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171 Advice when buying a farm in Costa Rica

171 Advice when buying a farm in Costa Rica
171 Advice when buying a farm in Costa Rica

Podcast Transcription

[Richard Bexon]
Good morning, Peter. How are you doing?

[Peter van Hussen]
Hey, good morning, Richard. Good to see you.

[Richard Bexon]
Yeah, it's good to see you in the virtual world. We were in the physical world before having lunch and now we're in the virtual world, so.

[Peter van Hussen]
Yeah, it was a good sandwich.

[Richard Bexon]
Exactly. Exactly. Well, let's get straight into it as I know you're a very busy man juggling many chain sources all over the country.

As you are. As you are also. I think we both are, right?

We keep busy. Keeps us young. Keeps us young, Peter.

Exactly. But I mean, with like, I always like to ask the first question just to get an idea of kind of, you know, your perspective on the market here in Costa Rica. I mean, you know, I've asked quite a few actually North Americans over the past day, kind of what's happening in real estate up there.

And they're still saying like, it's still moving. They're starting to see a bit of a slowdown up there. You know, mortgage rates, I think, are having an impact in there.

But I mean, what are you seeing here in Costa Rica? And do you think it's a seller's market? Do you think it's a buyer's market?

What are you seeing?

[Peter van Hussen]
Yeah, I think definitely it's a buyer's market at this moment. We have, I don't think the hype of Costa Rica will never disappear. That's what I think.

I think also that I believe very much in authenticity of the people, which is basically a very, very big brand of Costa Rica. And I also think that the real estate business is basically connected with the tourism business also. I think they go hand in hand.

So if tourism goes well, the real estate also goes well. I think they're brother and sister basically. Right now in Jaco, we have about five, six condominium projects and they go like hot items for four.

Local market, basically, the big 60, 70% is local market and the rest is foreign. So the Costa Ricans do have money. And they do like to go to the beaches.

They do like Jaco because it's basically the very first beach destination after San Jose and it's shore by. You have the 27 of course, the highway. So it's for them, it's pretty easy.

So I think that overall the single family homes are missing at this moment, very much in the market. I think that the developers are really scary to get into a project. Buying land is easy.

Let's say buying land is 10% of the 100% and the 30% is the infrastructure, 30% profits, 10, 15% marketing administration, and then the famous 10% no shit funds, what they call the emergency funds. Which you always need. Which you need always no shit funds here in this country.

There's always something coming up. So overall, I think that the country is at various markets. For in my section, the land and the hotels, they go very slow at the moment, especially the lands.

Hotels also, I do not think that, and don't hold me up to it, that the model here in Costa Rica, what we call the PIMES, Pequeño, Mediano, Empresa, the small hotels, is a dying model. That's what I think. It's financial.

It's not going the right way.

[Richard Bexon]
I mean, it's difficult.

[Peter van Hussen]
We had the bed and breakfast first, and then we had the inns. They all went dead. Right now, we have the PIMES.

I think that you were in the ICT in the marketing department. The model on itself is a model that really is going to be extinct in the next years probably. Why is that?

Because the hotel business really is starting to be productive from 30 rooms, 40 rooms and up. The average in the country, the total amount of rooms between the hotel of hotels is about 16, 17 rooms per hotel about. So it's a dying model.

[Richard Bexon]
But Peter, you don't think that model is changing, meaning that I think what I've started to see is probably in the 80s and 90s, a lot of people were looking to develop boutique hotels here, have boutique hotels. I think what I'm seeing a lot more now of is individuals that potentially want a piece of land with vacation rentals on. So it's transitioned from boutique hotels to now being like, okay, I may have a house with some vacation rentals on.

[Peter van Hussen]
That's true. A boutique hotel is still not the average. A boutique hotel starts from 30 rooms and up.

So a boutique hotel from definition is a better financial entity than just a small hotel, 15, 16 rooms. Then of course we have the big problems right now. We are still in reactivation of the COVID.

We have the exchange course, which is completely killing tourism right now, but 10, 15% of the profits are going the local loan rates versus the dollar. And then tourism is just a very variable business, very high risk business right now. You remember Roberto Artavia from the Incalle.

He basically told us in a seminar, every six years we have a crisis. We have something coming up. We have a hurricane or we have COVID.

2028. We had 2022. We've got like 2028.

We still have five years. We have about four of them in five years or something. So you take that in consideration also when you start to invest in tourism, there is this variable or a crisis coming up every four or five years.

Why would you do it? Why would you do it?

[Richard Bexon]
I mean, why would you ever invest in Costa Rica, Peter?

[Peter van Hussen]
That's what the minister of tourism said, Carlos Ruiz in his days. You have to be a sadomasochist to really invest. That's what he said, literally.

Because you're a slave of your job. You invest in something, but it's not bringing you a good return. Augustin Monge always said, if you make 10%, it's a miracle in a small hotel business.

You cover your salary and your cost basically, and it's a lifestyle type of investment. So I think developers are scared. The farms and hotels.

Farms is a good business. I think land banking right now. Invest in lands and you just sit on it for the next 10, 20 years.

And I think that's a very good investment.

[Richard Bexon]
Am I crazy then to be developing, Peter? Developing luxury tree houses in Manuel Antonio, doing stuff in Arenal?

[Peter van Hussen]
I think that if you create an experience, like we talked about Hans, you can basically charge anything what you like, a treehouse experience. I think that that's it. That's the key.

That's the answer.

[Richard Bexon]
Origins Lodge doesn't have that many rooms and it's further up north in Nupala in the middle of nowhere. And it does really well. But again, it charges like 1,500 bucks a night.

I mean, to have a small boutique hotel now, you need to be probably upwards of $600 a night to make it work just because of your payroll costs and social security, et cetera. So I think that what I've seen is people transition away from boutique hotels where it was in the 80s and 90s to now more vacation rentals, whereas we didn't have that before. It's like a new sect of tourism, if that makes sense, which tourism hates, of course, because they're like, oh, it takes people away from the hotels.

And I'm like, look, I'm not always a believer of the tide rises or boats rise. So look, it's just more marketing. It's more money.

As long as everyone's playing at the same level, paying their taxes, et cetera, then it's a capitalistic free trade, like the cream will float to the top.

[Peter van Hussen]
Right. You take an opportunity and you establish a marketing plan and you make money on that return. Yeah.

[Richard Bexon]
I mean, and you have to surf the wave. You have to surf it. Like, okay, we're going to see exchange rates changing.

We're going to see other stuff happening.

[Peter van Hussen]
It's the, I think that the faults right now or the downfall of the tourism, they're not innovating. They're not growing with the markets. They're not changing their marketing strategy.

Before the COVID, we had a lot of group business, for example, that the boomers that were traveling quite a bit after the COVID, I think that has changed also. The product is the same, but the owners and the hotel marketing is completely the same as before. They're not changing their strategies.

And I think tourism is not growing enough really to attack all those threats like the COVID and right now terrorism probably will come up again. We have to be unique and we have to start growing as a tourism product.

[Richard Bexon]
I mean, I agree. Look, 2024 looks like better than 2023. 2023 was the best year ever for tourism in this country and 2024 high season is looking great as well.

But I don't know whether I fully agree with you, Peter, from the point of view of that, like the country has focused a lot more on wellness. It didn't have that wellness before, like it was set up, but there has been a focus on wellness, which has created areas like Nosara, Santa Teresa, the southern zones where there's been a more of a focus. And I think there's going to be more of a demand for that.

But I agree that like Costa Rica seems to just do stuff organically. Like there doesn't seem to be a plan laid out for the next 20 years of how Costa Rica is sustainably going to develop its brand.

[Peter van Hussen]
I was part of the planning process of the marketing plan for the country in its start. And I brought up the competition of the condos, for example, the condo business. And they said, no, that's no problem.

We'll beat them forever. And I don't think that's going to be a problem. I would suspect that the Airbnb movement is also, they brought them by surprise, basically, the ICT.

And this was not part of the marketing planning or as a threat of the whole country. So I don't think they're too aggressive, really. And I'm very afraid of the Pimas.

I'm very afraid of the small hotels. I'm afraid that that's going to be extinct if there are no incentives, that there are no perks. If you charge 300 bucks or 400 bucks a night for a small hotel, yes, that's no problem at all.

But 80 to $120 establishment room, 16, 17 rooms, they're going to be dead without any perks, without any incentives.

[Richard Bexon]
I agree. But I don't see that changing, Peter. I mean, I think this Costa Rica is now an expensive destination to come to.

Its brand is very well known, but it's an expensive brand as well. But the question here is, do people still see the value in that? When they're paying 300 bucks a night, are they still getting that value and that experience in Costa Rica?

And I don't bump into many people that say, I hated my vacation in Costa Rica. Quite the opposite. It was the best vacation I ever had.

[Peter van Hussen]
Right. Too expensive. But again, if you pay 300, 400 bucks a night, then it's not too expensive, but the low markets.

And that will weed it out automatically also.

[Richard Bexon]
And I mean, really, are we that expensive compared to Hawaii and Cabo San Lucas and those kind of areas? You know, probably not. Probably not.

But still, I think we have that image right now as well. Yeah. Yeah.

I mean, look, I think everything, a lot of the stuff that Costa Rica has done is very organic. Like there has been plans, but little plans. And they've kind of, it's all happened kind of organically, which is the beauty.

And I think, as you said at the beginning here, the number one asset of this country is its people. Like it's the number one thing, you know.

[Peter van Hussen]
I completely agree. But that is changing too a little bit, I think. Yeah.

I arrived here in 81. And I think the difference of intensity of the people between 1981 and right now is, there's a huge difference between that. So we have to be careful.

I think we have to really sit in a room together and really start to plan ahead what we're going to do. What you said in the next 20 years or 30 years.

[Richard Bexon]
And a visionary. I'd love to be part of that conversation.

[Peter van Hussen]
What would we like to be in 30 years or 40 years as a futurist? What is our vision over 40 years or 50 years?

[Richard Bexon]
Yeah. I would love to be part of that conversation. Me too.

[Peter van Hussen]
Just put me in.

[Richard Bexon]
Yeah.

[Peter van Hussen]
I mean, it's a real... Sustainable development. Yeah.

[Richard Bexon]
Well, I mean, let's say we got in a time machine, Peter. Let's say that like, oh, like say we went 20 years in the future. What do you think the country, what would you like to see the country look like in 20 years?

[Peter van Hussen]
Let me first tell you what I'm afraid of right now. I'm afraid of the, that we're losing our eco-image. Yep.

That we overdeveloped. And I state Tamarindo, Manotonio, Jaco. Manotonio, for example, a national park is dreadful.

If you go down there, you cannot even get a ticket nowadays. So I'm very afraid of the overdevelopment. I'm very afraid of security issues right now.

[Richard Bexon]
Yeah. I think that's on everyone's mind.

[Peter van Hussen]
I'm very afraid of organized crime. But this started already 15, 20 years ago. I was president of the Chamber of Tourism.

And I remember Fernando Berocal, which he used to be the minister of security. And he compared Costa Rica with a five-story beautiful condo. And Costa Rica is right in the middle.

It's completely furnished and it's nice carpets. And all the rodents from Central America, from both sides, all the rodents, rodents, and cockroaches are going to Costa Rica from Central America. That always was knowledge in Costa Rica.

I think right now that the security issue, for example, here in Jaco, we had four deaths last week, right on the streets. And they're NARC-oriented.

[Richard Bexon]
Colombians, right? If I'm correct.

[Peter van Hussen]
But it gives us a very bad image. Also, I read an article somewhere that it's not really the security issue. It's between the NARCs.

They're getting paid in drugs. And they're fighting, the gangs fighting between each other. And how can you attack that?

How can you resolve that issue? It's going to be a long term process also, and very hard to resolve. Also, the current economical crisis, what Costa Rica is facing.

So that worries me tremendously, the whole security issue. The government is very, it's very hard to govern the country right now with so many parties. So that frightens me.

[Richard Bexon]
That's not going to change though, either.

[Peter van Hussen]
That's not going to change. Before that, we had a two or three-party country. And it was very much, it was a lot easier just to do stuff, although they were pretty much corrupt also.

But it was easier just to do stuff. Right now, it's very hard to get anything going. And that frightens me also.

[Richard Bexon]
What do you look forward to in 20 years? I mean, what are some of the stuff?

[Peter van Hussen]
Sustainable. We are a sustainable country. Wellness.

I think that's definitely a very good point. I like the communities that people are living in communities together on food, on food supply, on water, on electricity, on rules. Basically, their own Indian tribe rules.

In a circle. And that's how I see Costa Rica probably in the next 20, 30 years. Good food, permaculture, wellness, and the beaches, but sustainable, not overdeveloped.

And not like in Mexico, where we have just this big pushy kind of tourism, where everybody is aggressive on the streets. And I hope that Costa Rica is not turning that way. And I'm afraid it will probably, if they're not planning ahead.

[Richard Bexon]
I think, if I look 20 years in the future, what my advice would be to Costa Rica is just to try and stay as raw and authentic as possible to what it is. And how do you do that? And I would be incentivizing some form of agro tourism model where you give, whether that's international development bank loans, whether it's government loans at low interest for people to be able to purchase bits of land in more rural areas of Costa Rica, and provide jobs to those areas so that everyone doesn't have to move to the cities or doesn't need to move to the main tourism areas.

But there is a support for that authenticity and community in certain areas where you're buying local produce. They did it in Italy, agro tourism, just let's follow that model. It was great.

Everyone was moving to cities. They were losing that authenticity of making pastas and pizzas and being within the towns and villages. But I think that a focus on that would very much help draw people out of the cities.

[Peter van Hussen]
I share it completely. The communities, the local El Campo, what we call the people, agro ecotourism. That's exactly what...

[Richard Bexon]
You know who's done a great job at that, Peter? Jim Damanis. So Jim Damanis has Santa Juana Lodge.

He set up Santa Juana Lodge because he used to drive up there and grab a beer on the way up there from this guy that had this block of ice that would call beers. And on Fridays and Saturdays, that's how he made money. He would sell beers to people coming up, cycling or driving up.

And he got to know them, got to know the town, bought some land and created what I think might be the first community hotel where it's run by the community there. Kids that were now, had moved down to Caples and Manuel Antonio are now moving back up to Santa Juana and creating this very unique, authentic experience.

[Peter van Hussen]
I know the area. I know the hotel. I love it.

[Richard Bexon]
And Jim's not involved in it. He is giving it to the community.

[Peter van Hussen]
I went down there twice, I think. And I had a casserole down there being served by a local woman and a beautiful service and very great energies and no tourism, which I love.

[Richard Bexon]
It's authentic, dude. And raw. I mean, it's, you know, it's...

[Peter van Hussen]
I share that, but we have to promote that.

[Richard Bexon]
Correct.

[Peter van Hussen]
There has to be some kind of planning and incentives also from the government, from the ICO.

[Richard Bexon]
Yeah, I know. I was working with Diego from José de Portão on pushing through the, like he was trying to change that for tourism, you could use agricultural parcels for tourism, you know, which was only a small thing, but like you could somewhat develop those agricultural lots to if it was focused on tourism and you had your Declaración Turística and you had your CST sustainability, you know, you had to get those things in order to do that.

But yeah, but yeah, it's... Yeah, maybe we'll be part of that discussion, Peter. But let me change gears.

Let me change gears a little bit here into kind of more kind of, I suppose, investing in Costa Rica. I mean, what mistakes do you typically see people make when investing in Costa Rica? And I'm sure that you've seen a lot of them over the years, dude.

[Peter van Hussen]
Do you know the term, the tropical sunshine syndrome? Yes. Okay.

But that is a term by the Tico Times already 20 years ago. People are having their shield on. The best businessmen in the world, they go to Costa Rica and they have their shield on and they just invest in things and they don't do a feasibility study, don't do a marketing study, don't do planning.

It's incredible. How to become a millionaire, right? If you have $2 million and lose $1 million, right?

That is basically the trick. So, for example, in hotel business, I'm selling them a hotel. They 90% will say, I'm not doing a feasibility study, right?

I'm not really... I don't think that's necessary. I like the hotel.

I like the lifestyle. I like that whole tropical things around it. I like the food.

I like the people. And that is, I think, the biggest mistake here in Costa Rica, the tropical sunshine syndrome. They're letting their shield down and they're not really thinking what they're used to in their own countries as a business.

[Richard Bexon]
Yeah. I mean, it's funny that you say that because I hear it all the time of like, I don't know whether it's the first, like, you know, they get off the plane, people get off the plane and have one, you know, pina colada and then like everything goes out the window. You know, it's just, oh, everything's so great here.

It's sunny. Everyone's so nice. But like, you know, nothing's ever going to happen.

You know what I mean?

[Peter van Hussen]
The poor are here a lot. Exactly. Exactly.

[Richard Bexon]
Oh, give the construction guy 50% of the money now, you know.

[Peter van Hussen]
I had an example last week. I have a client who's doing some construction at his house in Pampas. And he is a construction guy and the guy didn't have any insurance.

So the guy fell off the roof and who is being sued is the owner of the condo. Why? Because never, he forgot to check with the construction guy if they have insurance.

And he just says, you know, it's a good price. We don't have to pay any taxes and it's a good price. So that is one example.

In their own country, they would never do that. They would never do that. They would take the job and they will really check everything out.

So that is possibly one of the biggest problems I think here in the country. People don't have the guard, they have the guard down in the middle. I, for example, I came here in 81 and I'm still being hustled still by the locals.

The difference is that I know about it.

[Richard Bexon]
I'm the same.

[Peter van Hussen]
Yeah. Your Jedi mind tricks don't work on me. I do myself a daily cost benefit analysis and I think about myself, okay, you know, this suits me.

I know I'm being ripped off so much, but again, this is no problem. It's still beneficial for me. And that's basically what I think about the people.

People are very beautiful. They say yes to everything. They cannot say the word no.

[Richard Bexon]
Yep. If they say the word maybe, if they say maybe or stutter before saying yes, it probably is a no.

[Peter van Hussen]
It is a no. But if they say yes, it's a no.

[Richard Bexon]
It means a maybe. And it can be a maybe. Yeah.

[Peter van Hussen]
Mostly it's no. And if you start to criticize them, they completely collapse as a personal being. So positive reinforcement in management is very important.

For example, you know, you're a great guy and I love your family. I like your grandma and I like your kids. And I like the way what you're doing and you do very well this specific job, but you might have to change your habits in that specific way. And then you might make a difference in your management style. But if you criticize them directly, they completely collapse.

[Richard Bexon]
Well, Peter, where do you think, I mean, looking ahead, let's say 20 years down the line, where would you be? Because you mentioned land banking earlier. Which areas of the country would you be land banking for 20 years in the future?

[Peter van Hussen]
Land banking, as I told you before, Costa Rica for me is another country. I don't know a lot about it. It's the same as in Mexico, basically.

I don't know. Land banking everywhere. I think there are great deals to be made in land banking.

Really cheap amount of lands with waterfalls, jungle, primary forest, secondary forest, good access, great for communities, great for permaculture, good soil, a buck a meter for 50 hex or less. They're great. And it's great to have also.

I love my farms. I do a lot of fruit trees and I love my permaculture. And I love, one of my passions is to plant a tree, fruit tree.

And in five years, you see the very first fruits coming out. And then for me, I'm happy.

[Richard Bexon]
Avocado tree in my back garden there, which has given me tons. I was going to say a beautiful avocado tree, Richard. Beautiful.

Oh, it's there's about 170 avocados on it. And this is its second year flowering. It's insane.

So what do you feel? It's fantastic. Oh, it's pride, man.

I mean, every time I talk to my avocados, dude, it's crazy. I just go out there and just admire it every single day. Every time I walk past it, I admire my avocados, my lemons, my mandarins, you know, my guanabana, like I just it's spectacular.

[Peter van Hussen]
So I have a I have Pitaya right now, the dragon fruit. It's eight different varieties. And you have to pollinate that at nighttime when the flower is coming up.

Some varieties are not auto auto pollinators. So you have to pollinate it. So you go at nighttime with a flashlight and you pollinate it.

Vanilla, for example, vanilla. And you also have to auto pollinate this with a toothpick. You have to open up the flower and then you you press the two parts together.

But again, to see that very first vanilla bean coming up and the Pitaya fruits, it's just I've got about 60, 70 varieties of fruit trees out there. And it's just fantastic, really. And then with permaculture, a bunch of dogs, a bunch of goats, some chickens and own food, own food supply like like the old generation used to go.

They used to go to parties and they used to bring an avocado or some avocados through the parties and they gave you lemons. And this is interchange of food was very, very common in the in the in the old generations.

[Richard Bexon]
And I still do it.

[Peter van Hussen]
I still do it.

[Richard Bexon]
I go fishing in Camaronal and Don Cedro, who sold his farm for millions, has his house, doesn't wear shoes, does all of his own food, makes his own rice. And I camp on his land and I say, how much do I owe you? And he usually says, just bring me a bunch of onions.

And so I pay him in onions. Yeah, yeah. You know, and it's great because we'll sit down at the end of the day and he just tells me about his life and growing up in that area and how it's changed.

It's just I mean, it's just beautiful listening to those stories.

[Peter van Hussen]
I didn't know you had that in you. The social, the development, the sustainable development communities, autosustainable. For example, you have an oversupply of of eggs.

You trade that in for chicken or you trade it in for for for for meats, for example. So it creates a whole bartering process within the farm itself, which is extremely interesting. Also, the sharing of information that there are 20, 30, 40 engineers out there and they they could share that information to the younger kids.

So you have this community that everybody's sharing. Neighbor has a car and I have a golf cart. You share it.

That idea of the old generations, I think that's I see. I hope that Costa Rica will will form that. And I think there's a high there's a big future for it also.

Also, tourist.

[Richard Bexon]
I agree. Yeah, no, no, no. I definitely agree.

I mean, I know that you're very passionate about farms and permaculture. I mean, when people are thinking about buying a farm in Costa Rica, I mean, what questions do you think they should be asking and what things should they be looking for?

[Peter van Hussen]
That's a that's a great question. Always do a due diligence on the farm. Always check your the what we call the Pajas de Agua, your your water connections, if there is a water supply.

For example, on my farm, I have this issue. I have two issues with my farm is overlapping another another property. So yeah, survey always is very important.

Always survey.

[Richard Bexon]
And then there's inconsistencies, no inconsistencies.

[Peter van Hussen]
There's always inconsistencies or the neighbor is on your property, especially with the big farms, or there's overlapping of different farms together. So you have to make a new plan, a new new cadastral plan. So I would say a survey is extremely important.

Due diligence, of course, the water, water supplies. What is tricky are the Nacientes, the springs, because you buy a farm up and you need 100 meters distance on the Nacientes.

[Richard Bexon]
Setback of 100 meters. Yeah.

[Peter van Hussen]
Also, the neighbor, if you really want to want to screw you, he can register your spring from your property without even having access, basically on the springs.

[Richard Bexon]
Water is available to everyone here. Maybe that Naciente you do not own. Like it is public.

It's public as the beaches are.

[Peter van Hussen]
So there is, for example, Nacientes, the cabarets, you have to check the setbacks from the Nacientes. Also, the swallow, what we call the zoning law. What can you build on the restriction of heights?

Hire an architect. I think that's important if you buy lands. Check out where your microclimates are.

Check out where you got to build, the north side or the south side. Check your, how much forest do you have? What kind of forest do you have?

The flat areas of where you can build. The sunset in which direction. Also, sleep on your property.

Camp out. Put a tent out there. Feel the energies of the specific areas in the farm.

I heard from an architect of Hans, basically, go down there, check. Stay down there at night. Go full moon.

Check the different energies of your area, which is very important if you buy a big farm up where you can build.

[Richard Bexon]
It's amazing that you mentioned energy, Peter, because I always say to people, and maybe it's that we've got too far away, but you can sense when you're on a piece of land if it's right or not a lot of the time. If you walk on something, like a home, you can walk into a home sometimes and go, something is not right here. Sometimes you can't put your finger on it, but you just know it's not right.

I think it's something innate. It's innate in us, but we don't listen to it a lot of the time.

[Peter van Hussen]
Exactly. Your gut. I love my gut.

Have a beer, have a cooler, some beers, and sit down there, feel the breezes coming in your face.

[Richard Bexon]
See it at different times of the day, see it at morning, see it at midday, see it at evening.

[Peter van Hussen]
It's just know your farm, basically. Know everything about it. That's basically my recommendation.

[Richard Bexon]
I think I know the answer to this next question, but I'm going to ask it anyway, because we may have covered it. What asset classes in Costa Rican real estate do you think still hold value in today's market?

[Peter van Hussen]
I take the value determination always includes the holding periods, the life cycle of the hotel, which is extremely important, NLP factor and net operating profits. The EBITDA, which is the earnings before interest and taxes and depreciation. You calculate the factor in there, the value of the construction, replacement value.

I take in also the KPI. I call it the Artavia KPI, like a variable, but you can always put a variable also in there. Your room for expansion is extremely important to take in there.

[Richard Bexon]
I had a conversation with a hotelier the other day.

[Peter van Hussen]
Capital expenditures is very looted. You determine your value on the existing NLP and existing building. If it's shaky, you look for capital expenditures and a room for expansion.

But first, you look at the current NLP. I translate my income statements into USALI. Do you know what USALI is?

[Richard Bexon]
No, I've never heard of that.

[Peter van Hussen]
Uniform System of Approach in the lodging industry. It is a specific accounting system that you use in the lodging industry. For example, you determine the cost for every revenue center right here in Costa Rica in a generic accounting system.

You bunch everything together, all revenues and all costs, and you put that in an income statement.

[Richard Bexon]
You mean setting out rooms, separating food and beverage.

[Peter van Hussen]
You have a room. You set up your energy costs for the room, the room revenue. You know exactly the net income and the net cost per revenue center.

For example, the food and beverage is always very tricky. You put your food costs on there, but the cost of your energy, you put that also in that bracket just for the food and beverage department, and all your taxes, the gas, et cetera, et cetera. That gives you an idea where your profit is located.

Room, of course, is always about 75% of all profits is room. Food and beverage is about 25%, 30%, 25%. Depends on your food and beverage business if you have a lot of special events, and it's about 40%.

But it gives you an insight what is happening in your hotel, very important cost structures and revenue structures. Revenue management is very important, I would say.

[Richard Bexon]
It's one thing that a lot of people don't think about is revenue management, and it's the most important thing. I'm doing some consulting work for a company at the moment where I'm like, look guys, nothing else matters unless you have the revenue coming in. Don't talk about it until you've got the revenue going in.

Extremely important. Nothing else happens until there's a sale.

[Peter van Hussen]
No, nobody's doing that. Revenue management is something that is completely necessary. Feasibility studies, of course, marketing studies, slot analysis, also very important in your calculations, and planning, planning, planning.

I plan ahead. I try to get as much information as possible in my analysis.

[Richard Bexon]
Awesome. Well, Peter, my last question for you is I've kept you long enough, which I love to ask everyone. If you inherited $500,000 and you had to invest it into a business or real estate in Costa Rica, what would you invest it in and why?

[Peter van Hussen]
First, my own development. I made my own development. I would put some model homes on there and greenhousing.

I believe right now, which is probably unique that I was planning that to put a business in a sustainable development. For example, as a crop, I would like to have langoustines or shrimp. Part of the revenues goes to the HOA in a community.

The community is living down there, but also it's like part of a business. You create a business in the development. I think that's a pretty unique structure of developments also or housing developments.

I would invest it in that. I would probably create my own fishing shore in the Gulf, fishing with Kanya, the Costa Rican way. I want to do that.

Also, helping the local communities. I think the Gulf is one of those areas, Costa Pajaros, Chomis. It's one of those areas that has been completely neglected by tourism.

You still see out there a lot of interesting people. For example, I went to buy some gas for my boat. I saw a gun laying on the table at eight o'clock at night.

It's not dangerous, but it's a little bit like the Wild West down there in the Costa Pajaros area.

[Richard Bexon]
I remember when you'd be driving and you'd be running out of gas and there were no gas stations and there'd be these guys selling the pichellas. They're black market for gas. Go and knock on so-and-so's door.

It's a lot of fun. It's a lot of fun.

[Peter van Hussen]
I would say invest in flipping houses probably, renovating them. There's enough to renovate, enough to buy also.

[Richard Bexon]
I agree. We've done a couple of those and it's been very successful. You just need to know what you're doing and have a good team with you.

Yeah. Very difficult to do if you're not in country.

[Peter van Hussen]
Yeah, exactly. That's one of my advice also for a starting business for an American. Be here.

You cannot have a business delegating it to somebody else. You have to be here doing it yourself. That is probably one of the biggest problems a lot of foreigners have.

They cannot delegate. You have to be really here to do it. Otherwise, it's suicide basically for your business.

It's very hard.

[Richard Bexon]
Look, I think you mentioned it. A lot of the time it's a lifestyle decision, investing in Costa Rica in general. The great thing is when you had your property, you get to see the best of people.

You see them on vacation. Nobody cares who you are, what job you have, what money you have. Everyone just wants to be like, hey, you want to sit down, have a beer and just talk.

[Peter van Hussen]
Right. Compared to the cruise ships, I worked on a cruise ship for three years and that's a whole other story.

[Richard Bexon]
I'm sure. Wow. Well, Peter, this has been great getting you on here.

I'd love to get you back on in a couple of months and just get a bit of an update from you, but appreciate you taking the time to come on the podcast.

[Peter van Hussen]
Anytime. Anytime.

[Richard Bexon]
All right.

[Peter van Hussen]
Thanks. You have a great day. Yeah, you too.

Bye-bye.

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40 years of advice and experience when investing in Costa Rica, and especially farms and hotels

Contact us: info@investingcostarica.com

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