This article originally appeared in Investor Review.
PURA VIDA! Literally “pure life” in Spanish, this phrase has become internationally recognized as the tag line for Costa Rica—one of the happiest countries on Earth, according to countless independent studies from bodies like National Geographic and the United Nations World Happiness Report. Costa Rica is home to some of the world’s most beautiful beaches, tropical rainforests, vibrant culture and famously friendly people. Add a growing economy backed by a democratic government that invests heavily in public healthcare and education, and it is no wonder the country attracts investment from around the globe—real estate chief among them. For more than a decade I have enjoyed tremendous success as a Canadian investing there.
It all started in January 2010, when a holiday turned into something much bigger. I bought a brand-new luxury condo in a resort-style gated community in Playas del Coco (Coco Beach), just 20 minutes from Liberia International Airport. The development offered a private beach club, six pools, a hot tub, gym, tennis courts, retail plaza, hiking trails and more. With two bedrooms, two bathrooms and over 1,400 sq ft, it was perfect for vacations—and it inspired my core investment concept: a vacation home that pays for itself.
The math was simple. The purchase price was USD $175,000, and comparable units were already renting to short-term vacationers for roughly $1,000 per week. By enjoying a few personal holidays each year and renting the property the rest of the time, I could cover all expenses and even earn additional income. More than a dozen Costa Rican properties have since passed through my portfolio, but I still own that very first condo—and it has met every expectation.
As with any investment, success starts with a plan. Mine relied on leverage: using financing to own a vacation property I otherwise could not afford outright. To execute, you need a local “dream team” of three key professionals: a property manager, a lawyer and a real-estate agent.
“My plan was quite simple: set this up as a real estate investment that both pays for itself and pays me to enjoy it.”
Your property manager is your on-the-ground partner when you are a plane ride away. They can furnish the unit, handle bookings, check-ins, cleanings, maintenance and even renovations, plus manage accounting—paying local bills and collecting rents. Typical fees are around $100 per month for administration, plus about 20 percent of gross short-term rental revenue.
Just as in Canada, you also need a lawyer for real-estate closings. Costa Rica’s growing market offers plenty of qualified attorneys, and there are no restrictions or extra taxes on Canadians buying property. You can invest personally or via a corporation, and corporations can be set up in a few days for under USD $1,000. Capital-gains tax is only 15 percent—far lower than in Canada—and reasonable expenses (including flights to “check” on your property) can be written off against gains.
Because mortgages from Costa Rican banks carry relatively high interest rates, most foreign buyers either pay cash or use home-equity lines of credit from their domestic banks to finance purchases at lower rates. With a favourable loan and consistent rental demand, only a few weeks of bookings each year can cover financing costs and operating expenses. Add in your own holidays—flights included—and positive cash flow can still remain to pay down the loan balance.
In short, with the right plan, the right local team and smart financing, you really can own a vacation home for free—and even get paid to enjoy it.
This article originally appeared in Investor Review.
