Introduction
[Richard Bexon]
Good afternoon, Jose. How are you doing?
[Jose Maria]
Hi, Richard. How are you? I’m doing great.
[Richard Bexon]
Awesome. Well, I very much appreciate you taking time out of what I know is a very busy day to chat with us here in Costa Rica, kind of about, you know, I suppose, land, risky, like risk, what to buy, what things to ask, and what things to kind of really be aware of. So appreciate you learning your many, many years of knowledge with us.
[Jose Maria]
No, it’s on the contrary. Great to be on, and thanks for having me.
Market Overview and Volatility Impact
[Richard Bexon]
Not at all. Well, my first question I always love to ask Jose is, I mean, there’s been some volatility in Western markets recently. Well, probably, you know, I mean, we’re going on six months now, maybe even longer, and I think that’s probably here to stay.
I think the new normal is volatility. So, I mean, how has this impacted like your level of work or what it is that you’re doing?
[Jose Maria]
Well, I mean, that’s a very interesting question, Richard. It’s something I’ve been thinking a lot about over the past few months because, you know, it speaks directly to what I’m doing down here. And there’s no doubt that Western markets have been, you know, significantly more volatile during the course of this year.
And I do agree with you that that is here to stay, at least for the foreseeable future. And, you know, a lot of people have analyzed the cause of that, when people were much more proficient than me in economics. But I think the consensus is probably that this is driven by some degree of uncertainty with regards to the USA trade policy.
And, you know, other factors sprinkled in here and there, you know, like inflation and tech valuations. And obviously, in April, you know, when the stock markets took a dive for a few days, people got really nervous. And I think, you know, rightfully so.
It was kind of like a, you know, a blast that everybody got. It was like a slap in the face. And a lot of people, you know, reacted.
And of course, that resulted in an abrupt and negative reaction to what we’re doing here in Costa Rica. But as the markets have stabilized a little bit, you know, we’re not in April was crazy. I’ve seen some of that, some of those transactions that people might have abandoned at that time, come back and revive.
[Richard Bexon]
And if you were comparing, you know, because people are always trying to get an idea of like, what’s going on in the market here. If you were to just give a summary of what happened in the market and where we’re at today, how would you summarize that?
[Jose Maria]
Well, I mean, I would say first, we had the tariffs thing, right? When that was announced. And I think that there was a huge dip in the stock market.
And it was like, quickly, all time lows. And, and that affected a lot of investors. You know, we have a lot of investors from the United States here.
[Richard Bexon]
Yep.
[Jose Maria]
And many of them have their money in the stock market. So people get nervous. And when people get nervous, they slow down their investments.
They like to see what’s going on, right? I wouldn’t say that the volatility that we’ve been experiencing over the year has been alarming by any stretch of the imagination. I mean, there is always some volatility.
It’s just somewhat more volatility.
[Richard Bexon]
Yeah.
[Jose Maria]
And actually, you know, from an investor perspective, a moderate fall in demand of real estate, which was what has been occurring because of that volatility, is actually, it’s, you know, it creates opportunities for savvy investors that are coming here to take advantage of what’s now becoming a buyer’s market, right? Yep. So there’s a lot of deals that are going to be going around because the market is a little slower and because people are a little more worried.
And, you know, we’re seeing some investors already taking advantage of this. And if you think about it, the US stock market and the Costa Rican real estate market, there’s some relation between both. But if you’re looking to escape the volatility of the stock market in the US, one of the best ways to do that is by diversifying internationally.
And Costa Rica just happens to be one of those options. And I think that, you know, real estate has always been a mid to long-term investment. So if you’re liquid, it’s actually a great time to buy right now.
[Richard Bexon]
So yeah, I agree. No, I mean, I agree that like we are, you know, I was speaking with a client this morning, we opened a bank account for them. And he was like, well, I want to transfer some funds out of the US down to Costa Rica, like just have cash down here, if that made sense.
And I’m starting to hear that a little bit more. There’s not huge amounts of faith in the banking system or the country. We’re starting to see a little bit.
So people definitely are diversifying. Yeah, I 100% agree with that. And yeah, I mean, I think it’s definitely a buyer’s market.
And there’s a lot of opportunity out there at the moment as well. You just need to know what to look for and what to buy as well. Because again, there’s still a lot of landmines out there.
[Jose Maria]
Yeah, well, you need to know who to talk to, to figure out what to buy and what to look for.
[Richard Bexon]
And that’s never easy here as well. Because again, you know, real estate is very unregulated. I mean, investment advisors, it’s not typical word that you hear in Costa Rica or investment consultants.
Like, you know, it’s just realtors or lawyers. Like that’s the two kind of, but there’s no one kind of in the middle, if that makes sense.
[Jose Maria]
Yeah, no, I agree. I’m strictly in the lawyers market. But yeah, I agree.
We have a lot of lawyers, a lot of realtors. But somebody that helps you navigate the investment landscape, that’s not as common. And probably that’s why you’ve been so successful at it.
[Richard Bexon]
Probably, probably. And I have great people, so yeah. But I mean, look, let’s just jump like kind of straight into land here.
Because I think we’ve got a sense of kind of what’s going on in the market. It’s a buyer’s market, it’s volatility. You know, a lot of people diversifying.
And I think we’re seeing that. The number of probably transactions has slowed down since post-pandemic. And that’s normal.
It’s going to happen. The craziness is over. When buying land in Costa Rica, because that’s really what we’re talking about here, land uses, main types of land, etc.
What should people just understand about what they can do on land?
Land Use and Zoning Fundamentals
[Jose Maria]
So, I mean, going to the use of land, you know, probably the first thing I would say is, it’s critical to determine if there’s any zoning regulation in place to figure out what you want to do. You know, this can be somewhat straightforward if there’s a zoning plan. And maybe not as much if there isn’t.
The MUNI can issue a land use certificate that will validate if the land is capable of developing in the way that you want to do that. But a lot of times there is no zoning regulation. And the MUNI will just issue like general boilerplate statements in their land uses.
And that’s when it’s very important to have a professional, an attorney or even sometimes a team of people with engineers and architects and attorneys that can help you define if you want to do what, you know, if you can do what you want to do. So, also there are many factors in land use that aren’t even considered in zoning. You know, like there’s environmental factors that will, you know, will be informed by the property that you’re analyzing, if it has creeks or rivers, if it has, you know, certain slopes, certain forest coverages, there’s legal restrictions, there’s topographical restrictions and advantages of different properties.
And there’s even economic and political factors that can influence the way you can use land. And another thing that I think is interesting is, you know, a lot of people consider permitted use but not intended use. And that’s, I think, Richard, where, you know, somebody like you helps navigate people.
I’m in the permitted use camp and you’re in the intended use camp a lot of the time. And what I mean by this is, you know, when we talk about intended uses, you know, does what I want to do with this land make sense? Does that make sense for an economic use?
Should I, is this the best use I can put it to? And when we talk about permitted use, is it, can I legally and physically do what I want to do on this property? And surprisingly enough, many times people don’t even consider intended use.
They just go straight to permitted use and handle the intended use part somewhat intuitively. So, yeah.
Permitted vs Intended Use Analysis
[Richard Bexon]
Everything’s great until you have to put in a $200,000 retaining wall.
[Jose Maria]
Exactly.
[Richard Bexon]
Or you’ve got water infrastructure because, you know, you’ve got water rushing down your land or something. And yeah, so.
[Jose Maria]
Yeah. Or you bought the property and then you figure out that you have to invest, you know, $85,000 in bringing electricity and water infrastructure from the road to your desired building site. Or, you know, all of these things that people sometimes don’t even think about.
They just go out, buy a property. And then it’s like, whoops, what am I going to do now? And I think, you know, part of the, that’s part of the importance of engaging competent professionals to accompany you in the investment.
Because a lot of what I do every day is answer questions about permitted use of properties. You know, can I build this? What are the setbacks?
Do I have environmental restrictions? There’s a water well on the other property next door. Is that going to affect me?
Can I get water? You know, that’s to a good degree. That’s the reason we do due diligence here.
[Richard Bexon]
Well, and not everyone checks wells. You know, I mean, I looked at buying a property a while back, and the whole thing was covered in by wells, neighboring wells. So I could build nothing on anywhere, man.
You know, it was in the hills of the mountains here, where the majority of the water for San Jose comes, you know, from up here in Aradia. But like, a lot of people won’t even check that though.
[Jose Maria]
Yeah, well, again, I think that’s why it’s important to get a good lawyer. I agree. And get a good team.
Because yeah, those are the surprises that you find afterwards. And you know, there are a lot of good professionals here that can help you navigate the waters. But there’s also some people that, you know, aren’t as proficient.
So yeah, I think that if you surround yourself with a good team, you’re halfway there, right? I agree.
[Richard Bexon]
Very important in Costa Rica. Very, very important. So yeah, I mean, what are the different main types of land and kind of like land usage?
Like what should people understand about each of them?
Types of Land Ownership in Costa Rica
[Jose Maria]
Okay. So types of land, right? I would say that I would qualify that in two big buckets, right?
You have the title land. Yep. And then you have the maritime zone concessions.
Yep. It’s probably best to double click a little bit on the maritime zone concessions, because that’s probably the most different of the, you know, people aren’t used to that. So maritime zone concessions are a leasehold.
So it’s a lease that the government gives you. And they’re applicable for beachfront land. So basically, the 150 meter strip of beachfront land, starting 50 meters from the high tide, if that makes sense.
[Richard Bexon]
Yes, you take high tide and go 50 meters back.
[Jose Maria]
Yeah, if you go to the high tide, then you go the first 50 meters, that’s public. Everybody can enjoy that in Costa Rica. No private holding or ownership of that, right?
Then you go the following 150 meters, that’s owned by the government. And you can use it and exploit it subject to the leasehold, which is called the maritime zone concession. And that it’s subject to a lot of regulation.
And it works in similar ways to property, but not exactly. And we, you know, we can get into that if you want. But I think that that’s kind of one bucket.
And then you have the title land side. And that is, you know, it’s property. And there are two important variants, which is the condominium property.
And that also works similarly to other places. And our agricultural parcels, which, you know, both condominium and agricultural parcels have additional restrictions to like legal restrictions that are imposed by the specific property routine that they’re under. And yeah, that’s how I would qualify that.
In terms of use, use is kind of separate, right? Use is a different thing. Because you can have condominiums that are put to commercial use, or you can have condominiums that are put to touristic or residential use.
Or, you know, an agricultural parcel isn’t going to be intended for commercial use. So you have to evaluate it on a case by case basis.
Agricultural Parcel Restrictions
[Richard Bexon]
And again, I mean, normally, you know, size-wise agricultural parcels, I mean, they can be smaller, but typically they’re 5,000 or 10,000 square meters. Yeah. You know, they don’t touch public road.
They’re usually accessed by an easement. Yeah. And then that has restrictions as well.
Like if it was an old pub, you can build up to like 15%. If it’s new, it’s like 300 square meters plus, you know, then a guest house. I don’t think like caretaker’s house.
And then yeah, like tool storage.
[Jose Maria]
Well, you nailed it. You don’t need a lawyer.
[Richard Bexon]
Oh, dude, I’ve been through the ringer. Don’t worry, man. Don’t worry.
I’m dealing with a condominium at the moment that is of agricultural parcels where you have to get your design approved. And they have no say over this, by the way. This is just like, there’s no legal standing between.
There is no HOA of a agricultural, but it’s not a condominium.
[Jose Maria]
Well, Richard, you know, it’s very interesting. A lot of developments in Costa Rica have been structured as, and they’re functionally, they look like condominiums. Like they have a gate.
They even have common areas in the whole thing. And when you look into it, there are agricultural parcels and they’re handled through some sort of association that, you know, and that has, I mean, that’s pretty common. And it’s not that you can’t buy in those.
Of course you can. And they work mostly. But yeah, that has all its whole different avenue of issues and problems.
And so, you know, if you’re new to this, like if you’re just like an investor doing a first-time investment or even a second or third investment and you don’t know all these things, it’s really important to have somebody on board that can, that can, you know, I agree.
[Richard Bexon]
I agree.
[Jose Maria]
Yeah.
[Richard Bexon]
I mean, like, look, I’m getting permits at the moment for something that touches public road. And the municipality told me the other day that I needed to change it. It’s also like it’s use, even though I haven’t also swallowed from the municipality saying what I can do on it.
Because it’s in, it’s in Kepo. It’s in Mamon Antonio, which has a plan regular. They were like, I need the name Pasto to turn to construct it, to like the construction.
And I’m like, really? I’m like, and then I went back and I was like, wait, two months ago, you approved something that was exactly like this, that had Pasto on it. And now you’re asking me to change it.
And so legally it has to be changed. And anyway, you know how it goes, man. I just nod my head and go, yep.
Okay. How do we get past this hurdle?
[Jose Maria]
Well, yeah, I think that that’s the right attitude, Richard, because yeah, it’s sometimes it’s better just to see where the current takes you with the public institutions and not try to swim against it. Yeah.
[Richard Bexon]
I think that’s general for Costa Rica is just go with the current. Don’t swim against it. Because if you try and bring your Western world of doing business down here, it doesn’t work.
I was on the plane the other day chatting with someone and he was like, well, man, it must be great doing business down here. I’m like, you have no idea how tough it is, man. Like stay in the States.
It’s a huge market. You can leverage everything down here in Costa Rica. There’s no easy way to make money.
[Jose Maria]
It’s not easy, but there are great opportunities here as well. And this is going back to some economics talk, not necessarily legal talk. But as with everything, the markets that are more established and more, you know, I don’t want to say safe, because I think that Costa Rica is a very safe country to invest in actually, but that are more seasoned will have, won’t have as great an upside in terms of return on investment, usually, than if you come down and invest in Costa Rica, where waters may be a little more complicated to navigate, but then, you know, you can make returns that just aren’t in the cards for somebody.
[Richard Bexon]
If you know what you’re doing.
[Jose Maria]
Absolutely.
[Richard Bexon]
You know, I mean, there are a million ways to lose money here and there are a few to make, but yeah. You brought something up earlier, which is a condominium. A lot of the stuff which I’ve been seeing at the moment, and I’m going to throw the word avianas out there, just because I’m seeing a lot of development avianas like this, where they’re kind of in the process, they quite haven’t got, you know, they haven’t quite gone through the whole condominium process and they’re offering people of like, hey, if you invest the $500,000 now, we’ll give you the land and then the house, you know, but it’s kind of pre, you know, any plan was being submitted pre-earth movement, you know, how risky is that?
Investment Risk Assessment
[Jose Maria]
Well, so I think that the risk level of that depends on the trust level that you have on the developers that are undertaking this. Sometimes getting in at the very early stages can be a great way to even, you know, to maximize your investment even more because you get the best deals, right? But then if the developers that you’re buying from are non-reputable or, you know, unknowns or doing this for the first time, they could even be great people that just, you know, with great intentions that just don’t have the track record, then that’s where the risk level starts increasing exponentially and quickly.
And I think that that’s why if you’re making that kind of investment on a project that’s not even started, looking at the track record is incredibly important. And a lot of guys have some spectacular websites that, you know, with these beautiful renders that look at this amazing proposition of a project that look incredible, but it’s not based on reality. And yeah, that’s important to look at.
[Richard Bexon]
Yeah, I mean, I always say to clients about, can you lose this money? You know, if you lost this money, would it change your life? You know, and if the answer is yes, I’d be like, don’t take the risk.
Like, it’s just not worth it. Like, wait until everything’s done and pay 20% more.
[Jose Maria]
Yeah, of course. Or just go next door.
[Richard Bexon]
Correct.
[Jose Maria]
And buy the one that’s already built where you can do diligence in and remodel it if you want. Yeah, it’s absolutely. The more crucial that the money is to you, then the safer you should go with the investment.
And that goes hand in hand with what you just asked about the risk, you know?
[Richard Bexon]
Yeah. What do you think is the most risky stuff to buy in Costa Rica?
[Jose Maria]
So, you know, I wouldn’t say, Richard, that there’s a more risky kind of property to buy if we’re talking about land.
[Richard Bexon]
What gets your spider senses going? Like, where are you like, ah, okay.
[Jose Maria]
I mean, for sure, concessions are more complex. This can be handled with a good due diligence, but they’re more complex to due diligence and they’re more complex to keep in compliance than just regular property. But yeah, I mean, I think that the riskiest, I think that the riskiest investments are probably what you just said.
The projects that are green land, nothing there, no infrastructure yet, not even permits, just these fantastic websites with promises of the most exclusive experience in the world. And yeah, a lot of those end up not getting built. And yeah, that’s a problem.
[Richard Bexon]
Yeah, I mean, this country’s full of graveyards of developments, you know, even some of the big guys.
[Jose Maria]
Yeah, absolutely. So yeah, I don’t think, I mean, with proper due diligence, I don’t think, I think it’s very safe to buy property. But yeah, you convinced me.
That’s the riskiest investment.
[Richard Bexon]
Well, I mean, I just look at these all the time of like, hey, I’ve got this great deal here. And I’m like, well, and you know, they told me if I don’t buy this week, the price is going up. And I’m like, well, that’s number one, like, you know, red flag for me of like, come on, dude, don’t give me the, you know, the heavy, you know, the sales, you know, pitch.
And then also is that like, what guarantees do you have? Because you’re, it’s like, oh, no, I’m investing in a corporation that owns the land. And I’m like, okay, well, you better do some due diligence on the land and make sure there’s no liens against it.
And that like, you have a lien against it, not just your contract.
[Jose Maria]
You know? You know, also without a proven track record, if it’s somebody that’s done this 100 times, then I think it’s much safer. But those new developers.
There’s a lot of them. Yeah, there’s a lot of them. And some of them have these, you know, these value propositions that are very sexy.
But yeah, you have to look at it on a case by case basis. But I think that’s one of the great things.
Recommended Investment Areas
[Richard Bexon]
What areas of Costa Rica would you be buying land in and why? What’s it?
[Jose Maria]
Oh, that’s a good question. I think, you know, I think one of the great things of Costa Rica is that there’s something for everybody. Yep.
If you will. I mean, we have like the beach towns that are more comfort oriented, like Flamingo or Tamarindo, you know, with like good fishing and restaurants and well equipped with services. And we have like in Peninsula.
Also, we have like the raw, like nature kind of experience where, you know, many of those properties don’t even have, they’re even not connected to the grid and just like solar power. And it’s very raw nature. And that’s super beautiful.
We have like the luxury and wellness communities, like the Nosadas and Santa Teresas, where, you know, it’s like yoga and that kind of vibe. That we have that, like the high end luxuries, Papagayo, the Waldorf.
[Richard Bexon]
It sounds like, Jose, you would probably buy in areas that are a little bit more established and not areas that are like a little bit of a, you know, a punt, like a Marbella or something. It’s like kind of there, but it’s kind of just trotted, you know.
[Jose Maria]
Well, it depends. I mean, for me personally, I love Playa Flamingo. So if I was going to do something for myself, I would do it in Playa Flamingo.
I think… That’s an investment. Yeah.
I think the more well-established destinations are a lot safer as an investment because it’s not like, you know, but then again, this is always a risk reward ratio here. So if you go to the well-established ones, you still can make a great return. But if you find like, what was the word you use, a punt?
[Richard Bexon]
Yeah, like we call it a punt to bet, basically. Like a diamond in the rough, like is Avianas. Like Avianas looks like it’s developing pretty well.
I don’t think it’s a punt, but like that diamond is starting to fall.
[Jose Maria]
Yeah, I don’t think Avianas is a punt though right now.
[Richard Bexon]
No, I don’t think so.
[Jose Maria]
Yeah, no, no. I think that that’s getting developed, but it’s so close to all of the well-established things already that, you know, it’s difficult to go wrong there. I think a punt might be like in the South.
[Richard Bexon]
Like way South, like in…
[Jose Maria]
Yeah, like way South, like in Isla Rosa and things like that, where there might be opportunities right now, you can probably get a lot of cheap stuff that in 20 years is going to be maybe worth loads of money. But it’s a punt.
Final Investment Recommendation
[Richard Bexon]
Yeah. Well, Jose, this has been great having you here on the podcast and kind of sharing your knowledge. My last question, which I love to ask everyone is, if you inherited $500,000 and you had to invest it, so it’s an investment, not a personal thing, into a business or real estate in Costa Rica, what would you invest it in and why?
[Jose Maria]
Well, Rich, that’s the easiest question you’ve asked me in this podcast.
[Richard Bexon]
You can’t tell me to give it to… No, you can’t. I’m going to say the answer can’t be give it to me, man.
[Jose Maria]
Okay. So $500,000. I would, I would, I think I would buy an apartment that is, you know, you can’t really get a lot of beachfront for apartments for $500,000.
And I would Airbnb it. I think that that’s, you know, you get, you get a good steady income from the rentals and then you do get the value of the land that’s increasing over time. So I think it ends up being a good investment.
Where would you do it? I would do it in the Flamingo area. Okay.
[Richard Bexon]
Kind of that area.
[Jose Maria]
I’m showing my colors with that area.
[Richard Bexon]
Hey, it’s a good area, man. It’s a good area. I mean, I think highly, like it’s very expensive.
It is. You know, but there’s a reason it’s expensive. There’s demand for it.
You know, it’s demand and supply.
[Jose Maria]
Yeah. But listen, like, for example, if I think about it, the only reason that I wouldn’t, for example, buy a couple of lots and build on them and sell them, which would probably be more profitable than the Airbnb thing is because it seems like that would be somewhat more time consuming.
[Richard Bexon]
It is. For the guy that builds, it is. And stressful, you know, hence the gray hair.
Well, Jose, it’s been an absolute pleasure having you here on the podcast and kind of sharing your knowledge. I think anyone that’s interested in contacting Jose, I’ll put all of his contact details in the description down below. But appreciate you taking time to chat on the podcast with me, buddy.
[Jose Maria]
Thank you, Richard. Thank you. It’s been a pleasure.
[Richard Bexon]
See you later.
[Jose Maria]
See you later. Bye.
