103 Running as business and developing in Costa Rica

[Richard Bexon]

Good morning, Bruce. How are you doing?

[Bruce McMillan]

Hey, I'm excellent this morning. It's beautiful. Yeah.

[Richard Bexon]

Well, I really appreciate you taking the time to join us here on the podcast. I know that you're up there in Hacienda Pena, if I'm correct, right?

[Bruce McMillan]

Correct. Yeah.

[Richard Bexon]

And you are where? I'm in Arredia at the moment. I usually bounce around, I'm in Arredia, but then tomorrow I go to apply at Homoza in Punta Arenas, and then actually further up north to Guanacaste the next day.

So kind of a little all over the place at the moment.

[Bruce McMillan]

Excellent. Excellent. Yeah.

It's nice up in the hills there. It's a little chillier. It's cooler.

This time of year, it's nice here, though. Temperature drops, the ground gets really wet, and it's the most comfortable time of year.

[Richard Bexon]

Yeah. I like Guanacaste this time of year. And it's also green.

It's lush green. And some people are like, I can't believe that this place goes brown, like completely brown. And it kind of becomes a dry rainforest.

[Bruce McMillan]

Yeah. It looks like Southern California for four or five months of the year. Nobody can believe that it's a tropical rainforest, but it's dry.

And no one can believe it's dry when it looks like it does now. Because it looks like it grows like this. Looks like the Amazon around here.

And the transition is incredible. The leaves drop. Wow.

Go ahead.

[Richard Bexon]

No, I was going to say, I mean, you've been here in Costa Rica for a while now, Bruce. How many years have you been in now?

[Bruce McMillan]

About almost 20. I moved here in 2003. We came for a year.

I sold my practice in the States and we came for a year on a sabbatical and we never left. Good for you. Yeah, it was great.

It was an exciting place. There was a families like they were living in North America. They weren't living off the grid becoming gypsies.

They were, you know, like peers from back home, but they were living here. And yet this place was incredibly rural. We didn't have an airport in Liberia.

We didn't have an auto Mercado. Auto Mercado, we shopped out of these little supers that were like hotel gift shops, you know. And if we want to get groceries, we drove to San Jose.

And then little by little the airport opened and things started to happen. And it's just been, you know, it's been really nice. So it was nice to be that rustic and then it was nice to be relieved with new services too.

[Richard Bexon]

Well, I mean, you've been here 20 years, but I mean, since the pandemic, I mean, what changes and trends have you seen that you think are probably here to stay?

[Bruce McMillan]

Well, I know we're going to talk a lot about investments. So that definitely necessitates talking about real estate. So I'll tell you the biggest trend we saw was, you know, post 2008 financial crisis.

We didn't see a lot of movement here. We didn't see a lot of residential arrivals. We saw a few, but not a lot.

And the investment here was driven by speculation. People wanted to buy because this was a booming area. We saw huge tourism growth, but we didn't see as many people moving here as we did prior to 2008.

So lots of speculation, lots of growth, lots of sales. Most of it was for the rental market, a small amount of residential relocation. And then when COVID hit and the world shut down, we actually ended up with a whole bunch of people who were renting here that ended up staying during the crisis.

And then they actually became residents. I mean, a lot of people were on vacation, got stuck and then never left. And then a lot of people in the States were like, you know, I want to get out to urban centers.

And as they did in so many places that they came here. So we've had an explosion of residential interest here. So their prices have gone up because people were buying for themselves, not for return on investment.

And moving here, the school enrollment has skyrocketed. People are moving here like crazy now. And there's a whole shift in the demographics of who lives here.

And it's really been a very good one, to be honest. And it's continued. It continues.

You know, when everyone was forced to work at home, go online at home, through school at home, everybody decided, hey, I can live anywhere. And so why am I living where I'm living? Why don't I live in Guanacaste?

And I'm sure that happened. That phenomenon happened everywhere. But it certainly happened here.

And that trend really changed things. And then so we've had a secondary real estate boom, which we hadn't had in a long time. And, you know, 2008 happened and there was a major collapse and the market really never came back.

When the U.S. market rebounded, we did not. We were flat, no man's land market for, you know, until probably 2017. And so we had a lot of catching up to do.

Yeah, so a lot of new residents, a lot of new people, a lot of people are suddenly arriving here. Our population is growing like crazy. Our weights at the intersections are exploding.

All of a sudden our infrastructure is being tested. But it is making it a richer area. I do enjoy living through these changes, except for the new traffic.

[Richard Bexon]

Well, Bruce, I mean, you've done quite a few things here in Costa Rica. I have the utmost respect for you for what you've done. But is it possible to give the audience an overview of kind of what your experience here in Costa Rica?

[Bruce McMillan]

Yeah, definitely. I'm originally a chiropractor. I practiced in San Diego for many years.

I was a real estate investor on the side. I bought, you know, apartments and whatnot. And we moved here in order to take a year off.

And I just thought, okay, we'll look around and see what comes up. First thing that came up was I ran into a catamaran sailing tour that the guy had just arrived. His mother was diagnosed with cancer.

He had to leave. So he hadn't even put it in business. So I bought the lazy lizard and I opened that up in business for, you know, five years and ran a catamaran sailing tour.

So it was very similar to running a practice back home. It was just a different product. And so the entrepreneurial spirit sort of became the way to go here.

And honestly, you have to be an entrepreneur in Costa Rica, because so many people can't bring their jobs or if they do get a job, I mean, unless they're online, but if they do get a job here, the wages are just not going to keep up with what they need to make, you know, to live. So people are forced into an entrepreneurial habit and navigating Costa Rica and small business and entrepreneurial efforts. It's a very different animal.

And if you figure that out, you're going to be fine. So we sold that, we went into real estate development, 2008 hit, froze all of those efforts and energies, you know, but part of our real estate project was to do a beach club. So we ended up opening our beach club restaurant, which is now Pongas.

That has been a big success. And I'm really happy with that and really grateful for that. And we went ahead and built, we're basically building an El Tesoro next door to Tamarindo Heights at the entrance to Tamarindo.

And we tried to launch that development as we built six units for sale, and there was no market, they just wouldn't sell. So we turned our attention to renting those units so that they would have an income, so the income would drive the sale. And that worked.

So all of a sudden, we had a good rental program and that we built on that became my next business. And we've been running that ever since. At the same time, back in 2003, we lived on a hill up near Tamarindo, we're waiting for our place on the beach to become available.

So we rented a place up on a hill nearby Tamarindo and fell in love with it. The views were amazing, that cool air was amazing, the lack of mosquitoes and elevation, and the light coming across the valley in the mornings and the sunset, the light shows from the clouds, it was just this incredible quality of life. Then we left there and got our place on the beach and realized that the quality of life was a fraction of what it was up on a hill.

And I'm like, what are people chasing? So we got to the beach and all of a sudden we've got mosquitoes outside, we have to use the air conditioner, it's much hotter, the airflow is not there. And we became obsessed with this idea that you could live on a hill and have a view.

And so we started looking for properties that were close to the water, but had hillside view and airflow and all the things we discovered. And so we purchased in that year, a farm out here just behind Hacienda Pena called Cerro Grande. And we have 105 hectares out there and it's got lowlands and highlands and middlelands and all that.

It's got beautiful views, it's got all those conditions we were looking for. At the same time, back in those days, we had three small children. And I think my youngest was six months when we moved here, my oldest was six years old.

And again, there was no infrastructure here, no sidewalks, you couldn't use a stroller in town. Shopping was a nightmare. So while I was thriving, my wife was really having a hard time.

So I discovered horseback riding. So I brought her to Flamingo Equestrian back then. And this great instructor Amanda was teaching horseback riding and we got her into horseback riding.

And she started learning dressage and jumping and all that. And it was the greatest thing in the world because all of a sudden she fell in love with something in Costa Rica that she probably couldn't have back home. And it turned the corner.

So it's really important if you ever move here to make sure that both parties in a couple have got their groove because Costa Rica is not the same environment as back home. And it sometimes doesn't resonate with one or the other. We've seen a lot of couples come and one will thrive and the other will suffer.

So it's a note to people who are looking to make it here, both have to resonate. It's a really important ingredient. And there's a lot to do here.

So if you take the time to figure out how to navigate Costa Rica, its cultures, its ways, its opportunities, there's a ton to do, but it is a different interface. So it might take some work. So we got into horses, we took our farm and I decided, well, if a little is good, a lot is better.

So let's build her an equestrian center and that'll really anchor her here. She won't be able to go anywhere and screw up my fun. And so we did, we built an equestrian center out there.

We call it Cerro Grande Estates and that's become a project. And like I said, we started that in 2003. We had the idea that a great big piece of land that's well-respected, reforested, has great pastures and beautiful scenery, could be a really ideal place for a real estate project.

So basically, rather than cut it up into small lots, we decided, okay, let's just pick the natural contours of the land, make the lots oversized. People will want these little small farms. They'll be able to have the equestrian center facility right there.

They'll be able to do all the horsemanship they want or get the support for their horses that they want, or they'll just be able to live in a rural setting. If you go back to California, where I'm from, some of your nicest neighborhoods were very similar. They were a little oversized.

I think about Retro Santa Fe. It's one of the oldest neighborhoods in California and it was always an inspiration. Santa Luz, a new one, they're really developed along these similar lines.

And so we picked that theme and we started developing and we just took 20% of the farm, brought it into 16 properties. It's about 20 hectares and that laid it out and it looks beautiful. And recently that portion all sold and we'd left the rest of it for future use and future development.

And we're just going to start planning the rest of it and same theme. We've got some great view properties in there, close to the beach. We'll be building a home out there ourselves here.

We've broken ground. We'll be starting construction here at any moment. And I think in the end we'll probably have 40 to 60 properties on 155 hectares.

So it's a real good distribution of land density. Very important to keep it beautiful. And we've been busy with that since 2003.

The biggest dilemma there was getting our water. That was a nightmare. When we first bought the farm, we went and we bought a couple of wells.

We said, okay, we want wells. We contacted a geologist and he goes, great, I can get you the well permits. So we got the well permits and we dug the wells.

We went to register the wells and that guy was suddenly in hiding and we found out our well permits were phony and we paid for phony permits. It's like, okay, great. So that was a bit of a process.

Back then there was a lot of environmental struggle in this area and they just weren't issuing new well permits. So now we have these wells that were working great, but we didn't have permits for it. So we went through the long process of assigning it to an ASADA and getting our water studies done and going through all the technical processes.

But boy, it took 15 years. It was absurd. And we've always had the rule that we wouldn't bribe our way through the process because we're here to add.

It's a very important rule. We're here to add value to the culture. We're here to add value to the country.

We're guests. We're not here to parasite off of it. And one of the ways to really erode the culture is to contribute to the corruption here.

So we've never done that. And boy, does that slow things down. Unfortunately, it slows things down.

So I highly recommend that that's a posture taken by all because it just encourages more of it. And once they own you, they own you. And I've seen it really get ugly.

But the Costa Ricans, one of the beautiful things about Costa Ricans is part of their culture, but it's not part of their culture. They're Latin American country that has a lot of that like so many do. And I'm recently discovering so does our country.

But it's something they're not proud of. And it's something they're ashamed of. And it's sort of something they want to throw people in jail for.

So this country is really fighting for a way out of that image and ideology that that's part of it. In other countries, I won't name names, that's baked in, and it's not going anywhere. It's part of the system.

This country has, I really believe that they look at it like it's shameful. They're ashamed of it, if it occurs. And their government rallies around eliminating that.

They have a history of throwing people in jail for it. It's really wonderful, actually. So we really want to not undermine that effort.

So anyway, that's one of the reasons it took us so long to get our water, which we recently got. And so now we're going to slowly move forward. We had the first phase sold quickly.

And then the second and third phases will be designed and released relatively soon. And I'm really excited. The location is just great.

We're right behind Hacienda Pina, right in front of maybe, you know, oh God, Cania Fistula area in front of that. You come to us from the Pina side. So it's a really good proximity to Pina, Avianas, Tamarindo.

It's really easy to get to. And yeah, I think you've done it.

[Richard Bexon]

Yeah, it's beautiful. I mean, I was blown away when I went to it, just the views, you know, on those hills, when you stand and you see and you can see all the way down the coast, you know, and it's I think it's, you know, a lot of people out there are looking for a larger piece of land and looking to kind of get off grid. And I wouldn't say off grid, but they want, you know, to just be out there in nature.

And, you know, Senegal and the States has that. I mean, how many people do you have buying their Bruce or kind of moving there that aren't, you know, into, you know, horses and want, you know, farms, but people just building homes out there to just kind of, they want to, they want to be close to Tamarindo if they want to go there in Alta Mercado, but kind of want to be far enough away that they feel like they're in Costa Rica.

[Bruce McMillan]

Yeah, we have two buyers that don't, aren't horse people, but they, they love, they love the opportunity of the nature of the larger lots, the views. I imagine our view properties may go to horse people because horses and views don't necessarily go together because if you have a view, you have a hill and a steep driveway and horses and steepness don't go well. So we assume our lower lands will go to our horse people and our view properties might go to someone else or someone in between, but yeah, the key ingredients are that you're within a short distance of the beach, short distance to the school, short distance to the major grocery stores.

And within an hour of the airport, the hour to the airport seems to be the magic range. Yep. And two hours from the airport seems to be a bit out of the range, but we have all of that.

And, and so we're well-located and they're actually just paving the roads now, right at this minute to Gata Pena. So finally, I was right. Well, I've come to not believe roads will be paved until they're actually paved, even if they're working on them because I've seen that before.

Yeah. But at the moment, maybe I'm, maybe I'm biting too soon, but it looks like they're paving the roads.

[Richard Bexon]

Wow. Bruce, what services do you think are seriously missing in Guanacaste? I mean, for anyone looking to come down there to start a business, I mean, where do you think the opportunity is?

[Bruce McMillan]

There's no question about it. It's financial financing. Okay.

So the biggest challenge in this country is there's really no way to get bank loans. I mean, on paper, you can go visit a bank and he can, they'll tell you what you want to hear, but then you'll start a process that just never ends. I was foolish enough to start one two years ago.

I'm still in it. Are you kidding me? So, and I've got everything.

I've got history banking credit in this country. Yep. Cashflow.

I've got everything and I just can't get through the process. It's, they're very awkward with loans. So there's expensive loans and private money, but it's expensive and it's usually short term.

So financing is the biggest obstacle. Patience is the other obstacle. We all, things happen at their own pace here and accepting it is the most important thing you can do.

If you accept it or push on it, but it doesn't break you and you don't get frustrated, you'll do well. The other big secret to doing business in Costa Rica is this is a country based on relationships, not based on terms and conditions. That's all they care about.

And so invest in your relationship skills. When you do business with somebody or you have a client, they spend the first five minutes talking about your mother, your grandmother, the football game and everything else. That's the most important part of the meeting.

It isn't perfunctory activities to get to a business deal. That's the meat of it for them. They like relationships and they'll do anything for people that are their friends and that's how you build bridges here.

If you don't invest in relationships, you're going to be very frustrated here. It is not a businessman's country. It is a relationship country first that does business second and you've got to invest in that.

And then Costa Ricans will do anything for their friends and they'll sabotage the world for their enemies. I love this country.

[Richard Bexon]

I really do. I mean, I'm just reminded by the wolf of Wall Street when they go to Switzerland that he wants to get straight down to business and they're like, we do 10 minutes of small talk here, then we talk business. I'm like, if you just text someone here, like, hey, I need this.

The response is Buenos Dias. Like there's all that that you've got to you've got it.

[Bruce McMillan]

Actually, that's a good gringo strategies to practice that I bonded with that same scene from the Wolf of Wall Street for the same reason. But yeah, you've got to practice your small talk, honestly.

[Richard Bexon]

Hey, how you doing?

[Bruce McMillan]

How's your mom? How's your weekend? Okay.

It's beautiful. It's actually, it's a beautiful part of the culture. It's beautiful.

I agree. I agree. Costa Ricans have great values.

They value family, they value their sports, they value their free time, they value friendships like crazy. And it's a good thing for us to learn. It's good for us actually use a little more of that.

And if you have the skills, it'll make a difference.

[Richard Bexon]

Well, Bruce, my last question for you is I don't want to keep you too long. I mean, if you inherited $500,000 and had to invest it into a business or real estate in Costa Rica, and you need to generate returns, whether it's cash flow or capital appreciation, what would you invest it in and why?

[Bruce McMillan]

Okay. You're going to be surprised. I won't say buy land in Cerro Grande because I think that I guess if you, I would do two things would come to mind.

Number one would be a piece of real estate that is well positioned that will make income. And it's not just any piece of real estate. I would buy something that fits the rental market right.

You could find a piece of real estate that is in demand where the supply is limited, demand is higher, and the look and appearance is competitive. I think there's a formula for that. And that's what we do in my other company is we manage properties for that return on investment.

So that would be the easy one. And if it's bought well, you're going to get good cash flow and you're going to get capital appreciation by the wrong property. And you're going to just break even.

We don't have any loser properties, but we definitely have some that don't make that much money because they fall outside the ideal parameters. But to be honest, I would buy a business. I would take $500,000 and I would find a good business and a good industry.

Something that somebody's already begun and it's got the framework bones and isn't asking for a fortune without financing here. If nobody will finance real estate, can you imagine nobody will finance small business sales? So it's all 100% cash.

I would imagine that you could find a small business and get a good price on it. And if you're a businessman and you can take it and improve it, I think that would be a great use of that kind of an investment. And that's a possibility.

Real estate is a safe one because even if it goes south, you have the asset, you're not losing money. A business is a risky one because if you collapse the business, you've got nothing left unless you bought it with real estate. But I think the opportunity, the great opportunity would be a small business, but not a restaurant.

[Richard Bexon]

Well, Bruce, this has been an amazing podcast. I really, really appreciate you taking the time out of what I know is your busy day. I know that you are juggling chainsaws over there between your developing property management, also your beachfront property that you have there.

So I really appreciate you taking the time. And I think I'll put all of the details of your businesses in the description below. And thanks again for taking the time, Bruce.

Thank you.

[Bruce McMillan]

Thank you. Thank you, Richard. Really nice speaking to you.

This was fun. Thank you. You too.

Have a good one. You too. Bye.