Can I please get a show of hands from my fellow Canadians who have grown tired of our long and bitter cold winters? Don’t get me wrong. On a bright, sunny day with fresh powder under my snowboard, somewhere between December and March, I can be a very happy camper. That said, I don’t live anywhere near the Rockies, and to get there, I would need to fly one hour longer than it takes to get all the way down to Costa Rica!
That’s right. Six hours from Toronto to Vancouver, but only five to the land of pura vida where the world looks very different. It’s funny when you think about it, as you need to fly south over the United States, Mexico, Honduras, Guatemala, Belize, El Salvador and Nicaragua to get to Costa Rica. Personally, the shorter flight is just a bonus, not the reason my family chose to spend three months on the sunny west coast of Guanacaste this past winter.
Our home away from home is in Playa del Coco, (Coco Beach) in the heart of the Papagayo Peninsula, just 20 minutes from the Liberia International Airport on the north Pacific coast of tropical Costa Rica. We are now celebrating 13 years of getaway enjoyment with this property and a lot has changed during that time. Marriage, kids and a Costa Rican rescue dog have certainly shaped our personal experience overall, but Costa Rica has also become an integral part of our business and the leading source of our real estate investments.
The Real Estate Journey
The real estate journey began with short-term vacation rental properties that could take care of themselves and provide a nice cash flow to boot. The inspiration for these investments was having a vacation home for free. Renting out your property enables you to own real estate without feeling like you are paying for it at all. In fact, the cash flow we generated from our vacation rentals was sufficient to not only take care of the direct property expenses, but it rapidly paid off our acquisition financing and covered our personal travel to enjoy free vacations along the way.
Learning about the broader real estate market around us over the years, we eventually grew into land development through the design, construction and sale of luxury ocean view spec homes. With only one business and investment partner, it started with just one house at a time. As our success became consistent and attracted organic interest from others, a new era of expansion was born when we stopped saying “no thank you” to investors who wanted to work with us.
Now, owning a “free” vacation property and earning 30% plus returns on spec homes probably sounds quite appealing to you, but what about life in paradise? I’m sure you are already aware that Costa Rica is constantly touted as one of the happiest places on earth, but what does it actually look like to live, travel and invest in real estate there?
To give you a lay of the land, let’s start by correcting a common misnomer about Costa Rica’s geography. It is not an island. Bordered by Nicaragua to the north and Panama to the south, Costa Rica enjoys the benefit of two oceans with the Pacific coast to its west and the Caribbean Sea to the east. The west coast is more developed and accessible, and for good reason. The tropical Pacific beaches attract the most attention from real estate investors around the world.
On much of Costa Rica’s Pacific coastline, you will not see rain from November to May. Protected from the more common tropical storms that cross through the Caribbean Sea, Costa Rica’s west coast enjoys more sunlight and suffers less extreme weather events.
Approximately one hour south of the Nicaraguan border you will find the city of Liberia and one of two international airports. Recently renamed as Guanacaste Airport, it has not been around for nearly as long as its big brother in the capital city of San Jose. Upgrading Liberia’s airport to international standards and access opened up this entire region of the country. It is no wonder why top-notch hotels and resorts chose to lay roots in this area. Take the Four Seasons, for example, who developed one of their most exclusive properties in the world at the very tip of the Papagayo Peninsula. The magnificently jaw-dropping location is home to the hotel and private residences, some of which are owned by Hollywood stars.
Coco is the hub of this area and the closest beach town to either of the international airports, making it a popular destination for short-term travelers. Proximity to an airport is a key factor for me to consider a foreign real estate investment with higher dollars to be earned on shorter stays vs. long-term rentals. Costa Rica is home to countless beautiful beaches, tropical rainforests and highly desirable eco destinations of all kinds. The challenge is that so many of these places take hours to get to, so naturally, they see less travelers coming through and the demand for real estate follows suit. This is one more reason I chose the Papagayo area to execute my real estate investments where tourism is highly active. This drives a stronger real estate market with higher occupancy and rental rates, along with lower days on market to sell homes for top dollar.
I say “homes” because my focus is residential, but there is a strong commercial market in Costa Rican real estate and these two sectors work in harmony to support one another. Coco Beach, for example, is home to numerous grocery stores, banks, restaurants, bars, retail shops, professional services, hardware, furniture and décor centres… you name it. The commercial activity at the epicentre of this otherwise quaint beach town supports a large demographic of both residents and visitors that span a wide range of geography. Coco is also home to some internationally recognized private schools and supported by a wide variety of highly skilled health-care professionals.
Now, you might be getting a better picture of why this place has become magnetic to so many. It offers a “choose your own adventure novel” type of experience for those who come on holiday, others who choose to lay roots, and so many options in between. I am quite pleased to find myself enjoying Costa Rica as a second home for my family and the focus of my real estate development work where we now operate a private equity fund that welcomes our sphere to join us on a project-by-project basis. Luxury, ocean-view spec homes have become a staple for us to generate an average of 30% ROI over the course of 10–14 months generally. There are always opportunities for unique investments, next of which takes us to new ground with the consideration of a 30-acre parcel of land that benefits from favourable zoning and infrastructure already in place to allow for a smooth journey through the process.
What’s nice about being a Canadian investing in Costa Rica is the feeling of affordability when you come from an otherwise expensive real estate market like Southwest Ontario. When you look at the condo market in Playa del Coco, a two-bedroom unit can be acquired for as little as $150,000 USD. Now, there is quite the range, as in any market. When you consider location, size, finish quality and amenities, you can also spend upwards of $500k on a luxury two-bedroom suite. On the rental side of the coin, investors can earn $700–$1,500 per week for these vacation properties throughout high season and double during peak weeks. When you compare anything in that range to what you will find back home, the value is unbeatable. Of course, it is not apples to apples. But hey, don’t pineapples taste better?!
When you jump into the housing market, your view will become the hot topic. Are we looking for an ocean view, volcano view, valley view or maybe no view at all? A three-bedroom house can have one, two, three, or even four bathrooms sometimes. It may very well be in the range of 2,000 to 4,000 square feet in size and I certainly hope it has a pool. Depending on the age and condition of the home, you will find houses starting in the $300s. However, to match North American standards for size, quality and layout, $500k would be a more realistic starting point. To give you an example of what I call the “upper middle” segment of our luxury home market, consider the most recent project we completed: three primary bedrooms all with ensuite washrooms and walk-in closets, an extra bathroom for guests, double car garage, covered terrace, outdoor kitchen, large pool, and ocean view spanning a total of 4,519 square feet of indoor/outdoor living with 2,786 square feet under A/C offered for sale at $1,095,000. If there was a comparable location in the Greater Toronto Area the house would likely be five times the price. One last helpful snippet is the equally more affordable cost of construction. Even with a higher standard, or earthquake code, we are building these luxury homes for as little as $125 per square foot. Factor in the exchange rate given all numbers in Costa Rica are USD, this is still approximately one third of the cost for a similar quality build in most of Canada.
You might be looking for a getaway spot to enjoy a few short holidays each year. Perhaps you are ready to become a snowbird and escape winter all together, but didn’t think you were old enough or had sufficient disposable income to enjoy that sunny privilege. Not long ago, I could relate to all of the above, but now I am pleased to share my experience that has enabled the freedom to choose my own adventure, and so can you.
Zack Snider
zack@sunrisesold.com
Realtor, Developer & Founder
Sunrise Real Estate Group
For more information visit sunrisesold.com
“Costa Rica is home to countless beautiful beaches, tropical rainforests and highly desirable eco destinations of all kinds.”