108 Up and coming beach investment towns
Andres Murillo, who has over 15 yrs investing and selling Real Estate in Guanacaste, chats to us about what is happening currently in Guanacaste and the developing beach towns that he has to suggest investing in and where he invested his money.
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Podcast Transcription
[Richard Bexon]
Andres, good morning. How you doing?
[Andres Murillo]
I'm doing great. How about you?
[Richard Bexon]
Very, very good. I really appreciate you taking time out of what I know is a very, very busy schedule that you have running all over Northern Guanacaste here to chat with us here on the podcast.
[Andres Murillo]
No, thank you. I appreciate the time. And I'm really thankful for being participating in the podcast.
[Richard Bexon]
No, I mean, I think it's going to be interesting to get your viewpoint. Again, you work in real estate, but you're also Tico as well, and also a surfer. So I think it's really going to be interesting to kind of get your viewpoint of what's happening, you know, especially in those Northern Guanacaste areas from Junquial all the way up to, I suppose, Papagayo areas as well.
Correct.
[Andres Murillo]
Correct. Awesome. Yeah.
Well, you know, it has been very interesting. And it's a very common question that we've been getting if the market has slowed down, if it's sinking, what's happening. Some people is a little more extremist and thinking, oh, it's going to sink, it's going to go down.
Well, it's a complete different situation. Yes, we have definitely seen a subtle drop on prices as we transition from like an 18 plus month run of unique sellers market to a more balanced market. So and we will continue to experiment that.
On the other hand, we have the really luxury. And when I say luxury is the real luxury residential market. Very interestingly, they have set records during what is more a traditionally slow season that encompasses August, September and October for the top communities as Peninsula Papagayo.
They have had in the last two months, you know, huge volumes and transaction sales in which which have reached historical heights. So again, that's a whole different world. But, you know, we're really we're really comfortable that demand continues to be strong.
And thankfully here in the in the 2CR office, we will still be getting closings every week, potential buyers looking at property every day. And we predict that with the upcoming high season, the US and Canadian based investment will remain strong while prices start to balance out. So it's going to I wouldn't say it's going to become fully a buyer's market, but I think it's definitely going to be starting to balance out the prices to what they're worth.
[Richard Bexon]
You know what? I think that there's a viewpoint there. You know, I've heard a couple of different perspectives there, which is like, look, we're in kind of our bowels of low season here, which, you know, September, October is quite a bit of, you know, time of month.
So everybody's been used to this high, this frenzy of buying. And now it's slowed down because, again, kids are going back to school, everyone's preparing for winter, they're looking at Christmas. So we typically see that slow down.
So I wonder how many sellers are just getting a little nervous, which is bringing a little bit more flexibility. But I can tell you is I've negotiated a couple of deals over the past like 60 days, and the seller is still in control. You know, there was no flexibility in the price because but maybe it's because what they were buying was very good.
It was a very good asset, very good land. So there really wasn't that much flexibility in the pricing.
[Andres Murillo]
Sure. I think it depends too. It really depends on each case and how much offer there is in certain communities.
For example, we are really strong in Hacienda Pinilla. And, you know, in there, there's a lot of competition in certain prices. So as you become a little bit more flexible, you have a higher chance of selling quicker.
Yes, there's definitely because, you know, interest rates and everything that the media is talking about in the States, of course, some sellers, they get a little bit scared about what's going to happen. But I'm pretty confident that it's just a mix between Yeah, it's a little bit, slowing down a little bit, I'll say I wouldn't say it's a, again, it's nothing insane happening, or a huge market crash that we had in 08. But definitely is it's combining with the low season.
And, you know, historically speaking, we all know this season, September, October, and probably part of November is our slowest time of the year, less people in town. So yeah, I mean, but I wouldn't say we're pretty confident things are going to remain pretty good for the market.
[Richard Bexon]
I wish it would slow down for me. I tell you, it's just seems to be all over the place. I was in Guanacaste on Saturday, I've got to go down to the southern zone this this, you know, this week.
So yeah, it's all over the place, you know, but I mean, what beach towns in Costa Rica, Andreas, do you like and that you would personally invest in? And why?
[Andres Murillo]
Well, I, you know, I work market that span from Junquillal Negra all the way to Flamingo, I've done a couple of sales up in the peninsula as well.
[Richard Bexon]
But let's talk about you, like you as a surfer, like, where do you like in northern Guanacaste?
[Andres Murillo]
Well, I'll tell you what, my major attraction is surfing, beautiful beaches, and I'm a nature lover. So, you know, it has to combine those three, you know, in a way, to me, places to invest right now definitely say Playa Grande, I really like Playa Grande is one of the most consistent beach breaks in the area. Everything that is being built right now is within a walking distance.
I absolutely love Playa Avellanas and Playa Negra. So now Playa Negra, I'm sorry, Playa Avellanas with the water coming in, there has been an increase on investment in there. I actually just purchased land in there myself.
Good for you. Yeah, thank you. And also in Negra, I'm purchasing a lot right now as we speak.
But, you know, those are the areas of my interest where I see the future is coming. Avellanas is one of the most visited beaches and most beautiful beaches in the area. And people just love it because the easy surf and the food you have and Lolas and all of this, you know, that whole bridge, people love taking photos in that bridge in the mangrove.
So, you know, it has a really good setup. So I would say probably stay within, you know, those for me, Playa Grande, Avellanas, Hacienda Pinillos is a great spot. Playa Negra, I absolutely love.
So those are probably myself, that's where I'm in that recommending only, that's where I'm putting my money in. I'm doing my own investments in there.
[Richard Bexon]
But would you say what, I mean, how long an investment are you making Andreas there? Because I mean, there's a difference between a five and a 20 year investment. You know, a five year is kind of, you know, you could be looking maybe at Grande, a 20 year, you could be looking at Negra, Junquial.
I mean, what's your, I mean, where would you be investing for five years? And where would you be investing for 20 years?
[Andres Murillo]
Well, definitely in the next five years, on a short term, I'll say Avellanas, Hacienda Pinilla, Playa Grande, Tamarindo, of course, which is like the hub of all the action here. And then I'll say Flamingo Potrero. Flamingo Potrero, just because of the marina, you know, everybody knows there's a huge investment that came in with the marina.
They were budgeting for 30 million a day that scaled up to 50 million. So, you know, it's a huge investment happening in there. Again, Grande because of the surf, because I know what's being developed in there is going to bring the value really high up.
And definitely Avellanas. I've been selling some property in Avellanas, Negra area, and what people is building is really nice. It's more residential again, which is super cool in my opinion.
I honestly, you know, I understand there's all type of, you know, likes and dislikes. I honestly don't like that much higher buildings, which is something that makes a difference in these towns like Negra, Avellanas, Playa Grande. So I will say probably in five years there, if I were thinking more of a long-term, probably Negra is going to develop a little bit slower.
Definitely Marbella, surrounding areas of like Garza, close to Nosara, and definitely like that Coyote area down there in the south, closer to like Santa Teresa, also even Manzanillo, because already Santa Teresa has developed pretty well. Hermosa is developing really nicely. And, you know, the next beach to them is Manzanillo.
Exactly. So, you know, I think that area over there is pretty interesting.
[Richard Bexon]
Well, it's funny though, that it hasn't gone over the hill that much to like Cagulla. I mean, it has a little bit, delicious Cagulla. I mean, it's a little bit in Montezuma, but it's really heading north, right?
[Andres Murillo]
Yeah, it's very interesting. Actually, I don't know why, but they discovered like all these, you know, again, I'll say probably is the beauty of the beaches. You know, how like Santa Teresa is really beautiful.
And then you have Playa Hermosa, which is stunning. And then they start going up the hills in Playa Hermosa. And now, I don't know.
Yeah. It's very interesting. They're moving north, not, not to Cagulla and Malpais.
You're right.
[Richard Bexon]
I think it's maybe, it might be water, you know, water Malpais, bad land is called Malpais because it doesn't have water. You know, Cagulla, I've worked on a few projects over there where we had some issues getting water up in the mountains. Yeah.
You know, so it's amazing how water infrastructure really determines here. You know, and I say this to a lot of people, I'm like water infrastructure is everything. You can get electricity.
You can't get water always.
[Andres Murillo]
Correct. And, and, you know, again, it's a matter of infrastructure because, you know, for all these area, for example, now that completely changed Avellanas. So Avellanas was a very dormant town.
Now it became, you know, there's a lot of people investing in there and doing really nice stuff because what happened is they connected Avellanas to Paraiso. Paraiso is a huge water table, you know, the valley is beautiful and, you know, they have enough water to provide for the whole area. So that's what they did.
But it, you know, it takes, it's, it's a little bit of bureaucracy, I'll say, and also a little bit of, you know, money infrastructure. I know they're working on these huge investment on bringing water from a town called Nimbo Llores up North from here. And they're going to provide water for Tamarindo, Langosta, like all these area in here as well, Playa Grande is included.
So yeah, that's, it's slowly going, but yeah.
[Richard Bexon]
Andreas, where do you believe the gap in the market is at the moment? I mean, like, you know, I mean, it's interesting because a lot of stuff is happening here, but there is also, you know, I mean, I was at a, I was at a round table the other day with some big developers here in Costa Rica. And I'm just like, look guys, like long-term rentals for staff, you know, hotel managers, people working in hotels, people coming from the city, like it's severely lacking, but I mean, where do you believe the gap in the market is at the moment?
[Andres Murillo]
Well, definitely what you just mentioned is huge. There is a huge demand, huge demand for, you know, young professionals who don't have a place where to live. There's definitely a gap in that market.
If you want to, you know, it's a little bit complicated because of course, then you don't have any limitation in terms of short-term rentals. So most people rather do short-term, which gives you a higher return, but there's definitely a way to do it. And there's a huge demand for that.
So, you know, small families or single people are moving to the area of young professionals who need a place to live. And there's a huge, huge hole in the market for that. Then also saying there's from an investment standpoint, if you were to be, you know, building spec homes, I'll say there's definitely a huge gap between how nice houses between and newer houses between like $350,000, $300,000 to $750,000 around there, because that's exactly what the market was doing before COVID.
Those were the prices, but then it became a seller's market and everything, you know, prices doubled. So, you know, there's a gap in there, you know, waiting to be filled.
[Richard Bexon]
I think the real, you know, because I've done a lot of analysis on that, that it's, you have to get the land at the same price at a really good price because your cost of build is the same anywhere, like anywhere in Costa Rica. I mean, there's minor fluctuations in pricing, of course, Guanacaste being a little bit more expensive, but like your cost per square foot does not change that much throughout the country, but it's the price that you get the land at, which really determines your, you know, your profitability.
[Andres Murillo]
Yes. And also, yeah, definitely getting the land at a good price is going to allow you to, you know, build at a lower cost and, you know, or have a lower investment. But yes, we have been seeing, that's where the other problem is in that market, in that gap, because yes, with the pandemic and the lack of, you know, some materials and iron going up and, you know, construction, it did went up.
I'm currently finishing on one of my houses. And from what I was, you know, what I was targeting to get in that budget, it went probably a 15% higher from what I was expecting. That happens with construction, but at the same time, yes, there has been, so that makes it a little bit more complicated.
I am currently working on one of the properties that I just purchased. It's a hundred percent an investment property. And we managed to get one of those rare deals where you get a good price and our market, we're aiming to be under 800 and more like around 750 at a short walking distance to the beach.
So, it's going to be like a really nice, that's the market I think I want to get. And it's definitely a huge lack in that.
[Richard Bexon]
Yeah. I actually, you know, consult for a big construction company here in Costa Rica. I just give them some of my ties, a friend of mine that owns it, and he asked me for his help, but I always do it because it gives me an idea of kind of like the front side of construction.
So, Rebar is actually starting to drop a little bit. So, they see that in the next six months, Rebar is going to continue the steel, but they believe that the actual concrete and the blocks are actually going to rise a little bit. So, it's going to be interesting to see what happens.
But yeah, I mean, I think that you always need, you know, because we were managing a couple of constructions at the moment where it's like, they're a fixed price and then there's cost plus, of course, you know, it's which one's better to go with. And it's like, well, like that's not a decision we can make. Like we think it's going to do this, but like you have no idea.
[Andres Murillo]
Yeah. You're a hundred percent, you know, that's right. It's so hard to predict.
And there's always this little risk in there. That's why you always need to add that 10% extra just for unforeseen things that could happen. But yeah, there's definitely, it's hard to predict this.
It's complicated, but you know, it's just what it is, you know? I mean, hey, no risk, no return, right?
[Richard Bexon]
Exactly. Exactly. I agree with that.
Andreas, what returns do you tell clients that people can achieve on a vacation rental here? Because a lot of people make an investment here. It's like, I'm going to come down, maybe use it a week or two, but I want to use it as a vacation rental.
I mean, and I'm sure the question is, it's like how much, what percent can I look at getting on my, you know, vacation rental?
[Andres Murillo]
Okay.
[Richard Bexon]
What do you typically sell people?
[Andres Murillo]
Well, what I tell is it all depends on how and where the owners market their properties, how they do it, who they hire, they run it. Typically as an owner and I, myself, I also own vacation rental properties and I handle my vacation rental properties myself. So of course I'm on it.
It's my property. And, you know, typically if as invested as the owner is in the rental, you know, the higher return you're going to get. Also, it really depends on how much they want to use the property, right?
And when. Exactly. And when, that's the key.
Because I've seen, you know, returns all the way from like probably 4%, 5% to 10 plus, depending on the property, the price they got it for, you know, how much they rented. If they managed to hit that sweet spot where you're getting the rentals and you're, you know, it's really good. Also there's people who I know for a fact that if you rent, there's three or four really high weeks, what we call peak season, which is last week of the year, first week of the year, Semana Santa, Easter week, which is huge for Costa Ricans.
And then in some cases Thanksgiving. So normally with those three, four peak seasons or peak weeks, you are covered for your running costs, you know, saying you're going to break even paying HOA fees, water and electricity bills, property manager, if you have a property manager. So I'll say, but interesting lobby is when people want to visit.
So some owners are not willing to give up their, you know, Christmas, you know, New Year's week, but that's where you're going to, you can actually almost triple your prices. So, you know, it also depends on what and how they operate. I think every owner is very unique.
Also, you got to create that uniqueness on the property, depending on what you buy, again, because there's a huge offer of two bedroom condos in Tamarindo, for example. So if you're looking for like a really high return, you're going to be competing with a lot of people. So you need to stand out.
You know, there's many different factors that are going to come into play in, you know, when it comes to a return, but I'll say any, you know, you can expect five or 6% on a regular property. For example, in Hacienda Pinilla houses with five bedrooms, nicely decorated with, you know, spaces, you can be looking to gain a year between $120,000 to $150,000. I've seen up to $170,000 in bookings a year.
You know, so again, what then comes the expenses, which I'll say is probably like around a 50%, but you get to pocket, you know, $60,000, $70,000, you know, so.
[Richard Bexon]
Yeah. I think it's also the property management company, right? Because they're also going to want to take 20, 25% of your revenue.
[Andres Murillo]
Yes, definitely. So that's the thing. I mean, you got to hire the right, you know, the right property management company who knows what they're doing.
Also that they're very invested in the company where they are, you know, now we have, you know, you can smartly change your prices depending on what the demand is or the offer is. So, you know, that comes to play how involved they are in the pricing. And yeah, definitely think about that.
It's 20% what they're keeping. That's pretty standard. Well, up to 25%.
So that's going to eat from your, from your profit as well.
[Richard Bexon]
Yeah. Yeah. I mean, I know, you know, I know Vacasa usually charges 25 to 30, but no fixed fee.
Other property management companies charge a fixed fee plus take 20 to 25%. You know, different models, you know, and I think that the owner needs to understand if like, it needs to be a good fit based on their goals with the property management company, because there are companies that will sell the headlights out of it like Vacasa, but then there are other companies that would like take really good care of the property, the maintenance, you know, but maybe might not sell it as much.
[Andres Murillo]
Yes. I honestly, I'm a bigger fan of property management companies that they take a niche because they tend to do the better job. In my experience, right.
There's, for example, there's a certain company in Reserva Conchal. They only specialize in Reserva Conchal and they do an amazing job. Same thing for Hacienda Pinilla.
You're talking Melissa, the OCC or my Guanacaste? I actually like to work a lot with Conchal Rentals or, you know, that's the name of the company. Gabriel Araya and his wife, they own it.
So that's them. But then, for example, in Hacienda Pinilla, I love how Joel from Vida Pinilla works and we've been working together for many years. And I know for a fact, you know, he's really on it.
He has a really good team. So again, that's my go-to companies when I have to recommend somebody. I feel like larger companies, yeah, they have a larger, you know, probably have, you know, a larger market in terms of sales, but at the same time, they need to spread their sales through the whole country and through the whole developments and all the areas.
So it gets a little more, you know, house-to-house way.
[Richard Bexon]
Like a property matches the buyer. I think a property management company also needs to match the owner depending on their goals.
[Andres Murillo]
Correct. A hundred percent. A hundred percent.
That'll be the first thing, the first thing to know. Do I want to use it a lot? Do I'm willing to give up?
This is a hundred percent an investment property. So it's going to play a huge role in terms of exactly what's going to, what's going to, your property, how it's going to perform in terms of return on investment.
[Richard Bexon]
Andres, let's just jump back at Playa Grande. And I always say to people, I'm a bias towards Playa Grande because I think it's beautiful. You know, if there was a beach to living in Costa Rica, I would live in Playa Grande.
I've had a lot of people, you know, we're building five homes, four or five homes. I keep losing count and we just keep getting more there that we project manage. But Grande Salvaje, I want to talk to you a little bit about that.
That's a project that I've, you know, that I've seen kind of grow up. It's there in Grande, in Playa Grande Estates. I mean, tell us a little bit about it just because I know it's something that's dear to your heart.
And also I think it's going to be, you know, I mean, they're probably the most luxurious houses down by the beach in Playa Grande, no?
[Andres Murillo]
Yes. A hundred percent. I mean, to be honest, I'm really proud of being representing a development like Grande Salvaje.
You know, it's being built as we speak. It's a family business. It was really interesting what they did because they managed to get a cul-de-sac, you can call the whole street.
So they managed to buy actually 10 lots where they basically control the street. And interesting enough, the other three neighbors that are in that street and they don't belong to Grande Salvaje, they're building really similar housing in terms of style and quality of construction. And so, and they all agreed to put a, to, you know, they created these sort of HOA fee that covers for a secure entrance.
It covers for little garden maintenance. And, you know, so it's going to be definitely the most and definitely the safest community in the whole Playa Grande section, just because of those very interesting, very special, you know, factors that they managed to control. And then I'm really proud of it because, you know, they, it's basically how development, the direction that development should be having if you're responsible with humankind and nature at the same time.
They, they were very careful in, in who they chose as their architect, which is the architect for this is Juan Robles. He's a very well-known Costa Rican architect and they're, he's very specialized into bioclimatic architecture. And that's exactly what they did.
They focused on being able to, you know, maximize or actually minimize the AC consumption by properly studying, you know, what the sun is doing in the different times of the year, what parts are being more exposed to the sun. They did a really thorough, you know, I would say, you know, due diligence in terms of understanding what the nature is doing around you. They were also really smart in, in doing low waste during the construction.
So all the cinder block they bought is completely modular, meaning there is almost close to zero waste. I mean, there's a little bit of waste, something can break, you know, you know how it is, but they have, the way they did it is minimizing waste, respecting nature. So they, they, they're very respectful of the trees they have around.
So they actually partnered up with a, with a company who provides that type of services, who understands what the trees are, how you need to cut them, when to cut them in order not to kill them. And you can actually combine that with your house at the same time. So going around nature, not destroying it and then putting your house on top of it.
And you know, they also one of the, one of the brothers who owned the company, they also own a company called Green Energy Solutions, and they're huge on solar panels. So all the houses, they were properly built to be completely off grid, if that's what you're looking for, or be hybrid, where you can have a battery that supplies electricity for some parts of the house, and you're connected to the grid, a part of it. So it's very interesting what they have been doing.
And I'm really proud because, you know, they're taking in consideration every single thing and they're not cutting any corners, they're building on the higher standards. So definitely, it's probably one of my favorite developments I've seen around in a while, and especially Ipta Yalande, which is a marine national park, and you got to be very respectful of the nature in there, because of the turtles and everything that goes around with it.
[Richard Bexon]
Yeah, I mean, prices start there from what, Andres?
[Andres Murillo]
Because I'm sure a lot of people were just like, okay, and how much does it cost? Well, so right now, the prices start at $1,095,000. Yeah.
There's a few of them already sold, there's four of them already sold. I actually had a very interested client last week, and I think we're going to get to the fifth, but we'll see how about that. I'm sorry?
I said, that's awesome. Congratulations. Yeah, no, thank you.
So definitely, yes. So that's the starting point. Of course, as the sales go, the price is going to start going up, because it's a very small community, and there's two things.
We got to bring value to the people who bought first, and second of all, is because the last lots are actually touching the park. So you won't have any construction being built in there. And something really cool that they're doing is at the very front of the development, they also own the property that touches the main, main road, and they're going to be building a mix of commercial on the bottom and apartments on the top, which is going to be really cool what they're doing.
Fantastic.
[Richard Bexon]
Yeah. I mean, it's going to be really interesting. I mean, I can't wait to see it all finished, because I think it's going to be beyond, I would say Las Ventanas, which is set further back, I think closer to the ocean.
It's going to be one of the most luxurious communities, probably on that coast. So it's going to be interesting to see how that finishes. Yeah, definitely, definitely.
Andreas, my last question for you, as I've taken up enough of your time, I mean, if you inherited $500,000 and had to invest it in business or real estate in Costa Rica, what would you invest it in? And why?
[Andres Murillo]
Well, definitely to me, and based on I've been doing, I've been doing real estate for the last 11 years since I'm 22, you know, selling property, so I would say definitely real estate. And the reason is because I mean, I've been so close to it, and I understand, um, you know, how the market works. So I'll be very careful in selecting the right property, the right property and actually reaching them to the market at the precise moment.
So definitely, I like, I like what I like about real estate. And I say this, because I've had, you know, businesses as well. And I have nothing against it.
But you know, when you have a hotel business, for example, which is something that I had, you know, you have so many, so you know, a lot of moving parts coming in, like, first of all, the clients, then each room has their own AC. So that means each room has AC maintenance. And no, there's so many moving parts, real estate to me, in terms of flipping houses, I think it's a great business, because it allows you to have a higher return really fast.
If you do it properly, again, going back to what we're speaking at the beginning, selecting the right property, you know, choosing wisely in terms of price, knowing how to negotiate, you know, and, you know, all that. But also, something that became really good to me is passive income is been really good to me in terms of I own a couple of rental properties, like I said at the beginning. And, you know, again, I was very involved in the construction.
So that helped me bring in the cost a little bit lower. And I managed my own reservation booking process with a crew that I hire for cleaning for maintenance and all of that. So to me, those two have been really, really good to me.
And I highly recommend people doing both. There's a huge demand for vacation rental properties in the area. Especially if you focus on building some going a little bit extra and building something that stands out from the rest, or actually trying to hit a target, you know, something that nobody has hit, for example, in my case, it's couples.
My two rentals are just 100% couples romantic. And it's been quite a really good lucrative market to hit. So it's very interesting.
But yeah, I'll probably say real estate is my go to choice, either for having as an investment in terms of short term rentals, even long term rentals, or just flipping even lots, I've flipped lots in the past, and it turned out really good. It's just a matter of timing. In case of, in case of, you know, people who are not Costa Rican or people who are not used to the marketing, Costa Rica is trusting your real estate agent in this case.
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