Central Pacific Real Estate Market Update
Richard: Good morning, David. How are you doing?
David: Good morning, Richard. Good to see you, as always.
Richard: You too, man. I think that you may have the crown for the most podcasts we’ve done with an individual.
David: But, you know, what with that said, I feel like we haven’t done one of these in quite some time. I don’t.
Richard: It’s been a. Yeah, it’s. Yeah, it’s been a while. But it’s always great to get you on and, you know, get your perspective and appreciate you taking the time to kind of share your knowledge and experience with us.
David: For sure. For sure.
Richard: Awesome. Well, David, first question I always love to ask is just kind of a bit of a market update. You know, I mean, there’s a bit of volatility in Western markets, you know, US Election, you know, I don’t know. You know, I think we’re going to see that volatility as, you know, things in the world politically and also economically, you know, kind of impact each other. But what are you seeing happening here in Costa Rica kind of in your market and kind of like your workload and inquiries?
David: Yeah, well, we’re seeing on our end, it’s definitely cooled off last, you know, 90 days, which is pretty typical for this time of year. Right. It’s going into our off season that coincides with what’s going on in. In the U.S. you know, I’ve been around for 20 years, and it. It’s pretty regular when a presidential election year we have that. That we see a lot of people wait to make decisions. And especially this one, I think, you know, as big as it is, that’s kind of the feedback and the pulse that I’m getting is we have a lot of people that are just like, well, you know, What? I just want to wait. I want to see what the reaction is not just for them personally, but they want to see how things react from that. Right. How the stock market reacts. And that’s pretty typical with the presidential election.
Richard: Yeah, I mean, we’ve always seen that in, you know, in tourism, you know, which was my, you know, where I kind of came from. And I think it’s my first cycle in, I would say the investment kind of world within it. But within tourism here, there was always kind of like a little bit of a lull. You know, we do some consulting work out there for other luxury property management companies here and they’re also seeing that little bit of a low. I spoke to hotel owners and they’re like, yeah. And I’m like, look guys, I think what you’re going to see here is probably a last minute kind of wave begin to happen, you know, for January, February, March, next year, you know. But again, as you said, it’s just the uncertainty. People don’t like uncertainty and won’t make big decisions when there’s uncertainty for sure.
David: And I’ve been telling all my, like my office, my staff, I’m like, get ready because we anticipate there’s definitely going to be some reactionary purchases in November. And I think after that, I think people are going to sit around whatever side they’re on. I think specifically with the U.S. i think we’re just seeing a lot of people that it doesn’t, again, doesn’t matter necessarily the decision, but I think just the angst and the climate is just driving more and more people to say, you know what? I’m just tired of it. I, I want a more peaceful place. I want a calming place. And they’re seeking a place like Costa Rica.
Richard: It’s amazing, amazing how many people say to me of like, wow, I’ve had a client the other week who had dinner with. And they were like, it’s so nice to be here in Costa Rica because it’s just none of the election noise, nothing like not watching tv. Like everyone just wants to go to the beach, kind of hang out, have fun, eat dinner, like, you know, have a better style of living. And he’s like, I just wish I could do this full time.
David: Yeah, yeah. And you know, these, these people in the battleground states, I mean, they’re just getting hammered with ads and left and right. So I mean, you can imagine if you’re in that it’s got to be getting pretty old pretty quick.
Costa Rica Real Estate Forecast for 2025
Richard: Wow. So, I mean, what do you think? 2025 will hold for Costa Rican real estate. And then like, what do you think it will do to the Hakko market? And then also do you think it’ll be a buyer’s or seller’s market?
David: David Good question. You know what I, I think the trajectory that we’re seeing in, especially in the Hakko area is I think it’s cooling off. I think that we’re going to see a little bit of a flat line, you know, from that growth that we’ve seen the last two or three years. And I think that’s going to continue. I think what we’re going to see is there’s going to be some spots in the market that are going to be soft and that’s kind of something to keep an eye on. And I think kind of to answer your question, I think it could be both a buyer and seller’s market depending on that inventory. So if you have one of those good spots, you know, in our market that is a Los Angeles property, ocean view property, you know, some of those more premium properties, then you could actually be in a good spot where we don’t have that inventory. And yeah, you could be in a seller’s market. However, you know, you could be in a buyer’s market if depending on that inventory. So I, I don’t think we’re going to fall off a clip by any means. I don’t think you’re going to see fire sales or anything of that capacity. But I think you’re going to get some opportunities to maybe off of the retail price and maybe the inflated price that we’ve seen the last couple of years.
Richard: I mean, it’s, it sounds like I was about to ask the question like what products are most in demand, but it sounds like your ocean view lo stuff, kind of your more luxury higher end stuff is, is in high demand.
Luxury Market Opportunities in Jaco
David: For sure. For sure. What what we’re seeing in Hako and, and I think it’s interesting how it’s evolving. Hako has always been one of the more affordable markets and by and large hasn’t been what we call a luxury market compared to other parts. So it’s been that affordable option. And I think what’s, what we’re going to see is as the rest of the country gets priced out specifically in those luxury properties, you know, Nesara and Flamingo and even Dominical be to all these other markets where now all of a sudden one and a half million dollars doesn’t go very far in those markets. And for us, you know, that’s still a very High end market. So I think that’s coming into our market and we’re going to start to see some of those opportunities in that development come into our area. But we haven’t had it right. I mean for the most part in our area, luxury is Los Angeles. That’s where that luxury buyer goes. So we, we’re seeing a lot of signs of that not just on the development side, not just on the interest side, but also too. And I think it’s, it’s a big, big driver and what’s going to stimulate a lot of this is on the accommodation side of things. You know, our area doesn’t have a lot of luxury accommodations as well and that’s the driving force of that buyer. So we, we have two hotels currently that are being fully remodeled or under construction that are going to be catering more towards a high end clientele, $500 a night type accommodations and that’s going to bring that level of client to this area. So you know, there’s a, there’s a lot of good things coming to this area and a lot of new territory, so to speak, that we’re going to see.
Richard: Maybe I’m asking the same question again, but what products are people looking for in your market that just don’t currently exist?
David: Well, that’s one. Right, the luxury buyer. Right. I mean right now it seems like again that sweet spot that we’re seeing is one and a half million up to one and a half. There’s, there’s a lot more people now that, that is almost like a, an average. I wouldn’t say, you know, everyone, but it, it’s a more common budget and we have that inventory. What and what people want when they’re in that range is they want contemporary, they want modern, they want newer, they don’t want Tommy Bahama, they don’t want dated, they want that newer look. And they typically are going to want ocean view or beachfront, things of that nature. And again, we don’t have it right. It’s not even price point. We just don’t have luxury properties. We don’t have a lot of those here. So Los Suenos continues to just be insane. There’s no inventory, high in demand, anything. Ocean view. The beachfront in Hako, the dated beachfront has, has kind of struggled to move. And again, I think that’s just people don’t want projects. They, they want the newer, shiny look. So some of that dated beachfront is, has been a little bit harder. But beachfront’s still in demand as well.
Richard: Yeah, I mean I think, you know, I mean, a lot of that beachfront is probably owned by local families. Would you say that had it for a long time or individuals?
David: Yeah, well, the, the beachfront development side, I was kind of referring more towards. Yeah. Like existing. Yeah. Condos. Yeah. And they’re, they’re foreigners, you know, for the most part, they’re foreigners.
Luxury Rental Success Stories
Richard: Yeah. Well, I agree on the luxury market there. Just because, you know, Casa Serena that you have there, you know, just rents absolutely incredibly, you know, Justin kind of manages that. Those guys absolutely kill it. So I think if there’s any, you know, litmus test for that luxury market, it’s definitely there. I mean, just look at their availability calendar and also what they’re getting per night in Hako, which is incredible.
David: Yeah. And that’s a perfect example, Richard. Like, that was new, Right. That was new territory where we didn’t have that. I mean, that was a client of mine that, you know, spent over $4 million for a huge beachfront home that he is just killing it on rentals. And, you know, that’s 2500 to $3500 a night, which in our area. Whoa. I don’t know if we’re going to get that. And he’s, he’s definitely proven that that market’s there. And then the next side of that. Right. Is people that are saying, oh, I, I would love to own a house like this. I would like to have a property like this.
Richard: Yeah.
David: Inventory is not there, but now we’re seeing signs of it. We have a new beachfront project really excited about that’s going to be direct beachfront lots. We’re very similar to that type that they’re going to be building, you know, high end luxury homes right on the beach. So it’s coming.
Richard: Yeah, yeah. I mean, it’s, you know, I mean, I was about to ask, are they good investments? But I know that they are based on, you know, I mean, I think if you can manage the construction cost and also the design, because again, a lot of it gets lost in overbuilding and over engineering. We see it like, you know, sometimes 15, 20% of like, we see construction budgets and it’s like, dude, you don’t need that. Like that’s over designed and over engineered. I mean, we’re going through it at the moment where we’ve, you know, I think we took 17% off, you know, in value engineering a project and the house only cost $800,000 to build, but the infrastructure was like 250. And it was like, you know, it was it was nuts. But like, yeah, I mean, I think that there definitely is a market out there for luxury and you just got to be careful that you don’t get too taken away, you know, with the design and over designing it and over architecture. And remember, you’re designing a vacation rental as well, not a home, like not a home to live in.
David: Oh, absolutely. And it’s one of the biggest mistakes we make now. Again, it depends on your goals. Right, But I agree. I think, I think the biggest mistake that people make when they, when they go to build these houses in. And again, I think this is in our area, especially when most of these properties get up into the mountains and they get ocean view properties, beautiful views, big land. Well, they’re paying a lot for the land. They’re paying, you know, two, $5,300,000 for a lot. And it’s hard for them to. Well, if I’m spending that much, I got to build a big home and not necessarily. Right, you know, you can, you can do a lot with 3,000, 3,500 square feet, you know, get that cost down. And now this, your margins are better and you’re also in a different price tier that you can offer. But sometimes people build too, and then they price themselves out.
Richard: Yeah, I mean, I always say to people like, look, you need to be beachfront, walking distance to the beach or you’ve got to be up in the mountains with a view and access to something down on the beach. Like if you like, you know, you’re too far to kind of walk but don’t really have a view. Like, it’s just not, it’s gonna, that’s gonna be a difficult, you know, a difficult exit, difficult rental. Like you just don’t need that.
Beachfront Property Availability and Pricing
David: Yeah, it’s got to be a certain price point.
Richard: Yeah. I mean, David, how available are beachfront slots in Hako?
David: They’re pretty much gone. Like right now. They’re, they’re just, they, they’re not there. You know, specifically Hakko, because of the development in. In Hakko. All of those pieces have pretty much been developed or they’ve been, you know, the game here has been, you know, five plus bedroom homes right on the beachfront because they rent well, so those are lucrative. So that has been pretty much exhausted and you can’t find it anymore. That, that’s why this new project, you know, it’s, it’s kind of a unique spot because it’s on the north end, it’s very undeveloped. And that’s going to be eight beach front lots to have, you know, an opportunity to even get on the sand is, is pretty unique. Hermosa still has a few options as well, but even then, I mean, beachfront, I think people forget sometimes just how limited direct beachfront fully titled in Costa Rica really is.
Richard: How much are those lots, if you don’t mind me asking, David, how big are they and how much are they?
David: So those are going to be around 750 to 850 square meters. So good size. And they’re pretty much just over a million.
Richard: Okay.
David: So you’ll have a chance. Depending on how you play your numbers, you can, you could get in just under $2 million for a nice direct oceanfront home.
Richard: Yeah. And it would probably generate you, I mean, I mean you probably, if managed well, maybe could do 7, 8%, maybe even up to 10, depending on what happens.
David: Yeah, yeah, for sure, for sure, for sure.
Hotel Development Needs in Jaco
Richard: And again, tidal beachfront, there’s just not that much of it in Costa Rica. But you know, one thing I’ve always thought that Costa Rica needs is like a part hotels. David, you know, like again you’d mentioned they’re kind of like luxury hotels. I mean, what’s your viewpoint on that? And you know, especially in Hakko, where it sounds like you guys need more luxury product.
David: Well, hopefully. Hopefully. I’ve got a listener on your, on your podcast. What’s unique about Jaco is that the development has been condo development. And in the Jaco area as, as much as it is a, a tourist hub. We don’t have anchor hotels in our area. We have the Marriott, but that’s in the, in the resort and on Hakko beach. It’s pretty much condo hotels or I mean, condos that people rent as vacation rentals. We are screaming and we are dying for a brand name anchor hotel on this beachfront. And I have no doubt that a Marriott Westin, something to that magnitude would just absolutely kill it. However, what happens is that the developers, they don’t want a hotel, they don’t want to operate a hotel. They want to build and sell and get out. And that’s what they keep doing. But I, I think that there’s a huge, huge opportunity, whether it’s a developer, whether it’s a buyer or an investor to basically some sort of partnership or development where look kind of like what, Croxton? Have your condos.
Richard: Yep.
David: And have your hotel and, and lease that hotel or sell that hotel to an investor or partner, whatever. And then that way you can have your cake and eat it too. And, and then, and then in a perfect World that hotel can partner because all these brand names are they, they want the vacation rental part of it as well. So you know, the Marriott Bonvoy, all those, you know, brand names are having that where hey, we’ll manage that as well. So then that way we can offer that to both of our guests or both options. So I think there’s an opportunity there. Let’s see if, if that happens and if that comes.
Richard: Hopefully. Yeah, I mean I think that, that I don’t know whether it would be word blended, resident style stuff, but when you have a hotel that has a lot of people coming through it really just drives up the value of the condos as well. So I mean a condo that’s, and we’ve seen it all over Costa Rica of like again take, you know, Los. I mean what’s really kicked that off was well of course they had a marina but they had the Marriott Los Angeles there. So people would come down and they would stay at the hotel and go, you know what, this is pretty cool, I like this, let me buy a condo here. And as then they get kind of property managed, it drives up the values of other stuff because people basically then can get positive cash flow and now it becomes a business. So there’s a premium to it. It’s not just the real estate and there’s a whole kind of snowball that happens there that we constantly see throughout Costa Rica.
David: Yeah. You know, and, and I think people don’t necessarily understand it but it makes a lot of sense in a tourism market and in a destination market the, the accommodation is the driver to the real estate.
Richard: Correct.
David: You know, Costa Rica blew up and the real estate blew up because tourism blew up. It was the tourism that drove it. And then that’s where people bought the property. Los Suenos works because people stay at the Marriott, then they look around and all the other markets you have a high end, you know, accommodation, then you’re going to get higher end clients and then you’re going to, you’re going to match that type demographic. And that’s what’s so odd with Jaco is that it’s really been a suppressed market because of those issues. Because of our accommodations have always been affordable. Our accommodations have been affordable condos which lead to affordable vacation rentals and that’s what’s kept it at a certain level. So, so the next step for Hako in its, in its growth is stepping up that tier of accommodations and that’s what’s going to lead to that higher end clientele.
Playa Hermosa Development Trends
Richard: David, we don’t often talk about playa Hermosa, which is next door, which, you know, I mean Hako is kind of very busy. Playa hermosa is kind of more of like a surf beach town with some cool, you know, beachfront restaurants and bars and does have some boutique hotels up there. Development happening there.
David: Hermosa is doing very well. So hermosa is going to cater more towards the single family homes. They, they have a little bit of beachfront there that’s titled and they see some development on the beach there. There’s one specific community that’s done very well there. You have the mystica resort. They’re starting to pick up steam. They just got a huge amount of funding that should be able to pour some gasoline and expedite, speed things along there. And then up in the mountains you have some opportunity to get some ocean views by Perdido. That’s a gated community that’s done very, very well. So that, that has been doing well. It’s been a combination of, you know, more end users that want a single family home, they don’t want a condo. They’re looking to spend, you know, six months a year or live here. And then you have also the investors that are a. I can get a five bedroom, six bedroom house, rent that out and make a good return. So it’s been a combination of growth there.
Richard: Yeah, I’ve always thought that like a boutique luxury hotel employer more so would do very well.
David: For sure. For sure. Any, anything, anything that’s hip, anything that’s modern, anything that’s luxury right in the area has the ability to do well. So you know, again, Mystico, you put a brand name hotel there, it will just crank. Estorio still doesn’t have a whole lot. I’ve got a client of mine that rebranded, renovated a hotel down there and same thing, contemporary, modern, hip. And he’s killing it. He’s doing really, really well over there because again, there’s no competition in that. I had asked me, it was actually my attorney, he said, hey, I’ve got some friends coming, they want a hotel. They don’t want a condo. They want a hotel in the area coming for the weekend. What do you recommend them? And I, and I told him, I said, look, hotels outside of the Marriott, I mean they’re.
Richard: Yeah.
David: Just nothing special over here.
Richard: Yeah, I mean, what is it? I mean it’s crocs best western. Like it’s just when it’s like three stars.
David: Right. I mean and, but, but that’s a perfect example. The best western is Full all the.
Richard: Time, just to a local Western, but it’s Best Western. Caters to locals and foreigners. You know, it’s affordable, you know, and.
David: They just, they feel, oh hey, out of all these options, at least I kind of know the Best Western. So you know what you get. I know it’s brand name, so yeah, the potential is there for sure.
Unique Investment Opportunity: Billboard Spaces
Richard: Awesome. Well, I’ve kept you long enough. And so my last question for you. So if you inherited $500,000 and you had to invest in business or real estate in Costa Rica, what would you invest in?
David: Buddy, I’m ready, I’m ready for the question. So I got a good one this time. I, I’ve been, I’ve been on the hunt for billboards, man. I don’t know how to do it, I don’t know how to spend it. But I want to get in on whoever, wherever I can own billboard space.
Richard: Yep.
David: Because what these guys are getting for rent is insane. So find me. I don’t know how I do it, but I’m going to spend 500,000 wherever I can have billboard space and lease that and rent that. Because it’s crazy. I mean guys are getting anywhere from 800 to $1200 a month for putting up a billboard on someone. Like it’s crazy.
Richard: That’s nuts. Wow.
David: It is nuts. So maybe we, we need to talk and figure out how to make that happen.
Richard: No, I mean I look at that though and I go go, what could that do on online advertising? You know, I mean it could, yeah, you know, RA billboard. But I’ve always, you know, I mean we’ve been in, I’ve been in the marketing world for a long time and like I’ve always loved online advertising because I can track it. Whereas I get billboards. It’s very difficult crack who looks at it and like, so it’s like it’s more branding if, if that makes sense for sure.
David: But I, I just want to own the space where someone will give me that amount. Right. That’s what I want.
Richard: Yeah. I think how it works sometimes here though, you know, is that there is a, like, like a Publix or something. There’s actual company here that like rent space on someone like some farmers land.
David: That has it like that’s what they’re doing.
Richard: 300Amonth or gives them a lump sum with a contract for like three years and then they’re just selling it for a thousand for sure. You want to be that middleman?
David: I, I wanna, well I want to own that land. I want to figure out if I can get some little pieces spend 500000 on wherever I can find some land off of highway where I can put a billboard and then lease it out that’s how I’m going to spend my 500 so that’s a.
Richard: That’s the first time I think that we’ve ever had that on here so very, very interesting but you know I always say that there’s a platinum there’s money in the street here you just need to pick it up.
David: Yeah and then and it’s interesting right I mean the amount of money that is out there on Facebook and I mean all sorts of marketplace and things like that for sure yeah awesome.
Richard: Well David, it’s been great to have you on the podcast Anyone that wants to get in contact with you I’ll put all of your contact details down in the description but very much appreciate your time sir it good as that.
David: Good talking shop as always man.
Richard: No worries have a good one all right take care.
