Many Americans seeking a second home are turning to Costa Rica. Known for tropical animals and exotic landscapes, Costa Rica beach and territorial properties are an ideal setting for a second home.
A trip to Costa Rica requires only a two-hour plane ride from the Southern tip of the United States, allowing investors to visit and inspect their second homes regularly.
In addition to the country's natural beauty, Costa Rica property and development costs are remarkably lower than in the United States, and return on investments are higher.
Last year, the U.S. Central Intelligence Agency World Fact Book ranked Costa Rica as one of five countries that stands "head and shoulders above all other nations worldwide in terms of the potential their real estate markets present property investors."
A piece of Costa Rica property currently costs approximately 70% less than equivalent property in America. Once developed, a Costa Rican piece of property can triple its value in as little as 5 years. To encourage development and investment, the Costa Rican government has reduced the slowing effects of "red tape" necessary to purchase or develop land.
The cost of living in Costa Rica is another incentive for second-home buyers.
A monthly income of $2,000 allows individuals to live very comfortably in Costa Rica, and tax consequences for owning property are minimal.
Costa Rican quality of life is comparable to that in America, and the country offers most technology and medical advances Americans access in their daily lives.
The actual nuts and bolts of purchasing are similar to those in North America. Dealing with a real estate company you recognize can provide additional security, since international franchises are governed by standard rules and regulations.
Unlike many other countries in Latin America, foreigners have the same rights when purchasing land in Costa Rica as locals do. You can own property outright in your own name or in the name of your corporation. You do not need a local partner, except in cases of beachfront concession property, where special rules apply. There is absolutely nothing to prevent you from purchasing property in your own name, but the majority of buyers form a corporation with the help of a reputable lawyer and then purchase property through that corporation. The reason for this is threefold. One - it may be more beneficial to have your income (from rentals) or capital gain (from sale of the property) taxed within a Costa Rican company rather than having it taxed as personal income. Of course, this depends on the tax laws of the country from which you originate. Two - it allows for simplified estate planning, whereby you can give or will shares of the corporation that owns the property to members of your family. Three – if you ever decide to sell your property, you can avoid paying property transfer taxes a second time by simply transferring the shares of the corporation to the new owner.
Another plus for property purchasers in Costa Rica is its central land registry which allows your lawyer to confirm that there is clear title to your property, as well as to discern if there are any restrictions on the property before the deal goes through. Further, if you would like to have the added protection of title insurance, the services of international title insurance companies such as Stewart Title are now available in Costa Rica. Also attractive are Costa Rica’s very low property taxes - 1/4 of 1% annually. That means if you buy a condominium or home with an assessed value of $200,000, the property taxes per year would be $500.
Many foreigners who come to Costa Rica to look at property have already arranged their finances so that they are ready to make an offer if they find what they are looking for. But what can you do if you happen upon the perfect property while on vacation? An offer can usually be written up with a small good faith deposit to be raised to 10% within a few weeks. Final closing would normally be anywhere from 30 – 60 days. If you need to borrow funds, it is far simpler and interest rates are usually lower in your home country. However, if your credit rating is impeccable, financing in Costa Rica may be available to you.