198 What's hot and not in Costa Rica

[Richard Bexon]

Good, man, good, man, great to get you on the podcast again. I mean, I think last time we had you on here, you were doing your Vizspirations and now we're working together, even though before Vizspirations we did work together, so we're kind of putting the team back together over here.

[Jake Alexander]

Yeah, coming back full circle here.

[Richard Bexon]

Exactly. Always, always. Well, I thought it'd be great to get you on the podcast just because, again, some of your experiences with water and also developing kind of land here, and you've lived in Kepos for many years, had a business as well, and also getting your viewpoint of just kind of like some of the common questions, where real estate is overpriced and also where we see the opportunity is.

So I thought good to get you on to give the listeners some information, but markets have had a somewhat good start to 2024, we'll see what the rest of the year kind of holds to them. Real estate worldwide is slowing down, I think we can see that here. I mean, what are you seeing happening here in Costa Rica, Jake?

[Jake Alexander]

I mean, I look at my calendar for June and I've got six different clients in areas all over the country from up in Tamarindo down to here in Manuel Antonio, Dominical, up in Arnall, San Jose. So I think we're staying busy and hopefully it continues. I don't think, look, it's not that crazy boom we had after COVID, certainly not, but people are still coming down here and they're serious about buying.

[Richard Bexon]

Yeah, I agree. I mean, I think that it's slowing down. I'm starting to see that in some of the price cuts as well.

I mean, on our last podcast that we did here with Dan Chappert of Costa Private Loans, he was talking that his inquiries are 50% down. I mean, our inquiries are not 50% down, probably even 100% up, more than that. But I mean, I think what we do is a little bit more unique than just trying to sell real estate.

But I think in most areas of Costa Rica, I would say kind of around non-key areas. But I'm even starting to see it in some key areas like Santa Teresa and in some areas like Dominical, prices are starting to come down. So there's definitely a slowdown happening.

What that's going to do to numbers, I don't know. But it's going to be an interesting 2024, that's for sure.

[Jake Alexander]

Yeah, absolutely. And even I wonder, as far as Dan's business goes, is there maybe less people interested in that kind of financing or are they just finding other options as well?

[Richard Bexon]

Yeah, I mean, I don't know. I mean, I would assume as, you know, inflation starts to hit in the US, the market slows down a little bit, even though it doesn't appear to be doing, you know, with interest rates, because the whole idea is to reduce inflation, you know, but that's been taking money from people potentially that do want financing, you know, because again, if you're going to be a cash buyer here, you have to have that disposable income.

So you must be doing pretty well, you know, and I think this inflationary period plus interest rates is kind of probably hurt, you know, the middle to kind of lower classes a lot more. And I think that who typically bought in Costa Rica was that upper, you know, that mid to upper class. So we'll see if that continues, just because a lot of people are telling me stuff in the million dollar range is kind of sitting on the market for quite a while.

You know, the stuff in the three, four million dollars is moving pretty well and anything under 500, 600 thousand dollars is moving pretty well. It's just that, you know, 750 to 1.5, 1.8. It's kind of just sitting there. So.

So, yeah, I think my daughter is about to come in here to the podcast. Your life disappears.

[Jake Alexander]

Hello.

[Richard Bexon]

You say hello. OK, well, you got my my daughter, 11 year old daughter there come in. So anyway, she's the boss of the house, as you guys can see.

So, I mean, Jake, what are some of the common questions that you get asked about investing in Costa Rica?

[Jake Alexander]

Yeah, absolutely. Where should I invest? What kind of financing options are out there?

What does it cost to build? Where's the best ROI?

[Richard Bexon]

I mean, let's let's break down some of those questions then. I mean, you know, where, you know, when someone's like, hey, where should I build in Costa Rica? Where should I buy in Costa Rica?

Where should I invest in Costa Rica? I mean, what is your response?

[Jake Alexander]

I actually respond with a question and ask them, you know, how much of this is an investment for you versus the lifestyle for you. And based on that, that determines to a degree of where we're going to look.

[Richard Bexon]

And I mean, say that someone says, oh, it's pure investment. I mean, what what are you looking at there compared to someone's like, no, it's majority lifestyle?

[Jake Alexander]

Yeah. So for investment, you know, I think you need to look at the big tourist areas. You know, we always talk about if tourism shrinks, it shrinks around the main hubs.

[Richard Bexon]

Yeah.

[Jake Alexander]

Where does everyone go? R&L, Memel Antonio or Tamborindo, that kind of further north area of Guanacaste.

[Richard Bexon]

Yeah.

[Jake Alexander]

And, you know, for example, the clients that I have under contract with the condo in Memel Antonio here, you know, at first they were a bit lifestyle and investment and they shifted to purely investment. So we said, hey, like, let's look at this and here's a good option for you. And then with the analysis, OK, we're looking at about an 8% return, estimating expenses high.

So it should be better. And, you know, they're happy with that.

[Richard Bexon]

Yeah. I mean, what about the options of financing here? I mean, what is available to people?

[Jake Alexander]

The best option would be, of course, cash, but if that's not the thing from a financing standpoint, owner financing, from a paperwork and logistical standpoint, that's always probably the best option. Other than that, you know, you could do a HELOC loan if you have equity in your house in the States or you can look at some private lending here, like with Dan or some other banks, for example, a FISA is one of the options that we work with down here as well.

[Richard Bexon]

Yeah. I mean, I agree on the owner financing just because the owner financing, I mean, you can really dictate terms. I always say it's your price, my terms or your terms, my price.

So, you know, you always get to kind of determine that. I mean, bank financing around here, you know, it's probably going to be fixed probably for a year or two at about eight and a half percent, maybe nine percent. And then from there, it's probably going to jump up.

You know, I mean, if it did, it's going to be around about 11 percent. Private financing here can be like 12 to 14 percent, you know, which can be pretty incredible. But yeah, it's yeah.

Yeah.

[Jake Alexander]

And from the private financing as well, I think one of the points Dan made was like you need to have cash flow.

[Richard Bexon]

Yep.

[Jake Alexander]

So, you know, if this is going to be like your personal residence, well, there's probably going to be a little bit more stipulations on what what they're going to be lending on and what you need to have versus an investment property that is purely, you know, cash flowing operation.

[Richard Bexon]

Yeah. You had mentioned, I mean, when someone talks about lifestyle there, I mean, what are some of the questions that you're asking them? I mean, what do you I mean, I suppose you're trying to get to a location based on who they are and kind of like defining locations based on what type of people they are.

[Jake Alexander]

Yeah. So asking them if you live down here, like describe to me your day. Yeah.

What are you going to do? And if they mentioned they really like going hiking, they like going to the beach. They also like the mountains.

OK, well, then based on that, I'd say you're probably looking more in the central South Pacific than up in Guanacaste, Coco, Tamarindo area.

[Richard Bexon]

Yeah. Yeah. I mean, it's pretty interesting, you know, once it comes to lifestyle, because, I mean, no one wants to make a bad investment.

That's for sure. You know, I think it's just going to be a balance between that lifestyle and making sure you make the right investment, just because, you know, I just know that, you know, some people, you know, you know, they make a decision of the of the heart rather than of the head. And just things don't sell as quickly here in Costa Rica, you know, because of the financing available, not everyone can go out and get it.

So it's a lot more cash buyers. So, you know, if you're going to make a decision of the heart, then that's yes, it's great, but like just make sure you're making a decision also of the head so that if you did want to exit it, it could be a quick exit.

[Jake Alexander]

Yeah, I think, you know, the way we like to describe it is you need to be OK with how it is now because you can't be speculative on how it might change.

[Richard Bexon]

Yeah.

[Jake Alexander]

So if you're OK with living off of a dirt road and you understand you're a little bit outside of town and, you know, you're well aware that you might have a little bit more difficulty exiting at the end. Go for it. Yeah.

But, you know, it's good to keep that exit plan in mind so that when the time does come either to sell, move on to a different house, et cetera, or even change it from a lifestyle property to an investment property that you at least hopefully have that option.

[Richard Bexon]

Well, I mean, that happens to a lot of people when they come down here, you know, they come down here, you know, with, you know, eyes very wide open and very happy. And then, you know, adjusting the Costa Rican culture is not for everyone. You know, it's very laid back, it's very relaxed and access to stuff is just not as easy as it is in the US.

You don't just click a finger and stuff turns up here. I mean, it's getting better, of course, in some areas, you know, here in the Central Valley, yes. But as you move further out towards the beaches where most people are looking to live, it just gets a little bit more difficult.

[Jake Alexander]

Yeah, I think even, for example, you know, 20 minutes south of Manuantonio, there's Portolone, Cartillo, great little towns. But like if you forget something at the grocery store, like you're not going back.

[Richard Bexon]

Yeah.

[Jake Alexander]

Hopefully the pulperia has got it down the street. But, you know, you're not, the access isn't there to like the major grocery store that you have. If you live in Quepos or Manuantonio, that's, you know, 10 minutes away, if that.

[Richard Bexon]

What are some of the areas of Costa Rica that you think are overpriced and why, Jake?

[Jake Alexander]

Yeah. Santa Teresa, Nosara, I think they just became inundated with extremely expensive properties and the occupancy and the daily rate that you would need to be able to make a decent return on your investment. I mean, you'd be, you can do way better with spending less.

[Richard Bexon]

Yeah.

[Jake Alexander]

So I think, you know, those places are definitely up there in the overpriced.

[Richard Bexon]

And why do you think like the craziness of Santa Teresa happened? Like Nosara, I kind of get a little bit and I think there's a little bit more longevity in Nosara, just because, again, it's a subdivided, it's a little bit more organized, even though you wouldn't know it by the roads sometimes. But like it's a good community there.

Lots of families, etc. Santa Teresa seems to be a little bit more, you know, it's fashionable, if that makes sense. And I'm not a big fan of fashionable destinations because they kind of come and go like Tulum in Mexico, you know, I kind of when things come in quickly, I think they'll go out quickly as well, you know, like fashion.

But I mean, why anything that you've got on your side that you think that these destinations just really rocketed in pricing?

[Jake Alexander]

I think they just became such a hotspot for like the digital nomad.

[Richard Bexon]

Yeah.

[Jake Alexander]

You know, it really priced out like good luck finding someone who's a Costa Rican local that lives in Santa Teresa.

[Richard Bexon]

Yeah.

[Jake Alexander]

You know, I think everyone moved to the short term rentals and not really providing any sort of housing for locals. So it really pushed them out of there. Like you said, I think it was like the cool place to go.

You know, like everyone talks, talk about Costa Rica and they're like, oh, what about that place in Santa Teresa?

[Richard Bexon]

Yeah.

[Jake Alexander]

They're like, yeah, it's like kind of like you said, Tulum.

[Richard Bexon]

A lot of people think it's bad that a lot of this development has happened and kind of push locals out. What's your opinion?

[Jake Alexander]

You know, it's good and bad. I think it's important to have areas where locals can live. I think like Caipos, Manuel Antonio kind of has a very unique situation for that where you have the town of Caipos and then Immaculada and then even sprinkled in Manuel Antonio.

You have these small, small neighborhoods with local housing and then, you know, next to it is a million dollar ocean view property across the street. Yeah. So if you can develop, if you can develop areas to also still provide housing to the local market, I think it's great.

A really good example, someone showed us this property in Uvita and it was four bedroom, are four different apartments made for long-term rentals. And that's what's there. And you kind of have that mix still in with higher expensive homes that are there for short-term, but there's still access to long-term stuff for the local population as well.

[Richard Bexon]

Yeah, I mean, I think it's a balancing act. You know, some people think it's terrible because you can't live in Santa Teresa or downtown in Guiones anymore. But also it's just the services that arrived around.

I mean, beforehand, yes. Okay. There just wasn't that many jobs.

People weren't earning amazingly well. But like with this development, yes, does come the opportunity as well. Yes, it makes certain areas more expensive that maybe locals can't afford to rent in.

But if they had property before that they've owned and then they resell it on, I mean, and if they want to resell it on, they don't need to, but I know many people that don't, but then with that money, they can live further out or move to another beach and build something close enough and et cetera. I believe it kind of like, as long as it's done in a sustainable way, the tide rises, all boats rise, as I love to say.

[Jake Alexander]

But yeah, I mean, it gives the opportunity to create more neighborhoods. You know, if there's a neighborhood, there needs to be a pulperia. Well, there's, you know, an opportunity for someone else.

[Richard Bexon]

Yeah. You know what I found, Jay? Because I found that there is a group of Costa Ricans or Costa Ricans seem to go to a beach and live and then it gets kind of cool.

And then the foreigners come in and we had that in Guiones. We had that in Santa Teresa because all my friends have properties in Santa Teresa, you know, and then 2021, they sold it all. And they're all moving to like Coyote, Playa Coyote.

They're moving. They were moving to Grande and now they're kind of moving out of Grande. Like these locals seem to go in, you know, the kind of cool surf group of people.

And then they kind of get out. Pavonis was one. Uvita, you know, kind of is.

It's just very interesting how that dynamic has moved because all I'm doing is asking my friends of like, where are your friends buying? Where are your friends moving to? Because I'm like, oh, they're probably gonna be the next cool beaches.

[Jake Alexander]

Yeah. Coyote is pretty cool. I was there like two years ago for an off-road rally.

And it's cool. I mean, there's just a whole strip along right, you know, beachfront places there. You're not like just on the other side of the road.

And some of them are even, you know, right on the beach there as well.

[Richard Bexon]

Yeah.

[Jake Alexander]

And it's definitely a cool little local town. And it's not really a pain to get to either.

[Richard Bexon]

Yeah. What areas do you think are underpriced?

[Jake Alexander]

Yeah, I think Arnall definitely provides a lot of opportunity and also down in Uvita. Prime example, you know, we're talking about not having to spend millions of dollars to get a nice property with a good return. You know, that property that you helped our client buy in Arnall, was it like $170,000?

Oh, $120,000. $120,000, you know, put some money into it. And what's the return that he's looking at, you know, 17%, 18%?

[Richard Bexon]

Well, look, it's a $120,000. It was a three-bedroom, one bath. We're turning it into a four-bedroom, two-bath very easily, you know, and then putting up.

Yeah. But his returns are going to be very, very good. I mean, you know, and he was like, look, Rich, I'd never have found that without you.

But I mean, that's, you know, why people contact us because, you know, we're kind of, we're diamond hunters, if that makes sense. So, but yeah, I mean, I like Arnall. I like Uvita.

I even think Monteverde has some legs on it as well. You know, Samara, the day I think I'd mentioned in one of the webinars that we did, you know, it was pretty good. I'm just not a, I don't know.

Samara just doesn't do it for me. I just like the tourism or the high-end tourism that goes to Arnall and Uvita, and it doesn't go to Samara, you know?

[Jake Alexander]

Yeah. Yeah. I mean, look at the travel agency, the majority of itineraries are always Arnall and then either somewhere like near Manuel Antonio or Tamarindo, you know, Guanacaste, Guanacaste area.

[Richard Bexon]

Yeah, yeah. I mean, what products do you think are missing in today's market here in Costa Rica? A lot of people are looking to invest or live down here and run a business.

I mean, what are some of the product services, you know, businesses that you think are missing?

[Jake Alexander]

Yeah, so long-term car rentals. Yep. You know, right now, if you want a car rental.

[Richard Bexon]

Which we do, of course, Jake.

[Jake Alexander]

Right, which we do. You know, you either have to go to like Adobe and pay probably double or triple what it costs to do it through us.

[Richard Bexon]

Yep.

[Jake Alexander]

So that's one. And then, dude, what I would do for a good deli here, just like a proper- I'm with you, man. Northeast-style deli.

Oh, like, I don't know, just give me like a bacon, egg and cheese, roast beef sandwich.

[Richard Bexon]

There is one in Tamarindo, this Argentinian guy has, just going into Tamarindo on the left-hand side. And it's spectacular. He makes all of his own meats and everything.

But yeah, again, you know, we just, I believe we need more like sandwich places. It's not typical for Costa Rican-style sandwiches, but in high tourism areas, like, I just want to sub sometimes. And all those people that work there as well.

[Jake Alexander]

Yeah, yeah. Here in Manuel Antonio, there's Karen. But like, you got to know Karen to get the sandwich from Karen.

You're not going to go to a store and find their food there.

[Richard Bexon]

Yeah, yeah. Here in the city, we used to have the Sandwich Bros. They were awesome, dude.

Their sandwiches were amazing. But I'm talking like 20 years ago. But I mean, a lot of people are looking to invest in Costa Rica.

I mean, they're all, you know, it's interesting because I think a lot, you know, what I'm getting a lot at the moment is realtors in the States or people that were doing, you know, syndication-style deals or investment funds going, hey, Rich, I'm thinking about doing it in Costa Rica, because I think that the party is now over in the U.S. or deals are getting more difficult to find, meaning that people that kind of have fell into this post-pandemic, you know, and kind of jumped on the gravy train, you know, now it's kind of dried up a little bit.

And they think kind of Costa Rica is the next, you know, big thing. And I might look, guys, it is not easy to find deals here in Costa Rica. I mean, you need to really understand the market.

You need to understand tourism. You need to understand development, building, you know, and just the price to do stuff here in Costa Rica, because, yeah, it can get very expensive.

[Jake Alexander]

Yeah, yeah. I mean, you got to, it's not easy, but with, you know, networking and also just taking into, like, how risky you want to be, you know, a great way to buy land for cheap is to find land that doesn't have water on it.

[Richard Bexon]

Yeah. I mean, networking is definitely the way or driving around. I mean, we do it a lot of the time, drive around.

I mean, you know, we have a Google map here with just, like, pins of all the different locations and the size of the land, etc. You know, but yeah, I mean, finding opportunity in Costa Rica is not easy because a lot of the stuff that you find on, you know, real estate websites, it's just being priced out. It's kind of, you know, they're just trying to get as most as they can for their seller.

I mean, every so often you'll find an opportunity in there. But yeah, I mean, Encuentro Anticuatro, you know, I found a few things on, even on Facebook groups as well as being pretty good as well. Yeah.

I mean, you know, we have that section of the website that we have the curated investments where people can just log in and they can go in and see stuff that we've analyzed and see it's grading, etc. But, you know, finding opportunity in Costa Rica is difficult because there is no M&S.

[Jake Alexander]

Yeah. I mean, I think the best way, like you said, you got to drive around and look for the Sevende sign. That's probably going to be a great deal.

[Richard Bexon]

Yeah. I mean, I found one the other day in Arenal, which was four hectares. You know, they want $200,000 for the four hectares, but I know I could probably get it down to like $150,000, you know, maybe even $120,000.

And then, you know, chop it up into eight 5,000 square meter lots. It's got stunning views of the volcano, you know, and sell each one of those very easy, you know, for $100,000 or $150,000. You know, it has water, you know, has a river running through it.

It's an interesting lot that we're looking at. I mean, what mistakes do you think people make when investing or what mistakes do you see them make when investing in Costa Rica, Jake?

[Jake Alexander]

I think the biggest one is location.

[Richard Bexon]

Yeah.

[Jake Alexander]

They just choose the wrong place. And whether it's, you know, too far out of town, I think that's probably the biggest one. You know, people say, oh, I have a house for sale in Tamarindo.

But when you look at it, it's 20 minutes away from the beach. Like, well, it's not really in Tamarindo.

[Richard Bexon]

Yeah. Yeah.

[Jake Alexander]

So I think that's probably the biggest one. Yeah, just, you know, it needs to be in a place where there's going to be people coming and going and that people want to be there.

[Richard Bexon]

Yeah, I agree. I agree. You know, I mean, I had someone who didn't work with us in the end, but they ended up buying a hotel, like, you know, 20 minutes outside of Tamarindo.

And I was like, dude, what have you done? Like, that's going to be so difficult. And like, you know, even the hotels in Tamarindo, they do pretty well.

But we're returning to some form of seasonality now. I say that the party is kind of, you know, stopping here. But yeah, I'm sure he's having a pretty difficult time.

[Jake Alexander]

But yeah. Yeah. Because you got to be, you got to be like in the action.

[Richard Bexon]

Yeah. Or at least close enough that you can walk in. But 20 minutes is not walk in.

[Jake Alexander]

No. Yeah. If you want it to be a little bit quieter, like, look at Langosta.

[Richard Bexon]

Yeah. Yeah. What are your predictions for the rest of 2024?

I always love to ask this. What do you think is going to happen to pricing? I mean, what do you think is going to happen here?

[Jake Alexander]

I think we're going to see pricing coming down a bit. Maybe people being a little bit more aggressive on their numbers, especially for things that are sitting on the market.

[Richard Bexon]

Yeah.

[Jake Alexander]

And, you know, like you said, for us, I mean, we still have lots of people inquiring. So I think we're still going to have lots of people coming down that are serious about buying. It's just going to be, you know, at what price point and, you know, what's the financing going to be looking like for it if they need it.

[Richard Bexon]

Yeah. Yeah. Yeah.

We're probably going to find that there's going to be more kind of, you know, owner financing deals available as well at some point. So, but yeah. I mean, my last question for you, Jay, because I've kept you long enough.

I mean, if you inherited $500,000 and you had to invest it in a business or real estate in Costa Rica, what would you invest it in and why?

[Jake Alexander]

Yeah. So I'd probably buy, there's a two bedroom condo in Velocell Parque right now. And after we analyzed it, I think it had like a 9% return.

That's $350,000 for one condo, two separate units. That, and then I'd take the rest of the money and start a deli for Karen. I don't want to work there.

[Richard Bexon]

Yeah. Have someone work in that because that's going to be a lot of work, buddy.

[Jake Alexander]

Yeah. Yeah. Yeah.

That's, that wouldn't be for me. That'd be more for me to enjoy being able to go there and eat.

[Richard Bexon]

Yeah. Well, I would, I would happily invest some money in the deli just to have something to go there and eat a good, good sandwich, dude. So we'd find quite a few people, but awesome, Jake.

It's been a pleasure chatting with you. I appreciate you taking time to come on the podcast. Anyone that wants to reach out to Jake, all of his contact details will be in the description down below, but thanks very much for your time.

[Jake Alexander]

Yeah, absolutely. Thanks for having me. Looking forward to the next one.

[Richard Bexon]

No worries. Bye.