It seems everywhere I look these days, I see articles that just rave about the benefits of living in Costa Rica. 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.”
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, bargain real estate.” 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 actual 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. 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. We thought it was Costa Rica’s turn, right? Wrong! We were ready to leave after only 2-3 days. It was the worst experience we’d had since we left the USA.
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 $40 USD. And we generally split one entree.
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 brought lots of cash and bought her home or apartment. So, no rent or monthly payment to include in “estimated monthly expenses”. 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. And about that last quote, they call it the Gold Coast because you have to bring a lot of gold to afford to live there.
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. Do not buy property for at least a year or longer. In my opinion, a much better idea is don’t buy any property outside the US. 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”!
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 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 sales people, and they do not have to list it at the same price. Again think “Gringo pricing”. 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 sales person and owner do not know who the buyer is nor where they are from.
“Foreign Currency Risk”
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 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 $162,000 USD to buy. Today, the 95 million colons are worth $157,600 USD. 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).
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 definitely 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 own personal experiences, but that still allows for a wide variety of subjects and destinations.