The laid back lifestyle and gorgeous tropical weather of Costa Rica attracts tourists and expats like a magnet. Real estate in Costa Rica is much more affordable than most parts of North America and getting to live in paradise makes the deal even sweeter. If you’re considering buying property in Costa Rica, this guide will cover everything you need to know.
Why would someone want to buy property in Costa Rica?
Like us, many people have spent time in this amazing country and felt a connection with the pura vida lifestyle. Costa Rica’s temperate climate is comfortable year-round and the list of outdoor activities to do is endless. It’s also a very safe country with affordable healthcare and strong expat communities that create a home away from home.
We’ll tell you from first-hand experience, buying in Costa Rica can be a lucrative investment decision.
With tourists and expats buoying the market, properties haven’t stopped increasing in value year over year. An investment property in Costa Rica can also be an excellent opportunity for rental income. For instance, rentals in San José, Escazu, and Santa Ana typically generate around 7.5% returns.
We bought a hotel in Playa Avellanas and have gone through the experience of buying property in Costa Rica first hand. And on top of that, my family has been living in Costa Rica for over 30 years. We love having a home base in Costa Rica and were lucky to have some local insight into the buying process. Now, we’re here to share that advice with you! The same information applies whether you’re buying an investment property, a vacation home, or a business!
Need Costa Rica moving tips, beach guides, or activity ideas? We have loads of helpful information available in our free Costa Rica travel guide!
Important Things to Know
Can Americans buy property in Costa Rica?
Absolutely! The great part about Costa Rica is that foreigners and locals have the same ownership rights when buying property. Foreigners can purchase property on a tourist visa without the need for residency or citizenship.
In Costa Rica, there is no MLS system or certified real estate agents. Unlike the United States and Canada, the industry isn’t tightly regulated. This means that shopping for properties isn’t as easy as logging onto the MLS and viewing everything available for sale. It also makes it harder to view comparable prices. Less regulation opens up the doors for potential fraud and “fake” real estate agents, so doing your due diligence is important.
Property Taxes in Costa Rica
The property tax rate in Costa Rica is 0.25% of the property’s value. So a $200k house will only be taxed $500 annually. Luxury homes (homes valued over US$234,000 as of 2020) are subject to a sliding scale luxury tax, but it caps at 0.55%. This is still much less than property taxes in many parts of North America.
One thing to consider if you’re thinking of buying a condo in Costa Rica or purchasing in a gated community is that condo fees will apply. These usually range from US$20-$100 per month and cover security, maintenance, and cleaning.
In Costa Rica, any property located within the first 50 meters of the high tide line is considered public land. This means it is protected and cannot be titled. The next 150 meters up from this zone is called the Maritime Zone or Concession Land. While foreigners can readily buy property in Costa Rica, a non-citizen can only own up to 49% of Maritime Zone land. To translate, that means direct oceanfront property in Costa Rica is usually off the table.
To check that there is a clear title on your prospective property, you’ll need to hire a real estate attorney. You can do a title search yourself online, but you’ll have to register and know the property’s identification number. It’s best to have a real estate attorney do the property title search through the public registry in Costa Rica.
Costa Rica also has a numbering system to be aware of called the Folio Real. Most properties have a unique identification number registered at the public registry in San Jose. This is the system your attorney will search to get all the available info on the properties on the market.
Title insurance is available but rarely used in Costa Rica. It can be useful in some situations but is also quite expensive. It’s best to consult with your real estate agent or attorney to see if it’s worth it for you.
How to Choose a Real Estate Agent in Costa Rica
Because the real estate market in Costa Rica has few regulations, it can be hard to know who’s a professional. You never know if someone is just a scammer or local peddler trying to make a penny. Be aware that people often try to sell property that’s not theirs—or anyone’s—to sell. Hence the importance of a title search!
Looking for recommendations for an honest real estate broker or agent with a good reputation is the best way to start. It’s wise to find an agent who’s highly regarded in the area you want to purchase in and has the references to prove it. It can be as simple as asking around the community for recommendations. You can then look into the names or Costa Rica real estate companies that pop up a few times. Keep in mind that just because an agent is an English-speaking expat doesn’t mean that they will be honest.
Real Estate Associations
In addition to reputation and recommendations, you can check if your agent belongs to any real estate associations. The NAR (National Association of Realtors), CCBR (Costa Rican Real Estate Association), and CRGAR (Costa Rican Guanacaste Association of Real Estate) are all national or regional associations.
The Purchase Process
Overall, the purchase process is similar to that of the US/Canada but does have its differences.
Checking Out Properties
First, you can begin your property search on your own or with the help of a real estate agent. Buying a house in Costa Rica often involves a bit more footwork than the usual internet scrolling most of us are used to. Once you’ve seen some listings that you’re interested in, take the time to visit the property. Either check it out on your own or with your agent and make sure you do a thorough run through.
When you find something you’re ready to jump on, have your agent write up an offer. Just like a property purchase anywhere else, you’ll then negotiate the purchase price. Don’t expect this process to move as quickly as it would back home. People in Central America aren’t glued to their phones and computers like agents in the US or Canada.
Once the price is settled, have your real estate attorney write up a formal purchase-sale agreement. Everyone signs on the dotted line and then it’s time to transfer some money for a deposit. Deposits when buying real estate in Costa Rica are usually 10%. You’ll have two weeks to deposit the money into a government-registered escrow account.
The closing period is usually 30-60 days from signing the purchase-sale agreement. If you need financing, it’s best to arrange this through a bank in your home country. Make sure to arrange your wire or money transfer well before the closing date in case your Costa Rican bank accounts have a holding period.
Your real estate attorney will then officially close the deal. Woohoo! Hiring a reputable real estate attorney who is also a Costa Rican notary public is a good idea. They have access to the national registry and are the only ones who can record purchases in the registry.
Closing costs can range based on the sale price of the home and the transfer of ownership process. Buyers typically pay closing costs so be sure to factor this in when sorting out your financing. Transfer taxes, stamps, and duties usually total 3.5% of the purchase price. On top of this, notary fees have a tiered system for every 10,000,000 Colones. To spare you the calculations, this brings closing costs to 5-10%.
In terms of real estate commission, typically the seller pays the 5-10% commission. Buyers will not have to pay this commission unless you hire a buyer’s agent. A buyer’s agent will split the commission with the listing agent unless it’s a for-sale-by-owner listing or a foreclosure.
In some cases, buyers and sellers might reach an agreement to split the closing costs and commission differently. As long as the agreement is mutual, you can divide these extra fees up how you please.
The last step is to register your property either in your name or as a corporation. Similar to an LLC in North America, many people buy property in Costa Rica through a Sociedad Anónima (SA) or Sociedad Limitada (SRL) corporation. Buying property through a corporation can actually simplify the purchase process. Just make sure that you have a real estate attorney who’s familiar with the steps.
Financing Property in Costa Rica
Bank financing is very different when it comes to Costa Rica real estate. Traditional mortgages aren’t widely available and are very expensive. House mortgage lenders Costa Rica typically charge 10-15% interest so it’s best to finance through your home bank or use owner financing. This is one of the main pitfalls of buying property in Costa Rica but luckily, there are a few alternative options.
If you’re wondering how to find a private mortgage in Costa Rica, consider owner financing. Owner financing is a common practice where you finance the property directly through the seller. If you’re ever the one selling property in Costa Rica, this can greatly add to your real estate investment returns. Do keep in mind that there are strict laws protecting property owners. So if a mortgage is not paid, the seller can repossess the property.
In many cases, expats—especially those buying retirement property in Costa Rica—like to do all-cash sales. Some might choose to sell their home in the US and re-invest in Costa Rica. Your dollar stretches a lot further here and property values in Costa Rica are growing consistently. This would eliminate any financing stress and set you up for healthy returns when you decide to sell.
Do I Need to be in Costa Rica for Closing?
It’s best to be in Costa Rica to sign the closing papers in person. However, if you can’t be in the country, you can have a power of attorney created. This will allow someone else to sign papers on your behalf on the day of the closing. Many expats will leave this name signing power to their agents and a lawyer. This is another instance where having a trustworthy real estate team is critical.
Where to Look for Property
As we mentioned before, the country has no MLS so shopping for property is a little different. Many towns have real estate offices where you can browse listings in the area or consult with an agent. Just like buying a car in Costa Rica, doing plenty of research beforehand is key.
The best way to approach buying a home in Costa Rica is to start looking in person. When you know which areas you’re considering, you can browse listings with a local real estate company. Costa Rica mountain real estate will vary greatly from San Jose, Costa Rica apartments for sale, for example, so in-person showings are critical. It’s also helpful to talk to residents in the community to get leads on potential properties.
There are some resources to browse the property market online, but not all properties for sale will be listed. Costa Rica real estate prices can be harder to compare because of this. Most of us are used to being able to see all property types in all areas at the click of a button. In Costa Rica, real estate transactions are far less public.
Be sure to spend time exploring Costa Rica’s many towns before buying real estate. Check out our list of the best places to live in Costa Rica, from the Pacific Ocean to the Caribbean Sea. Keep in mind that house prices in Costa Rica vary greatly based on the area. Investment decisions posing questions like “does waterfront property appreciate faster?” are also valid things to consider.
Even though the average house price in Costa Rica is lower than America’s, buyers should still do lots of research. Expats are often drawn to the Central Valley but there are many amazing places all over the country. Owning property in Costa Rica is much more enjoyable outside of tourist destinations anyway!
There are plenty of investment opportunities all over Costa Rica. In bigger cities and booming tourist areas, the rental market can be pretty hot. In the San Jose province in particular, rental returns earn an average of 8.6%. These yields are higher than neighbouring countries in Latin America thanks to Costa Rica’s thriving tourism.
Renting out a home or apartment can be a great option for extra income but does require some work. You’ll need to educate yourself on landlord-tenant property rights and try to find good tenants. While owning property in Jaco, Costa Rica would be cool, sticking to more family-oriented areas might be a better choice.
Also, don’t forget about the tax man! You will have to pay income taxes on any rent you collect with an assumed 15% in expenses. To break it down, the new tax law subtracts 15% of your rental income for expenses and then taxes you on the remainder. So each month, you are taxed 15% on 85% of your rental income. For a $1000 per month apartment, this would be $127.50 in monthly income taxes.
Buying Land in Costa Rica
Buying property in Costa Rica isn’t just limited to an investment property or a second home. Some people choose land ownership instead. Many of the same points and steps in the purchasing process apply.
Just like a house, you need to make sure the property is titled and not concession land (Maritime Zone land). Sadly, beachfront property in Costa Rica isn’t an option for non-citizens to own without a partnership with a citizen. Your attorney will check the public registry to verify the title of the land before your real estate purchase.
The most important thing to do when buying land in Costa Rica is to have a survey done. A surveyor will confirm your property boundary lines to avoid any disputes with neighbours. Then your attorney will record the property survey with the public registry to make it official. Even though these types of things bear legal fees, they’re steps you really don’t want to skip!
Also, note that you can register your land in your name or as a corporation. If you decide to register in your name and transfer to a corporation later, transfer taxes are 1.5%. You’ll also have to pay notary fees, which vary based on the price of the property. This is something to consider if you buy land for personal use and decide to start a rental property business in Costa Rica down the line.
Once you have the land, building a house in Costa Rica can be an exciting and challenging feat. Houses in Costa Rica are designed to accommodate the unique, humid climate and promote indoor/outdoor living. Since the days of cheap homes for sale in Costa Rica are becoming fewer and far between, many expats choose to go the building route. If you choose to build, this is when it really pays to speak Spanish!
Questions to Ask
If you’ve found land for sale in an area you like, visit the site and ask the seller lots of questions before making an offer.
- Does the property have water, electricity and sewer access?
- Does it have internet?
- Are you allowed to build on it?
Even if you have a real estate agent, the onus is on you as the buyer to do your due diligence.
Deciding to purchase a property in any country can be a stressful and overwhelming process. But investing in land or buying a vacation home in Costa Rica doesn’t have to be. With a reputable real estate team, you’ll be on your way to making an offer in no time! Taking advantage of the amazing weather and open foreign buying laws creates a great opportunity for investment or a new life in paradise. We hope this information helps you find your dream property!