Cash-out or partner on my 4 unit property in Costa Rica

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Hi BPers

I bought and completely remodeled a building with three side-by-side, 2 bed 1 bath apartments and one small, 2 bed 1 bath house on ~1.5 acres in Ojochal, Costa Rica. I added a pool and did some landscaping and have been using it as a family winter retreat and renting it to a STR operator the rest of the year. It is 5 minutes from the ocean and is in a small community that is nestled in a valley between the mountains that meet the shoreline. The property feels like you are in the jungle yet is on a paved road with high speed fiber optic internet and within walking distance of great restaurants that are owned and operated by entrepreneurs from around the world.

The area is expanding rapidly and I could see this property really going up in value as there is a very limited amount of buildable space between the mountains and the ocean, so I see this as a great investment and I would love to keep it. My issue is that I also want to expand my LTR business here in the states and would like to use the equity I have in the Costa Rican property in order to do so. However, currently there are no options for a foreigner to get a cash out refi on their property in Costa Rica other than for construction on the property itself. This is because most of the financing comes from government programs and they, of course, prefer to keep as much investing as possible within the country.  Because of this, most buyers come with cash or use short term seller financing. I used both and now own the property free and clear.

 There is a lot of room for expansion on the property and a person could build more units for not much money. (Or a restaurant, lots of options). The idea behind the expansion would be to make the property more profitable for two owners and to always have enough units for the owners’ to be able to enjoy the property without having to disrupt the rental business.

Does anyone have any thoughts on financing a foreign property and/or how one might go about finding a partner?  I would be looking to cash-out between 300-400k. For an interested partner- the back of a napkin calculations say that it would take ~475k to be a 50% owner of 8 units in Costa Rica.  It would cost less, initially, if a person kept it as four units and either rented the property out less of the time or not at all and kept it strictly as a vacation property.

Any thoughts are appreciated

[Mike Lambert]

I think it comes down to two main questions:

1. This sounds like it would be primarily an investment. What would be a reasonable return you can promise to an investor? Most properties in Costa Rica are lifestyle, in that the ROI is very high.

2. What's the exit strategy if any, for the investor, given that, with 50%, he has no control and the market there is illiquid, especially when the HELOCs out of North American properties are much more expensive.

Properties in Costa Rica are already expensive and I've tried many times to make a potential investment there work and it's never worked with the figures. All the people I know who bought there did it for lifestyle. So, if you can come up with a profitable investment there, you might have a winner in your hands for anybody looking for an investment there but you have the control issue.

Even then though, as a potential investor, I'd have a big problem here. By saying that you want to sell in Costa Rica to reinvest in the US, you are signaling that investing in the US is more profitable than in Costa Rica. So how are you going to convince an investor, presumably an American, to invest in a foreign country where he/she presumably has no experience rather than investing in his more profitable backyard. Isn't it like you're suggesting somebody to do something (investing in Costa Rica instead of the US) while you (the experienced investor in Costa Rica) does the exact opposite with your own money?

Of course, nobody forces you to tell a potential partner to tell the truth about what you're going to do with the proceeds of the sale. However, building a relationship on a lack of disclosure or a lie isn't probably the best idea, let alone the ethics of the matter.

Hope this helps.