Thinking of Buying Property in Costa Rica? Don’t!

It seems everywhere I look these days, I see articles that just rave about the benefits of living in Costa Rica. That may or not be. I invite you to look at another article on my site. Regardless, you should heed the sound advice of virtually all of the experts in this industry. Buying property in Costa Rica, or for that matter, anywhere in the first year is a mistake. This article will explain why you should wait a long time and be very careful before deciding to buy.

For example, here is a quote from the first site in my latest google search. “For most retirees, the cost of living in Costa Rica is much lower than it is in the United States. If you are a single, budget-conscious retiree, you can live very comfortably in Costa Rica for about $1,300 to $1,600 per month.” And here is another one of those quotes from the big-time publishers of “retire here” articles. “You will relish the ideal climate, safety, and security, neighborly atmosphere, welcoming attitude of the locals, low cost of living, low-cost and high-quality healthcare, stable democracy, and bargain real estate.”

More “puffery” to keep the Paid Advertisers Happy

And if you would allow, here is one more quote. “The North Pacific coast, also known as the Gold Coast, attracts expats who enjoy spectacular ocean views, gorgeous beaches, world-class sport fishing, bird watching, scuba diving, snorkeling, kayaking, horseback riding, and surfing.  Are all those quotes true for the average retiree in North America?  Absolutely not!  Please read on.  And remember, I write based on my experience, not what some sponsor asks me to write.

The “Real Truth” About Living in Costa Rica

My wife and I tried to live in San Jose. We thought we might live there for a few years because it was the next logical place, we thought.  Wrong!  After only 2-3 days, we were looking for ways to leave.  Our problem was all the stuff we had accumulated in Panama and brought with us on the bus.  It was the worst experience we’d had since we left the USA. We went in with our eyes open.  We had already been living in Central America for over 2 years, and we had been to San Jose many times.  For the rest of that month, we sat in our apartment, trying our best to limit our expenses and deciding what to do with everything.

Costa Rica is the most expensive place to live in all of Central America and also in comparison to the two cities in which we have lived in South America! Rents are outrageous. The cost of an automobile is about twice what it costs in neighboring Panama. We paid $1,200/month for a small efficiency apartment far away from any public transit routes. So anywhere we wanted to go required a taxi or Uber. And the taxis and Ubers were also the most expensive we had seen. Restaurants were ridiculous. We never ate dinner for less than USD 40. And we generally split one entree.

If it sounds too good to be true, then go see for yourself.

That quote above about “budget-conscious singles” living comfortably for $1,300 – 1,600 leaves out some very important details. That amount could not possibly include rent. So that single person brought lots of cash and bought her home or apartment.  And that amount also could not include a car payment. So, she also paid cash for her car. See how the “creative math” works?

Let’s talk about the next quote. The attitude of the locals is anything but welcoming – unless you are paying them lots of dollars at inflated “Gringo prices”. Then they are your best friend. And the real estate in Costa Rica is not a bargain unless you are comparing it to Los Angeles County or Silicon Valley.

Buy or Rent?

The best advice we ever received was to wait for at least a year before buying property anywhere. Way too many things can go wrong. You may hate the first place, but another place 50 miles away is perfect. You may find out objectionable things you missed during the “property tour”. Perhaps one of you gets sick and has to return to the US for care. It could be one of any number of issues.

I think it was one of the well-known Costa Rica travel guys who said, “Don’t do anything in your first year that you can’t undo with 3 phone calls”. Great advice. There are many reasons why buying a property in Costa Rica could be a huge mistake.

In my opinion, a much better idea is don’t buy any property outside the US. Just rent wherever you want to live and buy property in a place you know very well. The “rent to value ratio” all over Central and South America is very unfavorable for owners. It is much better in most parts of the US.

If Governments Don’t Like The Rules, They Change Them

Another very important factor is that governments down here are notorious for changing the rules whenever they like. The best example I know is in early 2017 when Panama decided to enforce the tourist Visa law actually on the books instead of how they had done it for decades. Before that, every non-resident in Panama knew that they could live indefinitely in Panama as a tourist simply by going to Costa Rica for a day or 2 every 3 months. When you came back, your tourist Visa was good for 90 more days. And your driver’s license was good for 45 days. (No one could ever explain that difference to me.) I knew a guy who had been living in Panama for 10 years as a “tourist”!

When the Rules Change, Property Values Are Affected

This change was especially hard on the US and Canadian Citizens who couldn’t qualify for the “Pensionado” resident visa. In many cases, these people had not reached the age to qualify for Social Security. They did not meet Panama’s income requirements for a resident visa. And that means they had to leave before their most recent tourist visa ran out. The new rules were that non-residents had to leave for at least 30 days before they would be allowed to return. And that rule kept me from attending the funeral of my Mother-in-law in Houston. I had nowhere in the US to live for 30 days, and I definitely could not afford to live in a hotel in Costa Rica for a month.

The worst part of this change was the effect it had on the Panama real estate market, especially in retirement communities like Boquete. Owners would put the property up for sale and see not one buyer for a year or longer. Liquidity simply did not exist, and it took years and substantial price reductions to sell any property.

No MLS Means “Buyer Beware”!

Another major problem with property in Costa Rica (and for that matter in most of Latin America) is the lack of a Multiple Listing Service (“MLS”) for the sale of real estate. Owners can list their properties with many different salespeople, and they do not have to list it at the same price. Again think “Gringo pricing”. And that is another reason buying property in Costa Rica could cost you more than you think.

There are no laws preventing discrimination based on nationality or the color of your skin. If you are white or black and you have a US or Canadian passport, you will pay more, and in some cases much more than your brown-skin competitors. It is a fact of life. The only way to get a fair price is to make sure the salesperson and owner do not know who the buyer is nor where they are from.

Foreign Currency Risk of Buying Property in Costa Rica

You may be unfamiliar with this term, but if you own property or have other assets denominated in a foreign currency, the value of those assets varies every day with the exchange rate between the foreign currency and your home currency. This is another risk you face with owning property outside the USA. In Costa Rica, the exchange rate between the Colon and the US Dollar was .0018 2 years ago. Today it is under .001659. That doesn’t sound like much, but it is approximately 8%. So the value of your property would have to have increased by 8% just for you to stay even.

In Costa Rica, properties are priced in Colons, not in USD. If you purchased your property 2 years ago for 90 million colons and sold it today for 95 million colons, you made a profit, right? Unfortunately not. In US dollars, you paid just over USD 162,000 to buy. Today, 95 million colons are worth USD 157,600. So, you actually lost money even before considering your selling costs. But here will be the shock. Costa Rica will want you to pay tax on your “gain” of 5 million colons! I have a good friend who lived in Roatan and had to fight that exact battle with the Honduran government.

Are You Sure You Have Clear Title?

The final issue (and it is a really big issue) is how can you assure yourself that you have clear title to the property you think you are buying? There are three types of land in Costa Rica. By far the largest portion of land is:
PRIVATE LAND / UNTITLED PROPERTY: … also called “possession” land. Most of the land in Costa Rica falls in this category.” That alone should give you pause. How well will you sleep at night? This would not be a factor in property transfers in the US. That is what Title Companies get paid for.

So please think long and hard before buying property in Costa Rica. Or for that matter, anywhere in Central or South America. If you want to invest in real estate, do it in a place you know. Rents are very cheap almost everywhere in Latin America (except, of course, in the popular parts of Costa Rica).

Conclusion

It wasn’t for that reason, but we left San Jose after one month. We couldn’t leave any sooner because we had prepaid the rent. Otherwise, we would have. Don’t get me wrong, there are many beautiful parts of Costa Rica. Our main reason for leaving the US was to save a lot of money. And in most locations, a couple can live very well and still stay within their US Social Security income, especially if both are collecting. That is our situation in Medellin, Colombia just as it was in Cuenca, Ecuador. But I honestly believe I could live for less in Houston, Texas than in San Jose, Costa Rica.

Thanks for reading my post. Please comment below and let me know your opinions about this topic. Also please let me know what else you might be interested in seeing on this site. We are very careful to only write about our personal experiences, but that still allows for a wide variety of subjects and destinations.

Steve Tuggle

Please follow and like us:

10 thoughts on “Thinking of Buying Property in Costa Rica? Don’t!”

  1. Nicely written Steve,

    I’ve always wanted to visit and stay in Costa Rica, I’ve heard so much about their beautiful beaches and waterfall, and their lovely people too being very friendly. It’s a good thing you mentioned the $1,200 for that one small room, saved me the risk of ever considering on staying there myself. Sounds like it will be quite a challenge even with my real estate plans to sustain myself there. Oh well, I guess it’s still good to go there for a short visit.

  2. Thanks for your insightful review on Costa-Rica. This article is really rich in information about what is going on in the country and to help people think twice before taking decisions to leave their home land to go to Costa Rica. It is surprising that cost of living and owing a property could be like that on Costa Rica. I have been looking out for a place to retire and enjoy my years outside US. Considering Costa Rica is not an option for me anymore as your article is an eye opener for me to back off. Thanks for sharing this article. It is really informative. 

  3. Are you really thinking of retiring outside the US?  You don’t say how far away retirement is for you.  We have had amazing experiences, but for us, Medellin is the best so far.  Perfect weather, lots of places to see, costs are very low, but we feel like we live like a king and queen.

  4. For a visit, I think the beaches in the Caribbean are far superior to the Pacific coast. The Pacific might look pretty and blue, but it generally doesn’t have much coral, and the visibility is only a few feet. In Roatan and Cozumel, there are rich coral reefs and visibility can be as much as 90 feet or more on a good day. And the beaches are beautiful white sand.

    The Pacific beaches from Costa Rica all the way to Ecuador look dirty because the sand has darker colors. We really didn’t care for it.

  5. Great Content and Information!

    What a concise and thorough article. I found the post very detailed and Informative. So so many useful tips and tricks all on one page! Wonderful! I bookmarked to look further.. I haven’t purchased any property in costa rica before now but your article has saved me from alot of researches and I would focus my attention on another country entirely. Thanks for the eye opener.

  6. Thanks for those comments.  If you have any more questions, please ask.  And I’m happy you bookmarked my page.  I will be adding lots more content soon.

  7. Hi! I love this article! You bring up a lot of salient points that help guide people with less experience in foreign countries, such as myself. I’m not a world-traveler (yet) but your website sure makes me want to be! Thanks for giving us the real DL on Costa Rica. It will make me think twice before booking travel to another country, that’s for sure. I’ll be looking over your others articles too! Thank you!

  8. Thank you for your visit and terrific comment. I will do my best to keep sharing our experiences. Not all of them have been great, but the overall experience of deciding to leave, disposing of all our stuff, our initial move to Roatan, and each of our subsequent moves has been very positive. And our granddaughter and friends who have visited have been amazed how comfortable it can be living outside the USA.

  9. If you want to have a more accurate title to your article, I suggest you delete “in Coast Rica” AND change “Don’t” to “Do your due diligence (or hire someone to do it for you”.

    Much of what you wrote is true of any free real estate market (even in the US). One example is the change in laws. What the government did was close a loophole (with admittedly drastic consequences for inhabitants–local and foreign). Any reasonable person should know that if you are skirting the rules by staying as a “tourist” for 10 years, then it should not be a complete surprise if the government shuts the door on those not abiding by the spirit of the law. In the US, local regulations can have huge impacts. I owned a horse farm in Pennsylvania for 20 years. Unbeknownst to me, the state government changed regulations on private sewer systems and the local government enforced the changes vigorously (the previous government frequently granted exceptions). This seemingly small change had gigantic consequences. I agree that laws can change at any time but readers should keep in mind that this happens everywhere and it’s not a reflection of some kind of banana republic system. If you don’t know what you are doing, hire an expert in the law (their called LAWyers for a reason).
    As for foreign exchange risk and fluctuations in real estate prices, that is an issue that anyone should be considering however they invest their money. Keeping all your money in the US and much of your savings wrapped un in your house, you will be screwed if the local housing market crashes before you sell. If you are treating real estate as both an investment vehicle and as a service (i.e. serving as your home), then you need to consider both aspects. What value did it give you to live there? Would it have cost 2-3 times as much to live in a similar place elsewhere? In your example, if your intention was to stay in Costa Rica after selling that home, the value in USD is not relevant (as you will be using the Colones to buy stuff in CR). The rate of local inflation (as anywhere) is a huge risk. The overall inflation rate fluctuates more in less developed economies. However, being invested in that local economy is a reasonable hedge against that possibility (e.g. if overall inflation rose 5%, then the value of your local assets would rise as well; of course if overall inflation was up 5% but real estate went up only 2%, your purchasing power has declined). Although overall inflation between the US vs Costa Rica are often quite different, the amount of fluctuation in local real estate markets within the US is much more dramatic (compare Detroit vs SF vs X vs Y).
    As for cost for your efficiency apartment, that’s a bit unbelievable. I know nothing about the long-term rental market in San Jose but a AirBnB search of monthly rentals with at least 1 BR very close to public transport for less than $1000 shows 25 places. I normally expect to pay 25-40% more for AirBnB than 6-12 month unfurnished rentals. Maybe you absolutely, positively had to have A/C (rare in most of LA but not expensive to remedy).
    Lack of MLS and proper titling are valid points but can be addressed with a bit less cloak and dagger. Hiring an agent to give you hard facts on what to expect to pay (as evidenced by recent sales data) and a lawyer to investigate the title are more reasonable approaches. Maybe older places should be off your list but newer places with owners who purchased it several years ago (i.e. at least one clearly-documented title transfer) are much less likely to have title issues. Even with title insurance in the US, the guarantees are not so clear. Claimants to partial ownership can still hinder sales for quite a while and cost a lot of money before the courts end the nightmare. Insurance doesn’t mean something won’t go wrong–they are just backstopping your financial loses.

  10. Hello Randy and welcome to our page. Please let me know how you found it. As you can see, it is relatively new. Thank you for taking the time and providing your very well-written, thoughtful comment. Please feel free to check out my other posts and comment. And if you want, you can share the post and your comment on other sites.

    When we left Houston 3+ years ago, we sold everything and moved with a few suitcases. We needed to be able to travel light because we were expecting to move from one adventure to the next. I can’t imagine us ever buying real estate again. Where we live in Medellin, Colombia, we rent a good 3 bedroom apartment located within 2 blocks of 2 large shopping malls, 1 block from our 24-hour grocery store, and walking distance to at least 200 places to eat. Our rent is extraordinarily low, as are many other expenses. So for us, the decision is easy. I hope my stories will help other retirees to see that there is another answer.

    Thanks again, Randy.

Leave a Comment