Introduction
Go. Good afternoon, Eric. How are you doing?
Hey, Richard. Good afternoon. I’m doing very well.
Awesome.
[Erick Corrales]
How about you?
[Richard Bexon]
Yeah, good. Good. You know, just back from, I was in Mamon Antonio yesterday in Hakko.
I know you’re just, you’ve just flown back from Mamon Antonio where we have our tree house villas over there. And yeah, I mean, I think for anyone that doesn’t know, we do also have investment spots available into Villa 5 in Mamon Antonio. We’ve actually finished four of the villas.
They’re doing ridiculously well at 70% occupancy. We’re increasing the nightly rates and things are going better than they should be. Right, Eric?
Correct. Yeah. Significantly better.
Yeah. So that’s good. And also you and I have a construction company, so that’s what came out of building one, two and three.
Yep. Two. Yeah.
Got it. So amazing things. Exactly.
Right. Exactly. Well, Eric, today we’re going to be kind of talking a little bit about building here in Costa Rica, just for anyone that wants to build here in Costa Rica and kind of what they should understand and things that they should also understand about what’s not included in building as well for all these extra costs.
Cause it seems to be, as we like to say, death by a thousand cuts sometimes with all these extra charges left, right, and center. So we’ll kind of cover that today, but to get to get an idea, I mean, Eric, how do you think the market currently is, you know, and how busy are you?
Market Conditions and Construction Demand
[Erick Corrales]
Well, Richard, we are like very busy right now. All of our engineers are like full. As a matter of fact, we have been saying no to some projects, but they see the market, you know, it’s kind of contracted a little bit, you know, there’s not as much constructions going on as before, you know, the first half of the year.
But I think there’s still a lot of jobs out there, you know, and a lot of people, they’re willing to invest and build in Costa Rica.
[Richard Bexon]
Yeah. I agree. Well, Eric, I mean, I think best to just kind of just go over here, you know, I mean, typically there are two types of contracts when building here in Costa Rica.
Maybe you could just give us an idea of what they are and how they work. Sure.
Construction Contract Types: Fixed Price vs Administration
[Erick Corrales]
Well, typically there, you know, there’s like fixed price, you know, that it’s also called key in hand. That is basically, you know, the client hires a building company to basically do their project for a fixed amount. Everything is included in that amount.
And the client knows from the beginning the amount that the housing is going to cost. Of course, in those type of contracts, everything has to be well detailed, you know, and everything that is specified in the contract is what they’re going to get with that fixed price. Anything else, it’s going to be like an extra cost.
Right. The other type of contract, it’s an administration contract, which basically is an amount like there’s an budget that is given to the client that it’s an estimation of the cost, the construction company charges and a fee that we recommend that it’s a fixed fee, a monthly fixed fee for the project, you know, and at the end the client covers all of the cost of the construction, you know, labor, materials, and any other indirect cost that the project needs. And the construction company only charges a fixed fee for that. At the end, there are savings, a lot more savings in an administration contract, but in a fixed price.
And that’s basically because the risk is on the client in the administration contract. Right. So, all the contingencies or anything else that it’s normally included in a fixed contract, it’s not included in the estimation of the administration contract, and the risk is on the client.
So, if anything happens and the project, you know, by any reason goes like in a higher cost or has a higher cost, then that extra cost will be covered by the client. Normally, you know, our experience, I would say 95% of the administration contracts are better prices or clients at the end has better prices of their constructions.
Risks and Benefits of Each Contract Type
[Richard Bexon]
Yeah. I mean, we typically find, you know, it’s anywhere from like 10% to 20% cheaper to do an administration contract, but there’s a caveat there. That’s when working with someone like us, because again, is, you know, we work for the client and protect the client.
I think in administration, there is also, if you don’t have inspectors coming in and doing things, it can also get out of control very easily. And I mean, there is risks to both if that makes sense that like, anyone building in Costa Rica that wants to do administration, and it’s kind of their first time or doesn’t really understand it, you’re putting all of your trust in that construction company, if that makes sense. And again, we see it time and time again, of just things failing, you know, because that company might be great at building stuff, but maybe not might be great at administering the money for it, if that makes sense.
But also is in a Javier manual, you know, like that’s the price and that’s what you get. There’s a, there’s also risks there, which is at some point you start the construction company starts to request money from you, but milestones kind of haven’t been hit and you don’t really know those milestones. So before you know it, you’ve paid 75% of your house, and you’ve only got 30% of your house, if that makes sense, or the costs have gone up so much, or it’s been badly managed that they go, look, I can’t finish the project for the amount of money, I’m going to have to walk away from it, or it changes to an administration contract.
So there’s pros and cons. I mean, I would suggest for anyone, always get inspections done. It doesn’t matter whether it’s a key in hand, you know, or an administration, just have inspections done at key milestones to just approve that money.
I mean, it doesn’t cost that much money to do it. It really doesn’t. But just have a third party kind of do that.
But I think for a client representative, yeah, just a client rep. And again, you can have different, I mean, there’s project management, which we do, there’s inspections, which is what we do, you know, during, you know, every couple of weeks, or there’s like milestone inspections, if you really want to kind of push it further out. But like your architect, and your structural and electrical engineers and mechanical engineers, they’re not doing that inspection, they’re just inspecting to make sure it’s built to the plans.
That’s it, if that makes sense. Their job is not to oversee, like, is the percentage of the project, the percentage that you’ve paid, you know, and just protect kind of the money a little bit. So I think it’s really important for anyone just to get those inspections done.
It doesn’t need to be with us. Again, you’re more than welcome to reach out to us and we’ll, and we can refer you people, whatever, but like, just get those inspections done. They’re not that much money.
Exactly. You know, and if you’re doing an administration contract, definitely get those inspections done or project management, because again, that’s where stuff can really go off the rails and you don’t know until the end of the project, basically.
Change Orders and Client Representatives
[Erick Corrales]
Yeah, correct. No, and not only that, Richard, but you know, the change orders that both of the contracts has, you know, there are like incredible. And if you don’t have like an owner’s representative, you know, someone that is looking, you know, towards the client, it can be, it can just go wild, the amount of money in change orders.
And also, you know, at the end, it can be like very frustrating for the client.
Architects as Builders: Pros and Cons
[Richard Bexon]
Yeah. Would you ever have your architect build your house, Eric?
[Erick Corrales]
Aye, aye, aye. No, Richard. And then, you know, there’s a lot of architects that are very good building, you know, builders, and they really know what they are doing.
But normally, my experience, you know, is that architects are artists, you know, and they, their background, you know, is to create things, not to manage things, right? Or to build things, right? So the some, most of the times what I’ve seen is that the architects at the end, when they are building, they are focused on the aesthetics of the construction, you know, and that everything looks very nice.
So sometimes, or most of the times is that they focus on specific things, and they do not oversee the construction. And, you know, all of a sudden, like things starts just to pop out, you know, and start to have delays or problems that could have been a prevent, you know, or yeah, detected before. So I will not recommend it.
[Richard Bexon]
Sorry. Excuse any architect. I mean, yeah, you just really need to kind of just ask the right questions, I think always have just your architect, because again, some architects are builders, but some architects that, like, I mean, I probably wouldn’t have my architect bid on my project, either, to be honest with you.
I mean, maybe that they could, but it just feels that like, there’s a conflict of interest there. I mean, the architect is there to make sure the design is done correctly, but the built, there should be multiple layers of checks, if that makes sense. You can’t just give the keys to one person and expect everything to be perfect.
You know, exactly. And in some cases, like it can be, but in most cases, it’s not from what we’ve found. But yeah, I mean, like Eric, I mean, we have a case where we have a key in hand project at the moment, you know, where the construction company is just like, look, dude, I mean, we can see that the money has been mismanaged and we caught that if that made sense.
And now I’ve kind of kicked the construction company out and now moved to an administration contract, unfortunately. So, you know, but again, if you, I don’t think if you, if you hadn’t had that rep or the inspections, you would have never caught this until it was too late. Correct.
Yep. You know, and by that time you paid beyond your key in hand amount and your project is like 70% done, you know? So yeah, I just go back and go, guys, please don’t be penny wise and pound foolish on this stuff.
Just again, it doesn’t cost that much money to get it done. Just always have someone kind of inspecting and auditing work. Now, Eric, let’s just talk about stuff.
Specification Details for Fixed Price Contracts
I mean, you mentioned there at a key in hand contract, you need to make sure that all the details are really clear, meaning that like, this is the tile we’re going to use. These are the faucets that like, I think the architectural part and interior design needs to be really clear when going out to bid. In administration, maybe you don’t need it as much, but definitely a key in hand to make sure that, you know, what it is that you’re going to get.
[Erick Corrales]
Exactly. Especially because the, that fixed price dates is the amount that you’re going to pay or that you are expecting to pay for your project. So everything has to be like very detailed so that you already know what to expect first, but also if you want to do a change during the process, you know, that sometimes happens, you know, clients just request, you know, like, well, you know, I wanted to use this type of tile, but now I want to move to a porcelain or a natural store or anything.
So when it’s well detailed, you already know what’s your cost and you know, whatever or any extra costs that you already have the base of what you were going to pay. So you are able to know exactly what your change order is going to be. Also, you know, for the like fixed furniture, normally it’s, or normally not, it should be very detailed on the contract because all the fixed furniture should be included there in that contract and or in that type of contract, but it has to be like all the designs, like everything, everything specified, you know, so that you don’t have problems.
Materials, like the type of, yeah.
[Richard Bexon]
I mean, would you use quartz on the tops? I mean, do you want the interior like that? It needs to be designed and sometimes architects do not do that stuff.
That’s not part of their, you know, scope.
Infrastructure and Hidden Costs
[Erick Corrales]
Most of the time is not a part of their, of their scope. So it’s, I think that, I think that it’s something that is very important is to have like a very clear communication with the architects. I agree.
And understand what it’s included, what are they are designing and what, you know, and what things types or what things are not going to be designed, you know, because another thing, you know, that normally is not included in their scope of work is like infrastructure design, you know, and most of the projects in Costa Rica needs infrastructure design and that can represent, you know, up to, I would say 25% of a cost of a project, you know, if you need to do air movement, retaining walls, driveways, you know, all of that. Water management. Water management, that it’s also an extra, you know, or expensive cost.
So that’s why I think it’s, it’s very important, you know, to have like a very clear communication with the architects and just understand what the scope are and for the client to then understand, you know, what’s the cost that they’re going to have in that fixed contract or according to the drawings that the architects are delivering, you know, and if there’s any other consultant that needs to come on, you know, to come on board, you know, on the project to know well before that the project starts, you know, and that is not something that once the project it’s being built, you know, that someone says like, well, you know, now we need to know how to manage, you know, the rainwater because we already, we only have the rainwater up to the downspout of the gutters.
And from there on, then the water is going to run wild on the lot or the driveway or a retaining wall that, you know, the lot it’s, there’s a lot of lots with spectacular views, you know, but those type of lots needs retaining walls.
[Richard Bexon]
I’ve built a retaining wall. You know that we did a retaining wall. It cost me a fortune.
So, so yeah. Yeah. Because it was not included, right?
It wasn’t included and that was a nice surprise. So, yeah, I mean, look, I mean, I think that there’s a lot of hidden costs that you need to kind of understand and not a lot, but there are some big ones infrastructure, as you said, their driveways, you know, water management, retaining walls. There’s also stuff that like fencing, you know, around a property, which is not already included as well.
Security is never included typically either as well. Landscaping is a big one. That’s not included that people don’t think of sometimes, you know, and it’s just, it all kind of sums up an internal furniture as well.
That’s, that’s, that’s, you know, sometimes people don’t even include the built in stuff that like, you know, your cupboards in your rooms and those kinds of stuff, you know, so you just need to be just really clear on like, just spend enough time in the planning phase here so that you have a great execution. Lamps, you know, decorative lamps normally are, they’re not included.
[Erick Corrales]
Like the construction drawings will include like regular lamps, you know, bulbs and spots and things like that. But decorative lamps, hanging lamps, not.
[Richard Bexon]
Yeah.
[Erick Corrales]
So yeah.
Planning Phase Critical Importance
[Richard Bexon]
Yeah. I mean, we can go on and on do because we find it left, right and center whenever we’re, we’re going over plans, but I think it’s just important to have this conversation so that anyone listening understands that like, again, construction in Costa Rica can be beautiful. Just make sure like, if you haven’t done this before, but even if you’ve done it in the US, I mean, the rules do the same rules kind of apply, but it’s just very different.
It’s a very, there is, there is not much recourse here, if that makes sense. If something goes wrong, it’s like, okay, you’re going to sue someone. I might, you better have 10 years and you know, $30,000, you know, to spend on it.
So yeah, you just need to go talk or like, just take your time really basically. And just make sure it’s detailed enough. And if you don’t understand it, hire people that do like, do not be penny wise and pound foolish in this country, guys.
There are, you know, cemetery sort of projects all over the country. Yeah. Yeah.
It is, it is worth it to hire someone that it’s on your side, right? Because again, the architect is not, but I mean, they kind of are, you know, but they’re kind of not, but like, no, one’s just fighting for you and only looking out for you. So, but also again, you might, if you hire an interior designer, make sure all of that stuff is detailed as well.
Kitchen designs, closet designs, the materials you’re going to use, like are using like a melon wood, or are you going to be using more of a hardwood like cedar or something or teak or like all of that stuff needs to just be really detailed out. So, and then also just think about maintenance as well, because teak, while, you know, other woods may sound great. I mean, you know, if you’re in the Southern zone where it rains with tons of humidity, maybe you might want to be looking at a WPC, like a wood plastic composite that like, again, it’s still 80, 90% wood and 10% plastic, but like, you don’t need to ever maintain it, really.
You just wipe it with a cloth. Correct.
Tropical Climate Material Considerations
[Erick Corrales]
So topics, you know, climate here, it’s very different. Sometime, most of the time, you know, the clients are not aware of our climate, you know, and how the tropics really affects the construction materials, you know, and that’s something that needs to be taken into consideration when the design is being done, you know, like wood, it’s very nice. I love it, you know, but it’s a headache and it’s a constantly maintenance, you know, material.
And even like that, I will, I can guarantee that soon it will be, you know, changed for another material.
[Richard Bexon]
I mean, we have one, you know, in Hacienda Paneer in Guanacaste that we’re replacing the wood in it, you know, two years later with WPC, but again, the architects wanted wood, so, you know, and the client chose wood and like, you know, but yeah. But yeah, I mean, I think it’s, again, building can be great. You get what it is that you want.
You just need, I just go really slow. Do not rush through it and probably don’t start building in like September, October, you know, you can start kind of mid-November and even December, like the first week in December, like, I mean, it’s really going to be like a two, three-week month, so you might as well just start in January when everyone else is back, but yeah, and have a great contract as well. Have your lawyer always review your construction contract.
Correct. You know, but I think you mentioned something there, which is in like an administration contract, which is again, which is where the client bears the cost and they pay a fee. Sometimes that’s a percentage, but our recommendation is always to fix that amount.
Administration Fee Structure Recommendations
Because if it’s a percentage and the project goes on and on and on, you just keep paying that percentage if that makes sense. Whereas if it’s fixed, say, I don’t know, it’s $80,000 over 10 months, that’s $8,000 a month. In the 11th month and the 12th month, if they’re still working because they didn’t get it done properly, they don’t get an administration fee.
Exactly.
[Erick Corrales]
Correct. That’s the best. Ideally is to fix that administration fee.
And since the beginning, of course, have a contract that can have penalties if there’s a delay in delivering the house, even if it’s an administration contract, that can be done and that they also protect the clients and gives a little bit more of a, how to say, on a push on the construction company to finish on time, so that they don’t take it easy.
Additional Hidden Cost Categories
[Richard Bexon]
Awesome. Eric, I mean, this has been great just talking about, I mean, are there any other areas that you think within construction that aren’t considered in budgeting on any of the projects that we’ve had where we’ve been like, oh, wow, the client, I mean, we talked about infrastructure there. We talked about gardening, fencing, I mean, furniture, non-fixed furniture, bed linens and all that stuff.
I mean, that’s never included guys. Yeah. Appliances, any type of appliances.
Appliances aren’t, cookers, et cetera. And you better have them picked out beforehand and probably buy them beforehand so that the kitchen can be designed around them. Because if they just leave holes, then sometimes it doesn’t really work.
Exactly. Yeah.
[Erick Corrales]
The earlier that those definitions can be done, the easier the project will go. And all of those processes of producing or building the fixed furniture is going to be a lot simpler and everybody will be in the same page basically.
Appliance Selection and Brand Recommendations
[Richard Bexon]
I think it’s important to take a variety of trips down when you’re building a house here. And one of them is again, to choose finishes, so to go out there and really choose those finishes. The other one again is to probably purchase your appliances.
And then the other one of course, is furniture. And some of that stuff can be pushed together, like the appliances with the finishes can kind of be pushed together. But you shouldn’t be buying your appliances at the end.
You can buy them and reserve them just so that you know that you’ve got them. But again, the kitchen should be built around those things. Right.
Well, and also don’t buy appliances like high-end appliances where you can’t get the parts here in Costa Rica. They take months. Stick with like GE, Frigidaire, Whirlpool, those kinds of brands here.
They might not be like, I don’t know, if you really want to go with GE profile stuff, that’s a higher end one. But SubZero, Wolf, while it sounds great, getting parts for it can take months here, guys.
[Erick Corrales]
Yep. And the maintenance and the service, if something happens, it’s just a headache.
[Richard Bexon]
Yeah. And I mean like ACs, get inverter ACs, highest numbers that you can get just for efficiency. And just make sure all of these things are really detailed in the build.
Correct. As much detail as possible, it’s better. Yeah, I agree.
Final Investment Recommendation
Well, Eric, my last question for you, which I love to ask everyone, if you had $500,000 to invest in Costa Rica into a business or real estate, what would you invest in and why? And you can’t say, give it to me.
[Erick Corrales]
Sorry, can I say that I invested in our investment fund? No.
[Richard Bexon]
No, because I think that’s kind of giving it to me. I mean, you could buy one of the fractions in Manuel Antonio and Arenal if you wanted to. Exactly.
[Erick Corrales]
Well, see, as a matter of fact, yeah, I will do that. I will invest in one of the projects that we are delivering or that we are building, Manuel Antonio and Arenal Bridge, that are amazing projects and very well designed. And everything is well detailed.
I don’t know, it gives me a lot of confidence. So I will invest there. Yeah, for sure.
[Richard Bexon]
I gave a presentation last night to Namu Travel, the country’s largest luxury travel company of the projects that we’ve got coming. And they were like, wow, they love Manuel Antonio. And I mean, those guys are selling it like hot cakes.
I mean, I think they’ve sold over $700,000 and we’ve only just opened the door. So God knows what they’re going to be doing going forward. And that’s four villas.
That’s not all six. So yeah, they’re very excited about what we’ve got coming. And yeah, I mean, I think anyone that’s interested, guys, all of our contact details are in the description down below.
That just even wants to chat and know about it. Again, there’s no obligation, guys. You’re not going to get a hard sale or anything, but the contact details are in the description down below.
But Eric, it’s been an absolute pleasure chatting with you, buddy. Again, anyone that wants to reach out with Eric, I’ll put all of his contact details down in the description down below, but very much appreciate you taking time to share your knowledge with us.
[Erick Corrales]
Hey, my pleasure, Richard. It’s always great to talk to you, not chat. Awesome, man.
All the things. Have a great day. Bye.
Hey, you too. Bye.
