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194 Building and flipping in Costa Rica, what you need to know

194 Building and flipping in Costa Rica, what you need to know
194 Building and flipping in Costa Rica, what you need to know

Podcast Transcription



[Richard Bexon]
Good afternoon, Adam. How are you doing?

[Adam Wood]
Doing great, Richard. Thanks for having me.

[Richard Bexon]
Not at all, not at all. I know that you're down there in Uvita.

What's the weather like at the moment?

[Adam Wood]
Well, the rain has started to come back a little bit, so we're getting some nice afternoon showers. It's starting to cool things off a little bit. So it's been nice.

It's been dry up until the last few weeks, but the rain's come back and things are starting to get green again. It's really nice.

[Richard Bexon]
Nice. I mean, that area of the country is pretty green most of the year, but it's nice to see the waterfalls and the rivers flowing, of course.

[Adam Wood]
It does, yeah. When the waterfalls start charging again, that's when we know we're really back into it. But yeah, it does stay green pretty much year-round here, for sure.

[Richard Bexon]
Awesome. Well, the first question I always love to start with, markets have had a, I would say, somewhat good start in 2024 globally. I mean, it's not been as bad as I think people would want it to be.

I mean, real estate worldwide is still kind of somewhat slow, but I mean, what are you seeing happening here in Costa Rica and specifically in Uvita?

[Adam Wood]
Yeah, no, in general, I think Costa Rica is still an attractive place for investment, for sure. I think after COVID, desirable, good terrain and things that kind of inspired people to be outside became more popular. I think those are continuing to be more popular.

So I think Costa Rica in general is still a great place to invest, and I think we're going to continue to see investment here. As far as Uvita goes, Uvita, man, I've been living here around Uvita for the last probably eight, almost 10 years. Jeez.

And just the growth is incredible. I don't know the exact statistic, but I think Uvita is one of the fastest growing towns or cities in Costa Rica, for sure. So yeah, I think Uvita is going to stay hot in the surrounding areas, Domenical, it's an attractive place.

Still a lot of development right now. I think inventory has increased a little bit now. There's a little bit more in the market.

And so there could be some better values out there for people looking. But overall, I definitely think Costa Rica is still an attractive place to invest. I agree.

[Richard Bexon]
I'm not seeing as many price reductions in that Manuel Antonio to Oaxaca stretch as I am seeing in Guanacaste. I mean, I'm getting in my inbox, probably like at least 10 a day, a fire sale. I'm not seeing that in the Manuel Antonio or Vito Oaxaca area.

[Adam Wood]
Not really. It's still a very desirable place to be. I think for the longest time, Guanacaste was what people knew about.

People that weren't very familiar with Costa Rica, if they knew anything about it, they were probably more familiar with the Guanacaste area with Tamarindo and other places like that. And the Southern Pacific zone of Costa Rica, I mean, shoot, I think we just got our first highway down here 25 years ago. And so in the grand scheme of things, it's not that long.

And so it's still, I don't want to say undiscovered, but there's still a lot of people that don't know about this area. So the more and more people visit the area, I've heard several people in the last week, I overheard this in the store the other day, they said that they were traveling around and visiting Monteverde and different places in Costa Rica. And as soon as they kind of came around and drove through Dominical and down through Vita and down into Oaxaca, they just felt like this was the place to be.

And I've been hearing that a lot lately from a lot of people.

[Richard Bexon]
Yeah. No, I mean, I've even seen it when we've been with clients, you know, and you kind of get down there and you explain an area to them, but once they get down there, they just go, wow. I mean, I've got a client at the moment that we were up in Guanacaste looking at property for, and he was like, Rich, you know, my wife just really loves mountains and green.

And I'm just a beach person. And I'm like, guys, you need to head down south. Like that's where that area is.

[Adam Wood]
Yeah, exactly. For me, I mean, just me personally, what I like to do for my extracurricular activities is to go have fun. I mean, where the mountains meet the ocean is incredible.

And especially kind of where I live and where I built this, the last house is just a really great location to be at the beaches in five minutes. And then you can tear off up the back road of the mountain, you know, in two minutes as well, and go off for an off-road adventure. So where the mountains meet the ocean down here, it's truly a special place.

[Richard Bexon]
Yeah. Why did you choose Vita to bring up children? You know, because again, you guys have got kids, you and Rachel.

I know we've had Rachel on the podcast before, but I mean, why? A lot of people are thinking about moving down here with their kids. That's why I asked the question.

[Adam Wood]
Yeah. Same sort of answer to that for us is the terrain really inspires us. I think Vita is easy to navigate.

There's a lot of things that, a lot of convenience here for services that we need as far as banking and pharmacies and things of that nature. We're super close to Domenico. We'd like to spend time there.

So we're 15 minutes south of that and 15 minutes south of Ochoa, where our kids go to school. But as far as Vita, as far as being our home base, we really like the fact that we're seeing more and more families move to the area. And we just like the convenience of Vita.

We liked it. Like I said, we like being around the waterfalls and the mountains and the beaches. And we can be right there within a few minutes of each one.

And there's lots of different school options for us. We've chosen a school option down in Ochoa called the Life Project for our kids. But there's, I mean, shoot, I think there's another school opening up next year.

[Richard Bexon]
You've got Journey coming in there, which is up in Guanacaste.

[Adam Wood]
Yeah, Journey's coming in. You've got the Uvita Christian Academy, Life Project, Oswego Verde, lots of different schools to choose for education. So that's, I think, why we're seeing more and more families come down.

And, I don't know, it's just nice being, it just feels like we're, it's more close to the way that I grew up. I grew up in, you know, Fort Worth, Texas, kind of out in the country a little bit and got to go to, you know, rivers and ride bikes and things like that. And I think we're seeing a little bit more of that down here in Uvita with our kids.

[Richard Bexon]
Well, I mean, over the past couple of years, you've been building and kind of selling properties. You know, is that a profitable endeavor? I get a lot of people, you know, from the States that kind of want to come down and do it down here.

And I'm like, guys, if you don't know what you're doing here, I mean, like, yeah.

[Adam Wood]
So yeah, in fact, I gave that question some thought because it's an important question. There's definitely opportunity here. There's definitely opportunity to build and try to create value for somebody else and make a profit on that side of it.

But I've learned a lot of lessons. There's a lot of hurdles to overcome. A lot of people out there that are not completely honest with you and that will take advantage of you on a few things.

So you got to kind of earn your stripes when those things are concerned. You need to be here. I mean, you definitely need to be here or have a manager overlooking and overseeing your project for you who's communicating with you throughout the process.

That's what I've found to be the most value I've done. I've built my own houses and I've also project managed for other people. And I think everybody would say that that's been a smart investment.

There's just too much opportunity for corners to be cut, details to be overlooked, the right materials to be substituted for or the improper materials substituted for what the correct materials should be. So having somebody oversee that is, I think, very important. But as far as profitability goes, there are ways to do it.

It's not quite as easy as I think we all would like it to be.

[Richard Bexon]
I mean, I think it starts with getting land at good value, right? Meaning that a lot of the time the money is made on the way in, on the land price, because if you're paying a premium for the land price, once you put it in with the bill, because it costs the same to build anywhere. I mean, if you build in a hotel, build in a Vito, build in Mount Montaigne, the cost is the same, basically.

[Adam Wood]
Building costs are starting to regulate, but you're exactly right. Finding good value on land, finding land that you can create value that maybe somebody doesn't see, something that's full of trees or a view or something like that. That's really where you can create a bigger margin for yourself.

One of the things that I think people tend to overlook sometimes is just the cost in preparing that land. Sometimes it could be more expensive than what you anticipate. I've been on that side of the fence before too, where you think something's going to be, you know, five grand, at the end of the day, it's 10 or 12.

And, you know, in the grand scheme of things, those numbers can affect your project for sure.

[Richard Bexon]
How profitable is a percentage? Would you say that the, you know, building and then selling would be? What would you say is a percentage?

You did 10, 15, 20, 25?

[Adam Wood]
No, I think you should be shooting. I think you should be shooting to make 20, 20%. I think if you make 20, 25% on a deal, you've done well.

If you net 15 on it, you've done well as well. I don't know if I'd put much more effort into it if I was going to, make a 10% profit. And there's just too many things that have started to kind of, what you need to be aware of that will affect your sale price and what you actually end up netting on the deal.

So, having a good spreadsheet and figuring out and projecting those numbers is a good tool to have and good tool to use before you make the leap.

[Richard Bexon]
Definitely. What are some of the mistakes that you've made, if you don't mind me asking, on the way that, I mean, you mentioned one there about, you know, infrastructure costs, which is something that's just overlooked sometimes. Someone just take, you know, sometimes people just take the square meterage of a house and multiply it by X dollars.

Whereas, yeah.

[Adam Wood]
Exactly. In fact, me and my crew were right in the middle of sorting that out right now for our next build that we're going to do for a client. You know, on paper, we have a certain set of instructions, certain set of plans, but then you have conversations with the client and they have a whole different sort of vision for what their house is.

And so, one of the mistakes that I've made before is basically kind of over promising on costs and basically telling people, hey, based on what we think you can get this done for, you know, in hindsight, it's always a little bit more expensive. So, those types of things, um, underestimating costs of project has been one mistake that I've made. And I learned that quickly.

So, now we're much more diligent on how we price these things out. But really for me, subcontractors has been one of the biggest pains for me and specifically wood subcontractors. Yeah.

It's hard. It's hard to get really dry wood and wood is a very popular material to use for design down here for ceilings and cabinets and things like that. It does have its pros and cons.

But on the couple of projects that I did that they required wood, that was one of the things that caught me off guard was how much the cost of good quality wood, teak, laurel, things like that has increased. And then the model, the over the labor that goes along with that has increased as well. So, I did make a mistake, uh, underestimating, um, wood costs and the amount of time that the wood was going to take.

And that necessarily wasn't my mistake. That's a subcontractor telling me they need three months when in reality they need six or seven. So, yeah, I think now I've learned enough to where I always take what a subcontractor says.

And then I add my own little buffer to that because that's just kind of the way things are in Costa Rica. If they say something's going to be done in two weeks, you should probably go ahead and plan that it might be three or four. And then if they get it done in two weeks, you're, you're, you're, you're doing great, but you've already planned for that sort of delay.

So, I think that's been one of the hurdles that I've had to overcome.

[Richard Bexon]
Yeah. I mean, I completely agree. I mean, you know, we manage usually around about, you know, 25, 30 projects at the same time.

And I always find that these tasks that are contingent on another one, like where one has to be finished in order for another to start is where things just go wrong. Like, you know, if it's just one thing I'm waiting on, that's fine. Like I can kind of play with that, but where, I don't know, you know, for the window and doors guy to come and measure of X, Y needs to be done.

Like I need that X, Y to be done for that guy to turn up and then his lead time and lag time, et cetera, you know, on a project, then it can sometimes just delay project. And we had a project recently, which again was wood where the, you know, the, the company was outsourced to, you know, and we're not the constructor. We just oversee the constructor and, you know, represent the owner of like, I had to go into the wood company, you know, basically actually act as the, as the owner only speak in English and just chew these guys out to get it done.

But it was like, you know, and they still turned up two months late, you know, but it's all that, that lead time that they needed. They needed the windows and doors to be done in order to be able to come in and install the word, which meant that it was like delay on top of delay.

[Adam Wood]
Exactly. Exactly. And so in the last project that I had, I think that those exact sort of things probably ended up costing me in all probably around four to six weeks, just waiting and just balancing those things out.

And so that, that has definitely been something in, you know, when you first start a project you know, when the guys are laying the block and building the bones of the project, that's all pretty straightforward. But then like you said, when you start bringing in the different subcontractors and trying to manage all that, that's where a manager really is worth his money to sort through all of those things. And I think I've earned my stripes when it comes to that.

So I'm very hopeful that the next few projects are going to go smooth. I do now. One of the biggest things too, I'd like to mention is just relationships too.

Like the more you do this, you'll, you'll build relationships with people you want to work with and that want to work with you. And you'll kind of sift through the guys that aren't really dialed into what you want. And I think I'm, I'm getting to that point now, which is nice.

[Richard Bexon]
Awesome. Awesome. Let's talk about your most recent project.

Tell us about it. Like why did you do it? You know, was it a good investment?

Any of the numbers kind of around it just so that people can kind of understand a little bit?

[Adam Wood]
Yeah, absolutely. So same sort of thing. I was looking for a good value on land.

I, there was some bigger properties that I was looking at to maybe improve land, create value, flip some land sort of thing. In the end, I decided to, to build a house. I ended up building a three bedroom, two and a half bath concrete block house, kind of in the center of Uvita.

The idea was to build it for a family to enjoy. I'm pretty fortunate to where I kind of have a plan A, B and C. I can build this for an investment and hopefully somebody comes along and loves it and can enjoy it.

And if not me and my family will, will go and enjoy it as well. That's another thing that I have to take into consideration, being from the United States, the United States wants to tax your, your worldwide income. So it's, it's funny, my, my tax situation here in Costa Rica is actually easier to deal with than, than the United States.

So there's some things to consider around capital gains and things like that whenever you are investing or building for yourself or things like that. But yeah, so I built Casa Negra. It's a three bedroom, two and a half bath house, concrete block, nice little cul-de-sac right around the corner from restaurants, bars, not loud bars, lounges.

That was important to me. I didn't want to put anything in an area where it was going to be super loud. That just doesn't vibe with families for me.

So that's what I see envisioning buying Casa Negra as a, as a family that wants to kind of be in the middle of everything, but be a five minute drive from the beach and the mountains and walking distance to the waterfalls and rivers and yeah, just enjoy it and not, I've lived up top of the mountain. I've lived three kilometers up the mountain before. And now with kids, we're very happy to be down, down in town.

It just makes, makes things a little bit easier for us. So I decided to build what I like and what I want. And if somebody else really loves it, I'd love to sell it to them.

[Richard Bexon]
Yeah. Why do you think, you know, cause I always, whenever I build or develop stuff, I always like to make sure there's enough meat on the bone, if that makes sense that I'm not, you know, I'm not just maxing it out to, and I'll give you an example. I bought some land in Ojochao.

I developed it. I ended up selling it to my clients, but why did they buy it? Because the land that I sold for 150 everywhere else was 200 or 220.

And they were like, well, rich, why is it 150? And I'm like, cause I'm not greedy. And also is there needs to be enough meat on the bone for everyone, if that makes sense.

I mean, they feel they've got a deal so that next time when they sell it, they do well as well.

[Adam Wood]
Yeah, exactly. One of the things that I'm actually trying to navigate here is the, is the real estate market, the real estate agents, the commissions and how all of those things work here. We have several bigger agencies here and they all do things kind of the same way.

But yeah, that's the, that's the idea. There's gotta be enough meat on the bone for, for everybody to, to be able to eat essentially. And so, yeah, you want to build out a good value.

What I tried to do, I really negotiated my mano de obra with my crew and we have more jobs coming up. So that was a, that was a tool that I had in my belt to negotiate with them. So I did pretty good on my mano de obra with them.

And I just shopped my, my, my, my materials. I did all the, I did all the shopping for, for everything. So I would get a material list from my, from my partner, Enrique, the builder, and I would, I would shop those materials.

And that's really how you, you end up creating a little bit better value for yourself. So yeah.

[Richard Bexon]
Adam, if you don't mind me asking, how much are you selling the property for?

[Adam Wood]
The house is listed right now for $495,000. Yep. And I think that that is one of the better values here in Uvita right now, especially for, for this type of construction that I have.

I have a solid concrete block construction, hard solid core Laurel doors, really nice finishes, convenient location that's quiet. And a lot of the other houses that I'm competing against right now, not many of them are concrete block. They're more of a prefab PVC ceiling.

I did all, all natural teak ceilings. I just really like to build. It doesn't have to be an incredibly big extravagant house, in my opinion, to be, to be finished out tastefully.

And that's, that's what I tried to do.

[Richard Bexon]
I agree. I agree. Well, I mean, I know that market and that is a great price for it.

I've actually seen the house, you know, from the outside, I haven't seen it inside. I drove past it the other day, Adam, and was like, wow, that's a beautiful house. So congratulations.

Yeah.

[Adam Wood]
Thank you so much. And we're going to be adding more curb appeal. Like I said, the rain has come back now.

So there's going to be a lot of plants that are going in probably next week. We've got some more blinds installed. So the house is pretty much ready to go for somebody to move in and start enjoying it.

So we will, we're going to put it out there on the market and see how it goes.

[Richard Bexon]
Awesome. What would be the one piece of advice you'd give to listeners when looking to invest in Costa Rica?

[Adam Wood]
Decide what you're trying to achieve. You know, I think decide what you're, what you really want to do. Like you, are you investing in the Costa Rica because you want to eventually retire here and you want to live here and this is where you want to be?

Are you investing in the Costa Rica because you want to, you think the market's hot and you're going to flip it pretty fast and make a profit? I think that's one of the most important things. I don't think, I don't anticipate properties losing value here.

We may go, we may go kind of stagnant for a while, depending on world economics and world events and things like that. But I think, I think we're pretty steady right now in Costa Rica has become a real desirable place. So yeah.

[Richard Bexon]
I think that's a great response because again, a lot of times I'm asking people, okay, is this pure investment? Is there some lifestyle in it? Is it pure lifestyle?

The reason being is it's so easy to get swept away with the beauty of this country. You know what I mean? If you're making an investment for an investment reason, like you can lose all of that logic very quickly because stuff is just so beautiful here.

[Adam Wood]
A hundred percent. Exactly. And that's why I think there's a lot of value in your podcast and in what you're doing and for your listeners out there to learn and kind of just understand what it's really like.

I have several friends that have done really well down here. They've made money, but it's all been about timing. Timing has just been perfect for them and they did great.

Timing can throw you off down here, especially right now with what's going on with the exchange rates, the dollar to the colony right now. Timing is important, I believe as well for investing into Costa Rica. But again, the timing tip kind of depends on what you're trying to achieve.

[Richard Bexon]
Well, it's going to get better. I'm in a group with economists and it already increased a little bit today. And I think that over the next coming rest of the year will improve slightly.

I don't think we're going to see, it's not going to shoot back up into the 600s, but I think we'll probably be looking around the 515, 520 mark probably by the end of the year, which is better than nothing, but it's not the 680 it used to be.

[Adam Wood]
Yeah. That's definitely good news for sure. And that is something to pay attention to as well, is that exchange rate and how that fluctuates.

And you can save yourself some money if you can play that the right way.

[Richard Bexon]
We structure a lot of our contracts with that inside so that, again, if there's a plus and minus, it doesn't become a win-lose situation for parties. It's always a win-win or it's a lose-lose because I don't think that, especially, it's a partnership when you build a house with whoever, as you said there with Enrique, your builder, it's a partnership.

[Adam Wood]
Exactly. And as a matter of fact, to speak to Enrique's character, he's actually the one who came and tapped me on the shoulder a few months ago and was like, hey, we need to talk about this exchange rate. I know I'm getting clobbered.

So it's really good to have a good crew like that.

[Richard Bexon]
I agree. Well, Adam, my last question for you, which I love to ask everyone, if you inherited $500,000 and had to invest into a business on real estate in Costa Rica, what would you invest it in and why?

[Adam Wood]
Yeah. Okay. So I think I'll stick with what my expertise is.

I think what I would do, I would look for a really nice piece of land, maybe that has some unforeseen value that you can create some value there. I would build a guest house, small guest house on that piece of land and get the primo plantel ready to build and get the design for the main house designed and ready, and maybe try to flip the land with the casita on it with the plan for the main house. I saw somebody do that earlier this year, and it really worked out well.

Sometimes there's a buyer that wants to be on site that wants to live here on site while their house is being built. And so they can be living in the casita that they have right there. Or give somebody the opportunity to buy something, enjoy their casita, the smaller house for a while and then in the future, build their bigger dream home.

That's what I think I would do. If I had $500,000 to invest, I'd find me a piece of land, create value and try to do that.

[Richard Bexon]
Cool. That's a great answer. I think that's the first time that we've had that answer, which is to build the casita.

I mean, because some people could live in the casita while building the main house as well.

[Adam Wood]
Yeah. And building takes time and you want building, you want it to be done right. So there's definitely some different scenarios that could be to your advantage in that scenario.

[Richard Bexon]
Definitely. Well, Adam, really appreciate your time and sharing your knowledge here on the podcast. I'll put all of your contact details in the description down below if anyone wants to reach out to you, but thanks very much.

[Adam Wood]
Great. Thank you so much, Richard. I appreciate it.

[Richard Bexon]
No worries. Have a good day.

[Adam Wood]
All right. You too. Ciao.

Let's Get in Touch!

Need any advice or information, message us at info@investingcostarica.com

Adam Wood, serial real estate builder and flipper, explains his journey of building and selling in Costa Rica and the mistakes he's made and advice for others looking to invest in real estate in Costa Rica. Adam also explains why he's bringing up a family in Uvita, Costa Rica.Free Consultation:

https://meetings.hubspot.com/jake806/crconsult

Website: https://www.investingcostarica.com

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