211 Need To Knows About Investing In Costa Rica

[Richard Bexon]

I will pause, say good morning, and then we'll get started, okay?

[Jake Alexander]

Okay. Good morning, Jake. How are you doing?

Good morning, Richard. I'm doing great. Thanks.

Thanks for having me. How are you doing today?

[Richard Bexon]

Yeah, good, man. Good. It feels weird kind of interviewing you, even though we kind of, you know, speak every day, but I know you're in North America at the moment, but your home base is in Mammal, Antonio, but appreciate you taking the time to come on the podcast.

[Jake Alexander]

Yeah, yeah, absolutely. I think you can kind of hear it in my voice after my sister's wedding this weekend. A lot of singing.

[Richard Bexon]

Well, I'm sure it was, I'm sure a few YMCA songs and other things like that were played because I don't know if it's the same in the U.S., but in the U.K., every single part, every single wedding has the YMCA.

[Jake Alexander]

Yeah, it was there, and I think the DJ just kept playing banger after banger, so definitely a fun way to end the night.

[Richard Bexon]

Awesome, awesome. Well, I mean, the first question I'd love to ask everyone, you know, is markets have had a good start to 2024. I mean, today, well, actually, I said this today because we're recording this, you know, in August, you know, markets are, I would say, heavily dropping at the moment, whether that's a correctional recession happening, but what are you seeing happening here in Costa Rica at the moment, Jake?

[Jake Alexander]

Yeah, I think, you know, pretty similar. It's definitely not, things aren't flying off the shelf, and it seems that, you know, prices are coming down, and whether that's, like you said, a correction, a recession, I'm leaning more towards a correction for the things that are in Costa Rica, and things are still selling, but it's definitely not flying off the press.

[Richard Bexon]

Yeah, I mean, I agree. Look, I think every market is different, of course. You know, I mean, I'm going to take markets, you know, like Playa Grande, okay, and Tamarindo.

We have not really seen much price corrections there, especially in land. In homes, maybe a little bit, but not so much. But, you know, there's just, it's a demand and supply thing.

There's a lot of demand in those areas and not tons of supply, whereas I think in, you know, in areas like, I don't know, you know, Uvita or Ochoa, we're seeing a little bit of a price corrections in those, you know, maybe in like Porchero, Flamingo, where stuff was a little overpriced, you know, overinflated, comparatively to some areas, I definitely see we're seeing some corrections.

[Jake Alexander]

Yeah. And even, you mentioned Uvita, from an investment rental standpoint, there's tons of competition that's popped up over the past year. I think the last time we looked at the data, there was a 42% increase in available rental properties.

And with the demand for rentals not on par with that, I think that's also leading to some correction and availability in the market as well.

[Richard Bexon]

Yeah. I mean, I agree. Look, some areas have seen a glut of, you know, of new rentals where the demand is kind of waning a little bit, but there are still areas, I mean, as you know, dude, I mean, we look at a lot of data ourselves, you know, both from the tourism data.

We also have some insider data there and also vacation rental data of just seeing of where that demand is, where there hasn't been, as you mentioned, there are 42% increase, you know, and it's just, there is opportunity out there. There was something I had a client the other day was like, hey, how much do I offer for this piece of land? And I was like, look, I think in order to get the land, you need to offer this.

I understand that the market's kind of correcting a little bit, but you can't think about that. You have to think about your whole project and getting it moving and the cashflow that it's going to produce, because getting your land for $10,000 cheaper, you know, is okay, but you might miss the mark, if that makes sense. So sometimes it's better to just be like, look, pay the asking price or the price that we know can get the deal done so we can get moving with your project.

Because in the grand scheme of things, it doesn't have that much of a huge impact.

[Jake Alexander]

Yeah. Saving a minuscule amount like that, especially when you're building a project that's going to be for cash flowing.

[Richard Bexon]

Yeah.

[Jake Alexander]

Just get it, secure it, be done with it. You know, we ran into that on two pieces of property a couple of months ago where we tried to save, I don't know, $5,000 and then it was gone.

[Richard Bexon]

Yeah. Yeah. I mean, especially in high demand areas, but, well, a weird question to ask you, because I don't think I've ever asked it before, but like, what's the stupidest investment you've ever seen in Costa Rica?

[Jake Alexander]

The first one that pops into my head is that property in Avianas that has four houses on it that isn't divided up into ownership and trying to buy one of those. You know, but the thing with that is it's also, you know, buyer beware. If you're unaware of the situation there, it looks like it could be a great deal.

And, you know, I think that one really just kind of pops off immediately, just the way it's structured there with the four houses on one plano. Unless you're buying the whole thing.

[Richard Bexon]

Yeah. I mean, that's it. You don't.

I mean, you basically, if I'm correct, that one was like a corporation that owns the land. There is no separate plano for each property, meaning you own a share, like a quarter of a share in a company that owns that property. And I think it had sat there.

I actually saw it price reduced again today even further. But, like, that one's going to be difficult to sell because there is no, like, title. There is no clean title.

Like, you're a shareholder in a corporation with other people, meaning that, like, now you have the complexity of those other people. Yeah. It's just not clear cut.

[Jake Alexander]

No. Like, and it's not even like, I mean, yeah, sure, you could go and buy the whole thing. But the other, there's only one out of the four for sale.

Yeah. That gets complicated. And if you had the whole thing and you wanted to do a project with it, I think it could be a great, you know, short term rental community if you own everything.

But trying to do one of them, there's so much better options out there. Yeah. It's just, it's a pretty stupid one.

[Richard Bexon]

What other one you got? You said that you had, that was like the one that jumped out. Any others that have jumped out to you?

[Jake Alexander]

That's definitely the biggest one. And I think another one could just be, like, people that buy land without checking to make sure that they're doing the proper due diligence, that there is water on it or the setbacks. The other one that pops out, there's that piece of property outside of Tamarindo that has, like, the river running right through the middle of it.

Yep. That is always for sale.

[Richard Bexon]

Yep.

[Jake Alexander]

And same thing, like, what can you really do with it? Yeah. But people keep buying it.

So why? Because they don't know. They don't check.

And it's kind of stupid.

[Richard Bexon]

Well, yeah. I mean, you know, and I mean, this is, like, just generally in Costa Rica, you have to trust but verify kind of everything. And there's a lot that you don't know.

And I can understand how a lot of people get burned in Costa Rica. Just even river setbacks. Because, you know, I mean, recently had a friend who, you know, Jay Casey, buy, like, put an offer on a piece of land.

We did the due diligence. But I was like, dude, before we spend anything, there's a river on it. Let me get you the setback.

And I knew if that setback came at 50 meters either side, it would eat into a lot of the best plant tails on the property. And it did come back at 50 meters. And the chance of us getting it reduced to 15 was so small that I was like, I think you need to pass on this piece of land.

And it was a beautiful piece of land, just that, like, again, 100 meters wide by, I think, probably, like, you know, another 100 meters. So one hectare of the seven hectares was nothing you could do with. Yeah.

[Jake Alexander]

And I don't know how much it was, but whatever it was, like, you can find something else. Yeah. That you're not going to have to deal with those kind of headaches.

[Richard Bexon]

Correct. But that being said, though, Jake, we had another client that we helped to end up buying, you know, a piece of land with those river setbacks. And there's always a way around it, as long as you're aware of it.

I think where the problem comes is you're intending on doing your project or designed it around something and then realize everything's in the setbacks. Whereas I think if you could, you know, on that one, we drew the actual map because it was a creek and a river going through it. The client ended up buying it because we were able to kind of design their project around that.

And thank God that, like, the main plantel where it was, the pad, you know, was there. And again, they walked up the river this week and was like, it's beautiful. Like, it's actually, it can, that setback can actually be a positive for you.

[Jake Alexander]

Yeah. Yeah. And you, like you said, you got to be flexible and get your homework done first before you start doing any sort of design.

Because then you start going down that rabbit hole and you get the perfect house that you dreamed of and the location, you know, you can see yourself standing there on your land with this certain view. And then you realize with the setbacks that it's going to be completely different. And all that work you did in the design process is going to get changed.

The view is going to be different. And you're already so far into it that it's now, like, upsetting as you're moving forward and deciding what you're going to do.

[Richard Bexon]

Yeah. Yeah. I think it's, you know, get a great team on your project, guys.

You know, I think that's what it comes down to. Now, I mean, there are many new projects in Costa Rica, Jake. We constantly keep seeing them kind of pop up.

You know, and I'm always asked, you know, hey, Rich, what do you think of this project? And, you know, that one's always a tough one, man. But I think I've been here in Costa Rica enough that, like, my spider senses go off on some projects and they don't on the other.

But, like, how do you determine which ones are the good ones or which ones are the bad ones, Jake?

[Jake Alexander]

So, you know, I like to see how far along they are. Yep. What kind of infrastructure is in place?

What's the legal structure? Are there separate planos? Yep.

And if you've, like, made it that far, you're at least going in the right direction. And then just look at who's developing them. Are these people that have a history of development in general?

Have they already developed things in Costa Rica?

[Richard Bexon]

Yeah.

[Jake Alexander]

Or, you know, are they coming from a completely different industry, have no idea about development in Costa Rica, but just have a bunch of cash and hope that it's going to go the way that they would like it to?

[Richard Bexon]

Yeah. I mean, I think you mentioned a great point there is that, like, I think any serious project should have the money behind it to put in the infrastructure and to get to separate the lots. You know, it should not be a, hey, invest $500,000 and when it's subdivided, you know, then you'll get, like, this founders kind of lot, et cetera.

I mean, it's just that's very risky. So much can go wrong. And I mean, I've seen it in so many places, even in Santa Teresa, you know, where a development group there has been trying to get a column in development for many years and just can't get it.

Like, you know, it's so much can go wrong. All it takes is a turn in the market and like, you know, projects die.

[Jake Alexander]

And then, I mean, good luck getting your money back. Well, yeah. If it's where it is, like, you're not taking someone to court here.

I mean, you can.

[Richard Bexon]

It just takes years. You'll spend probably more money in legal fees than you would do the amount that you put it in there. So, yeah.

[Jake Alexander]

Yeah. I think, you know, you can wait.

[Richard Bexon]

Yeah.

[Jake Alexander]

Yeah. I mean, the advantage of it, of getting in that early. Yeah.

There's other opportunities. There's other opportunities.

[Richard Bexon]

Yeah. Yeah. I mean, again, I think as you said there, a good project is one that, you know, has all of its infrastructure in place or that, you know, is willing to only take a small deposit in order for, you know, until we have all these things done.

That's when you know that they're good developers. When they're asking for all the money up front. I mean, literally they're going to take your money and use it for infrastructure.

Whereas I think any decent developer or any decent project in Costa Rica should have the cash to start it and get to that point. Yeah. Yeah.

Absolutely. Okay. My question for you, which areas of Costa Rica would you not be investing in at the moment and why?

[Jake Alexander]

So strictly from an investment standpoint, you know, places that are set away from the beach. Yeah. For example, like Villa Real and outside of Tamborindo, you know, it's just, it's a little too far.

And other than that, I would, I really wouldn't go south of Ocachal. I think there's some great opportunities in Ocachal, but I would not go south of Ocachal. Yeah, but you know, further south than that, at least now, you know, we'll see how things could look 10, 5, 10 years down the road.

But you know, I'd say Ochoa Chow, between Ochoa Chow and Manuel Antonio, and then Hermosa to Erradura will be good. But then that kind of no man's land between Manuel Antonio and Hermosa, I really wouldn't do anything there. There's stuff there, but there's so much better opportunity north and south.

And yeah, and then, you know, those smaller towns that aren't, that are a 15, 20 minute drive to get to the more populous area. You know, yeah, you can find things that are less expensive. But if you're looking at it from an investment standpoint, and you want to get returns on a house that's there or building a house, you could go closer to the beach, further north or south, and find something that's within your budget, and it's going to perform better, especially, you know, in the long run, as we see things move out of those tourist hubs, you know, they go north and south.

They don't go inland.

[Richard Bexon]

Yeah, I mean, I think the way to think about this is markets expand and contract. Now, we've been on an expansion, you know, post-pandemic, and also real estate in areas in Costa Rica have expanded out of those main areas. If things contract, or as they begin to contract, they're going to go contract around those main areas.

So if investment is the only driver, then you need to be in those core areas. I think if there's a lifestyle element to it of like, hey, we want a place to stay and also rent, then I think that that's a different scenario. But I mean, we were just talking here about investing.

So, you know, if you were like, hey, rich, Port Dalon, you know, which is between Mamon Antonio and Dominicao, I'd probably say, dude, I'd walk away from it just because it's not a key location. No one's searching it. There's not really that many.

There's nothing major hotel there. Like it's not a location. Yeah.

You know, but also there are locations like Santa Teresa, dude, I personally at the moment I'm not looking. I think it's I think it's way overpriced stuff that's way overpriced. You know, I would probably not be not be looking at, but also is that the, you know, vacation rental data tells me there also is that like, again, as you mentioned there in Evita, 42 percent, Santa Teresa has seen a huge boom, you know, over the past couple of years.

Yes, infrastructure is getting better, but it still has water issues.

[Jake Alexander]

Yeah, yeah. Anywhere with the history of water issues. And yeah, but it's kind of no man's land in between destinations.

[Richard Bexon]

Yeah. Yeah. I mean, unless your play is that like, look, I'm going to hold on to a piece of land for 10 years and I don't mind it sitting there.

But I personally like land banking is difficult unless that's your business and that's what you want to do. I like cash flow. I love to find land that you can put something on and then you can cash flow it.

You know, I mean, what do you think the safest things to invest in Costa Rica are?

[Jake Alexander]

The safest things from, you know, from an investment standpoint, things that are, like you said, close to those tourist hubs. So whether it is, there's still like two condos in Mamel Antonio for sale that I think are great options. Yeah.

They have good historical cash flow, middle of Mamel Antonio for under $400,000.

[Richard Bexon]

Yeah.

[Jake Alexander]

Even, you know, land in Mamel Antonio. There's just not that much of it. Yeah.

It's that big. Yeah. It's a big tourist hub.

Similar things in. I think there's good opportunity as well as it's pretty safe would be like Avianas.

[Richard Bexon]

Yeah.

[Jake Alexander]

It would be interesting to see how much more development continues to be there. But, you know, if you go buy land there, I don't think you're going to lose. So I think that's another good one.

And even up in Fortuna, especially when we look at it from the data standpoint, you know, you have the major hotels up there. When I was working at the travel agency and I'm pretty sure the data is still pretty similar. A vast majority of the trips are La Fortuna and then a beach area.

[Richard Bexon]

Yeah.

[Jake Alexander]

There's always people going there.

[Richard Bexon]

Yeah. I was actually on a call the other week with some of the owners of some luxury hotels in Arenal and we're mentioning that there aren't any luxury vacation rentals. You know, I was like, wait guys, because we've got a project that we're working on at the moment.

So yeah, that could be an interesting one. But I mean, I think safe stuff, as you mentioned, there is like, look, if you just want an easy go safe and safe investment, just buy a condo or buy a home in the main tourist areas. But again, I think it just comes down to what do you want?

I think if it's investing, you know, you've got to look at it from a cash flow point of view. You know, I don't think you can focus on how much your assets can appreciate because you don't know what that's going to happen. So you just have to look at it's free cash flow and really take a look and see what those returns are.

And, you know, there's the greatest returns are going to be in areas where there is still high demand and not enough product. And again, I think difficult for people to get that data, but it's what we do. You know, we just analyze data constantly.

You know, and I think that that's where we potentially have a bit of an advantage over other people is that, you know, we just look at data constantly. Not most people don't.

[Jake Alexander]

Yeah. Whether it's occupancy, ADR, I think the biggest the biggest one of the fluctuations in what is there and then also what's missing.

[Richard Bexon]

Yeah. Yeah. I mean, look, we said the other day that I think over the last 60 days, 3000 new products for sale have come on the market, whether that's land, hotels or condos, you know, but it's in other areas like it's not really in main tourist destinations.

I mean, it has come online in like Portrero, Las Catalinas area. But I think, you know, we're still starting to see price reductions there as well, where there's a glut of product and the demand is just not there. You know, so so, yeah, it's it's a it's a really weird combo that you just really need to understand or work with people that can clearly understand it.

You know, and that's one of my my next questions for you is, you know, a lot of trust is put in realtors, real estate agents representing buyers here. I mean, what do you think buyers need to understand when working with with realtors and real estate agents?

[Jake Alexander]

Yeah, so I think a big thing that buyers need to understand is that they're you're going into an unregulated industry where, yes, as I mentioned before, you can take someone to court, but it's going to cost you a lot of money. It's going to take years. There are tons of good people here.

[Richard Bexon]

Yeah.

[Jake Alexander]

But just like everywhere, like there are people who aren't, you know, you know, trust your gut. If you get a bad feeling about something, well, like look into it, verify it. Like we were talking about the water before.

You know, that's that's a big thing that comes up. And if they're brushing it under the rug like it's not a big deal, well, just make sure that it's not a big deal.

[Richard Bexon]

Yeah.

[Jake Alexander]

And and find someone that, you know, that you trust to to do right by you.

[Richard Bexon]

Yeah, I mean, I think you just said it there of like it's an unregulated market and it's trying to be regulated, but I don't see it regulating regulating itself very, very soon. It's a it's a trust, but verify environment. You just need to have a great team as well, you know, and just understand of like a lot of people are making money based on you buying.

And that includes the real estate agent, the realtors and also the lawyers as well. Like the lawyers have a fiduciary duty, but it's just to check stuff. It's not to go deeper into certain stuff, if that makes sense.

And if they don't have the context of your project and what's required for that. But as we said, like there are good apples and bad apples everywhere, man. You just need to really check references and double check everything.

You know, as I always say, you know, us personally, you know, we're realtors like a worse nightmare from the point of view of like, you know, we just check everything, dot i's, cross t's are a pain. But at the end of the day, we just want to make sure is that like the only thing we have is our reputation. So that needs to be protected.

But yeah, it's a trust, but verify environment here. And as you said, you can't take someone to court. I mean, you can, but it's like caveat emptor, buyer beware always, because once you buy, there's not that much recourse.

[Jake Alexander]

Yeah. Like, for example, they'll tell you that the property has a water letter, but maybe they don't understand the scope of the project that you want to do. And the water that you have isn't going to be sufficient for it.

And it's not even them being malicious. It's just not them not understanding and verifying what exactly you want to do with what is available to you.

[Richard Bexon]

Yeah. I mean, my last question for you, Jake, because I've kept you long enough. 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?

[Jake Alexander]

So I would probably invest in either land or a house in one of those big tourist hubs, Fortuna, Manuel Antonio, or Tamarindo area, Playa Del Coco, maybe even two.

[Richard Bexon]

Yeah.

[Jake Alexander]

Or from a business standpoint, I would love a touchless car wash. Wow. Instead of having to wait.

I mean, don't get me wrong. It's not super expensive to go to the car wash, but full detail inside and out. It's about $7,000 in Manuel Antonio, so $15.

But it takes them an hour to do it. And you're like sitting there next to the mangroves getting eaten alive by mosquitoes. Or you get a couple of these touchless machines, line them up, and you just swipe your card, drive in and out, and have a couple of vacuums outside to do the inside.

I think you could do a lot with $500,000 for the car wash.

[Richard Bexon]

If I made you choose a location to invest $500,000, which one would you invest it in and why?

[Jake Alexander]

For real estate?

[Richard Bexon]

Yeah.

[Jake Alexander]

I'd stick with Manuel Antonio. That's a market you know.

[Richard Bexon]

I live there.

[Jake Alexander]

Yeah, I know it. I live there. I love it.

And there's less and less that's becoming available, especially from a land standpoint. So I'd probably try to find some land and depending on how much it costs, sit on it or build something on it.

[Richard Bexon]

Well, Jake, I really appreciate your time for coming on the podcast. As I said, it's kind of weird to be interviewing you as we talk quite often. I mean, you have a very different perspective than I on some stuff.

We have a lot of perspectives on the same. We see a bunch of different stuff. You're constantly out on the street, as I like to say, so am I.

We talk to similar people and very different people. So I think it's always great to get another opinion and viewpoint. But I think anyone that wants to reach out to Jake or schedule a meeting with him, all of his contact details are in the description down below.

But Jake, very much appreciate you taking time to come on the podcast.

[Jake Alexander]

Yeah, thanks for having me. I'm sure I'll be talking to you later today.

[Richard Bexon]

Sounds good.

[Jake Alexander]

Catch you later. See ya. Bye.