step. The initial Offer to Purchase (once accepted) becomes the binding purchase contract, subject to any included contingencies.

Closing Process

The formal transfer process involves these key steps:

1. Preparation Phase: Your attorney prepares the transfer deed based on the purchase agreement
2. Document Collection: Gathering all necessary papers:
   • Property title and survey
   • Corporate documents (if applicable)
   • Tax clearance certificates
   • Utility statements
   • Identification documents
3. Closing Appointment: All parties meet at the closing attorney’s office or close via power of attorney
4. Deed Signing: The notary executes the formal transfer deed (escritura)
5. Funds Transfer: Final payment made via wire transfer or local bank check
6. Registration: The notary submits the transfer deed to the National Registry

Costa Rican closings are handled by notaries with special legal qualifications (Notario Público). While the buyer and seller can each have their own attorneys, the closing notary serves as a neutral party overseeing the legal transfer.

Transaction Costs

Budget for these typical transaction expenses:

• Transfer Tax: 1.5% of registered property value
• National Registry Fee: 0.5% of registered property value
• Documentary Stamps: Approximately 0.5% of registered property value
• Legal Fees: 1-2% of purchase price (negotiable for higher-value properties)
• Municipal Study: $50-100 USD for property tax status verification
• Escrow Fees: $500-1,000 USD if using third-party escrow service
• Real Estate Agent Commission: Typically 5-7% paid by seller (but may affect negotiated price)

By convention, the buyer and seller typically split the transfer costs (transfer tax, registry fees, stamps, and notary fees), each paying approximately 1.5% of the registered value. However, this allocation is negotiable and should be clearly specified in the purchase agreement.

Total buyer-side closing costs typically range from 3-4% of the purchase price.

Expert Tip: In Costa Rica, there’s often a difference between the “real market value” and the “registered value” of properties, with the latter sometimes being lower. While this practice has been common historically, be aware that new regulations are pushing for greater transparency. Artificially low registered values may save on immediate transfer taxes but can create capital gains tax complications when selling. Discuss the implications with your legal and tax advisors before agreeing to any value declaration.

Administrative Tasks

• ✓
  Property Tax Registration: Update ownership information with the local municipality
• ✓
  Utility Transfers: Register electricity, water, and other utilities in your name
• ✓
  Insurance Setup: Obtain property and liability insurance coverage
• ✓
  Community Registration: Register with HOA or condominium association if applicable
• ✓
  Payment Systems: Establish methods for paying utilities and property taxes
• ✓
  Property Management: Engage management services if not personally residing on property

Security Considerations

Property security is an important aspect of Costa Rican real estate ownership:

• Physical Presence: Vacant properties require regular visits or caretakers
• Security Systems: Consider monitored alarm systems for higher-value properties
• Caretaker Arrangements: Local caretakers (guardas) are common for homes with grounds
• Community Options: Gated communities offer additional security infrastructure
• Lighting and Visibility: Good exterior lighting and visibility deter opportunistic theft
• Local Integration: Building relationships with neighbors enhances informal security

While Costa Rica has lower crime rates than many Latin American countries, basic security precautions are still important, particularly for vacation properties that may sit empty for extended periods.

Property Management Setup

If not residing full-time in Costa Rica, property management is essential:

• Management Options:
  • Full-service property management companies
  • Vacation rental management specialists
  • Individual property managers or caretakers
  • Hybrid approaches combining professional and personal management
• Service Coverage: Should include:
  • Regular property inspections
  • Maintenance coordination and supervision
  • Bill payment and accounting
  • Tenant/guest relations for rental properties
  • Emergency response capabilities
  • Vendor and contractor management
• Cost Structure:
  • Full-service management: 15-25% of rental income
  • Vacation rental management: 25-35% of rental income
  • Basic caretaking: $200-500 monthly depending on property complexity
  • Additional fees may apply for special services or projects

Creating a detailed property management agreement with clear responsibilities, reporting requirements, and spending authorizations is essential for successful remote ownership.

Expert Tip: The tropical climate and seasonal heavy rainfall in Costa Rica creates unique property maintenance challenges. Establishing a proactive maintenance calendar is essential to prevent small issues from becoming major problems. Include regular checks of roof condition, drainage systems, water pumps, septic systems, and treatment of wood elements for termites and rot. Properties near the ocean require additional corrosion monitoring due to salt air exposure.

Costa Rican Tax Obligations

• Property Tax (Impuesto sobre Bienes Inmuebles):
  • Annual tax of 0.25% of the registered property value
  • Paid to the local municipality, typically quarterly
  • Property values reassessed periodically
  • Can often be paid online or through a local representative
• Luxury Home Tax (Impuesto Solidario):
  • Additional tax on properties valued above approximately $230,000 USD
  • Progressive rates from 0.25% to 0.55% based on value
  • Based on construction value and improvements, not land value
  • Filed annually by January 15th
• Corporation Tax (Impuesto a Personas Jurídicas):
  • Annual tax on all active Costa Rican corporations
  • Approximately $400 USD for active corporations
  • Reduced rate for inactive corporations
  • Must be paid to maintain corporate good standing
• Income Tax on Rental Income:
  • 15% flat tax on gross rental income
  • Option to register as a taxpayer and pay on net income at progressive rates
  • Monthly or quarterly declaration and payment
  • Separate tax ID (cédula jurídica) required for tax registration
• Capital Gains Tax:
  • 15% on profits from property sales acquired after July 1, 2019
  • Properties acquired before this date subject to 2.5% of the total sale price
  • Primary residence exemption available under certain conditions
  • Payable at the time of property transfer

Home Country Tax Obligations

Both U.S. and Canadian tax codes have specific provisions for foreign real estate that may differ from domestic property treatment. Working with a tax professional experienced in international real estate investment is strongly recommended.

Tax Planning Strategies

• Entity Structure: Evaluate whether holding property personally or through an entity provides tax advantages based on your specific situation
• Rental Income Planning: Consider the trade-offs between Costa Rica’s simplified 15% gross income tax versus registering as a taxpayer to deduct expenses
• Record Keeping: Maintain detailed records of all property improvements to establish proper basis for future capital gains calculation
• Residency Planning: Understand how obtaining Costa Rican residency might affect your tax obligations in your home country
• Timing Strategies: Consider timing of income recognition, expense payments, and property sales to optimize tax outcomes
• Exchange Rate Management: Plan for currency conversion timing to minimize tax impacts from exchange rate fluctuations

Tax laws in both Costa Rica and North America change regularly. Establish a relationship with qualified tax professionals in both jurisdictions who can keep you updated on changes relevant to your investment.

Expert Tip: Costa Rica implemented significant tax reforms in 2019 that introduced a formal capital gains tax system and made changes to rental income taxation. These changes have increased the importance of maintaining proper documentation of your original purchase price, all capital improvements, and related expenses. Keep detailed records with receipts from the beginning of your ownership to maximize your tax basis and minimize future capital gains liability.

Selecting a Property Manager

Evaluate potential property managers using these criteria:

• Experience with Foreign Owners: Look for companies accustomed to international client communication and needs
• Regional Specialization: Management companies often specialize in specific regions or property types
• Technology Systems: Verify they offer online owner portals, electronic reporting, and digital payment solutions
• Staff Structure: Understand who will directly manage your property and their accessibility
• Communication Protocol: Establish clear expectations about frequency and methods of communication
• Rental Marketing Channels: For income properties, evaluate their marketing strategy and platform partnerships
• Maintenance Resources: Assess their network of reliable contractors and response protocols
• Financial Controls: Understand their accounting systems, reporting frequency, and fund handling procedures
• References: Speak with multiple current clients, preferably other foreign owners

Management quality varies significantly in Costa Rica. Taking time to thoroughly vet potential managers will pay dividends through better property care and fewer remote ownership headaches.

Management Agreement Essentials

Ensure your property management contract includes these key elements:

• Services Scope: Detailed listing of included services and excluded responsibilities
• Fee Structure: Clear explanation of all management fees, commissions, and additional charges
• Performance Metrics: Measurable standards for occupancy rates, response times, and other key indicators
• Reporting Requirements: Specified frequency and format of financial and property condition reports
• Spending Authority: Clear limits on expenditures that can be made without owner approval
• Maintenance Protocols: Processes for regular maintenance and emergency situations
• Insurance Requirements: Both property insurance and the manager’s liability coverage
• Contract Term: Duration, renewal conditions, and termination provisions
• Dispute Resolution: Mechanisms for addressing disagreements or performance issues
• Property Access: Protocols for owner visits and usage coordination

A well-structured management agreement provides clear expectations for both parties and prevents common misunderstandings. Have your attorney review any agreement before signing.

Expert Tip: Costa Rica’s high season (December through April) can generate 70-80% of annual vacation rental income in just 5 months. This seasonality makes having an excellent property manager especially important to maximize revenue during peak periods. When interviewing management companies, ask specific questions about their strategy for maximizing high season rates and occupancy while still generating reasonable off-season revenue. The difference between good and exceptional management can easily represent a 20-30% variance in annual rental income.

Exit Options

Sale Process

When selling your Costa Rican property:

1. Pre-Sale Preparation:
   • Property improvements for maximum appeal
   • Professional photography and possibly virtual tours
   • Gathering all legal documentation
   • Resolving any title issues or encumbrances
2. Pricing Strategy:
   • Comparative market analysis with recent sales
   • Evaluation of unique property features
   • Understanding typical negotiation margins
   • Currency considerations for international marketing
3. Marketing Approach:
   • Selecting appropriate real estate agents
   • International vs. local marketing emphasis
   • Online listing strategy and platform selection
   • Property story and unique selling proposition development
4. Negotiation and Contract:
   • Reviewing and responding to purchase offers
   • Negotiating price, terms, and contingencies
   • Structuring the sale for tax efficiency
   • Creating a binding purchase agreement
5. Closing Process:
   • Buyer’s due diligence period management
   • Addressing any inspection or title issues
   • Coordinating with closing attorney/notary
   • Executing final transfer documents
6. Post-Sale Requirements:
   • Tax filings in Costa Rica
   • Reporting the sale in your home country
   • Fund repatriation procedures
   • Corporate dissolution if applicable

Market Exit Timing Considerations

Several factors should influence your exit timing decision:

• Market Cycle Position: Real estate markets in Costa Rica experience natural cycles influenced by both local and North American market conditions
• Currency Exchange Rates: USD/CRC exchange rate movements can significantly impact effective returns for foreign investors
• Seasonal Timing: Property viewings and purchases often peak during high tourist season (December-April)
• Political Factors: Elections and policy changes can create uncertainty that affects market activity
• Infrastructure Developments: Completion of major roads, utilities, or community amenities can trigger value increases
• Tax Considerations: Changes in tax treatment in either Costa Rica or your home country may influence optimal timing
• Personal Timing: Life events, retirement plans, and financial needs often drive exit decisions

The Costa Rican market typically follows longer cycles than North American markets, with periods of strong appreciation followed by stabilization rather than dramatic corrections. Having a flexible timeline for exit allows you to capitalize on favorable conditions rather than being forced to sell during less optimal periods.

Expert Tip: When planning your exit strategy, consider creating a “property resume” that documents the history and special features of your investment. Include past rental performance data, improvements made during your ownership, unique property attributes, and community developments. This documentation helps differentiate your property in the market and demonstrates its value proposition to potential buyers, particularly in regions with many similar listings. A well-documented property history can often command a premium price and reduce time on market.