In escrow to buy beach adjacent property in Costa Rica.

[Rob Pattison]

I'm looking for advice from anyone who has bought property in Costa Rica.   It's been my dream to have a house within 60 seconds walk to a beach where I can surf, where I can step out on my front porch and both see and hear the ocean.

After 3 trips to Costa Rica over 3 years, I've finally found a lot, about 12,000 square feet from a surfing beach in a small village of about 300 to 500 people.  The village is south of Jaco, and north of Dominical.  

The lot has a house on it, 2 bed / 1 bath, built in the 80's and the inspector says is in poor condition and at some point will need to be torn down.  I'm buying the lot for $160k and plan to use it to spend long weekends and when I'm not there, rent it out through airbnb or similar.  I live in Los Angeles and can fly non-stop  into the capital city, San Jose in 5 and 1/2 hours.  The drive from the airport to this village is approximately 2 to 2.5 hours, depending on traffic.    The property title is in the form of a "concession", meaning basically a lease at this point, renewable every 20 years.   The attorney I've hired says she has never heard of a lease not being renewed.   I could buy a titled property, but they are all a 5 minute drive from the beach or further away.

My plan is to put about $20k into the house, stay there on some long weekends, rent it out when I'm not there, and think about what type of house I would like to eventually build, probably something like a 5 bedroom / 5 bath.   I'd put in an orchard with different types of fruit trees, possibly a pool, and one of those large chess boards like what is at Santa Monica Beach, where the board is on the ground, and the chess pieces range anywhere from knee high for a pawn, to chest high for the major pieces.

I welcome any advice as I've just started my due diligence period.  

[Mike Lambert]

@Rob Pattison

This property looks awesome. It sounds like it's the property of your dreams and more like a lifestyle purchase than an investment purchase.

If it was a pure investment, I'd personally stay away because of the concession. I invest internationally but I refuse to invest in any property that isn't freehold. This means that I won't invest in many Asian countries, where foreigners can only  get a lease. Am I afraid that the lease won't be renewed? Not necessarily. I don't think that the government will want to take back my property. It's only a leasehold because the government doesn't want foreigners to hold land. Why won't I invest there? Because I refuse to invest in countries where foreigners are treated as second class, which could have dire consequences if I ever have to go to court for anything.

Costa Rica is a different animal, where foreigners are treated equally and are allowed to own property freehold, which is the standard way of detention. So, the only reason why a property in Costa Rica is a concession rather than freehold is precisely because the government or whoever is the legal owner wants to have the right to take the property back.

I personally wouldn't take comfort in the fact that your attorney has never heard of leases being terminated. Things change. Take the example of Portugal. Portugal recently decided that the waterfront is public, whereby it won't be possible to acquire a beachfront property in that country. Yet, all the beachfront property owners who bought prior to the decision kept their properties because these were freeholds. Imagine that they had been leaseholds, the government would just have had to terminate the leases.

And, the termination of the lease isn't the same as an expropriation. You won't get any money back because you only paid for the lease.

Also, it sounds like you'd never want to sell the property but imagine that you'd have to or just changed your mind. Reselling might be difficult as many people will never buy that kind of property.

If all properties in Costa Rica were leaseholds and I wanted to buy a property in Costa Rica, I'll have to buy leasehold. However, there are plenty of great freehold properties in Costa Rica so buying leasehold there makes no sense to me.

I'd only buy that property if I absolutely have to have that one and if the enjoyment I get from it until the current term of the concession ends is greater than the pain I could get from the potential loss of my investment.

I didn't mean to poop the party but, whatever you decide to do, it's good to be aware that that risk isn't non-existent, as your lawyer seems to be suggesting. Don't forget that your lawyer has a vested interest in you buying so that he gets paid.

Hope this helps.