94 Is the Real Estate Slowing?

[Richard Bexon]

Good morning, Becky, how are you doing?

[Rebecca Clower]

I'm good, how are you?

[Richard Bexon]

Very, very good. I appreciate you taking time out of, I know, a very busy day to come and join us on the podcast today.

[Rebecca Clower]

Anytime. I love being on your podcast, though.

[Richard Bexon]

Awesome, awesome. Well, we love having you. And I know that the, everyone that listens, enjoys hearing from you.

So, but I mean, I'm starting to see signs. I mean, I think globally, we're starting to see signs of a bit of a slowdown. You know, interest rates are increasing.

Stock markets are kind of pulling back. If you had Bitcoin, some people, yeah, you've definitely seen a reduction in your value of your Bitcoin. But I mean, have you seen a bit of a slowdown in the real estate market in Costa Rica?

And particularly like the Guanacaste area, are you seeing a bit of a slowdown?

[Rebecca Clower]

Yeah, I mean, I have never, you know, I've been obviously here since 2006. And I've seen so many people over the years. I've obviously been here during the good times and the bad times.

And there's been a lot of talk, obviously, of us going back into bad times. But here, the difference is that we have a lot of higher end buyers. So we have the high end buyer.

What I've noticed, though, is that since the interest rates are creeping up in North America, it does affect us, maybe not right away, and not maybe 100%. And I always feel that there's a little bit of a delay. You know, that delay might be a few months.

But what my first indicator is when there's a delay is that we start having price reductions. And I've seen a bunch of price reductions lately, especially on higher end property. So what I'm seeing more so is that property is still the sweet spot that I call that's anywhere really from 50,000 to 500,000, depending on what you're looking for, is still active.

Whereas everything that seems to be 500 to a million or more seems to be slow now. I've seen a lot of price adjustments. So that, for me, is an indication that things are slowing down some, for sure.

Now, having said that, we still have limited inventory. And we still have a lot of demand. So, you know, it's a difficult situation because sometimes we don't have exactly what our client is looking for.

And so that also creates a problem in and of itself.

[Richard Bexon]

Yeah, no, definitely, definitely. And I mean, I think we'll start to see probably more product come in the market in the next coming, like, maybe towards the end of the year as some of these construction projects finish. You know, but I mean, I think it's that.

You know, Costa Rica, everybody's always very, you know, I suppose, amused that Costa Rica has no, you know, financing or, you know, mortgages out there. And it's just cash buyers that come down here.

[Rebecca Clower]

So it's a different market. I'm not sure if I sent you information or if you've heard about the BCT product. That's a relatively new product that they offer.

I have yet to see one of my clients actually take advantage of it. The main issue, as I'm sure you know in Costa Rica, is everything takes so long. So even if you could get approved for a loan, if it's going to take three, four, five or six months, most sellers aren't going to be interested in that.

That's why cash is king here. So even if you were able to get the BCT loan, which requires at minimum 35% down, the interest rates are at 7.5%, which before maybe wasn't that attractive to foreign buyers. But as the interest rates creep up, it might be an alternative for someone.

Again, we still go back to the fact that we don't know how long it's going to take. I need to talk to someone who's actually gone through the process and gotten to the finish line. Yeah.

Because I would be interested to know that. But in this country, cash is still king. We do have some options with owner financing, for sure.

And you mentioned the new construction. I actually have three new construction projects that are going up. And historically, all of my new constructions have gone under contract before they have been finished.

Wow. Yeah. And the nice thing too is that all the funds are held in escrow, so everybody's protected.

It's not like your typical construction situation. But yeah, everything that's pre-construction is going because again, there's just not a lot of inventory. And I think a lot of people too don't necessarily want to tackle building.

And we also, at least in Wanakasa, there's some areas that are plagued with water issues in terms of not being able to get a water letter. And if you don't have a water letter, you can't get a meter and you can't get a permit.

[Richard Bexon]

Yeah. I mean, what types of properties are you seeing that are still selling strong though?

[Rebecca Clower]

Oh, I'm seeing land for sure. Ocean view land, but we just don't have a whole heck of lot. We don't have too much left of ocean view land.

Also, people are buying land that is walking distance to the beach. When I say walking distance, I might say one or two kilometers at the most, where people can still kind of walk to activities, et cetera. And I also see people that are buying in the mountains that are okay with going farther back because you get more bang for your buck or going south or north of the more touristy areas along the coast to get more for their money.

So I've seen a lot of that kind of, I call it like getting out of the city, sort of. We don't really have a city, but.

[Richard Bexon]

I know that. I mean, it's nice to have it there, right? I mean, if you want to go and use it, you can, but if you're not, you're not in the hustle and bustle of it.

And I mean, sometimes going further back is the climate changes and you get a little bit of a breeze the higher up you get as well.

[Rebecca Clower]

That's correct. And I also joke and say, the second that you're on a dirt road, there's still some upside potential. I used to always say that, but I truly believe in it.

So once you're off paved roads, you might've missed a boat already, depending on what it is. But there's still some areas that are relatively close to some of these really touristy areas. I know I've talked about Pirate's Bay and north of Potrero and south of Tamarindo and all of those areas that are still dirt roads, like Avellanos and Kigal.

You can still get some good deals in those areas.

[Richard Bexon]

Well, I mean, you sent me some stuff that you guys had in Pirate's Bay the other day and I went down and take a look at it. And I mean, it's beautiful. I mean, you're literally a couple of hundred meters from the ocean and very, very affordable lots.

I think they split, what's the price that they start at around about $40,000?

[Rebecca Clower]

Yep, they start at 39,000 up to 70,000. And it's basically, it's a gated community within a gated community. So you're going to have your own gated access.

We're actually getting ready to pave the roads in there. They have all proper drainage. It's going to be fully fenced around, gated access.

They're going to have a community pool with a barbecue area and a park for children. And the nice thing is that if you want more space, because they are smaller lots, anywhere from three to 600 meters, you can buy a couple of the lots and obviously build a bigger house. So a couple of people, we already have two lots under contract and I'm getting another two offers coming in this weekend.

So we're excited about that. And I think they're going to sell quickly because of the price point. And simply because you can walk, 10-minute walk to, in my opinion, one of the most beautiful beaches in the country that's great for snorkeling.

But yet you're still close to Conchal, you're close to Paya Minas. If you want to drive to Tamarindo, if you want to drive to Playa Grande, if you want to drive to Flamingo, those are all within a 15 to 20 minute, 25 minute drive. So it's still totally possible to be amongst nature and yet still somewhat close to amenities.

[Richard Bexon]

I mean, I think that's a great way to summarize that area because it really is caught between Tamarindo and kind of Conchal, which are two very busy areas and Grande is just around the corner as well. Matapalo is right there for your local kind of supermarket. If you want to, you can go to, you know, Alto Mercado, but that beach is phenomenal.

I mean, it really is beautiful.

[Rebecca Clower]

It's one of my favorites. It's one of my favorites. And I guess I'm a little biased because I lived down that road for five years and I built one of the first homes down that road a while back and I loved it.

I loved it.

[Richard Bexon]

Oh, well, I mean, where do you think that the opportunity lies in the coming years and investing in your area?

[Rebecca Clower]

I mean, basically the areas that we kind of talked about, you know, I feel that obviously there's always going to be a market for ocean view land and land that's close to the beach. Surf side's booming right now. You know, the whole Potrero area is booming because you can get more for your money over there.

So that's, you know, for already built product and also land that have water letters. And also areas South, I've actually seen a lot of activity in Avellanas, Lagarto, Junkida, Paya Negra and those areas. I feel like those areas, because they're not as developed, again, you still have upside potential over there as well.

And then North of us, Coco Hermosa, Ocotal, Playa Panamá, the whole Papagay region is booming. As you know, we just opened an office there not too long ago. And, you know, we've got several listings up there, both budget and high-end homes.

So it's an opportunity to definitely get more for your money and go to different areas to invest. And obviously the positive of that whole area is that you're anywhere from 20 to 30 minutes on average from the airport, from Leiredia International Airport. So it's very convenient for those who, you know, especially if you travel a lot and you're living here, it's convenient.

You're super close to everything. And you're close to Leiredia too.

[Richard Bexon]

Well, and I mean, it has solid rental rates and occupancy as well. I know that because again, have a property up there. And I mean, it's great.

I mean, it does really, really well.

[Rebecca Clower]

No, there's, and that's, you know, a lot of people say, where would you buy? And the funny thing is I actually own property in several different parts of Costa Rica. So I'm not going to pretend and say, what it costs is the only place where you can make a dollar because I would be lying.

There's several different areas where you can make money. There's definitely many areas still where you have upside potential. And a lot of people say, oh, Costa Rica is expensive.

It is relatively speaking, but we get such good money. For example, on the Airbnb topic, I just bought a condo myself and, you know, put a little bit of elbow grease into it. And basically I'll be renting that out nightly.

And it's that type of investment that does really, really well here because we have such an influx of visitors. And so the Airbnb market is always going to be a hot market. And so that for sure is a great place to, you know, park your money.

And not only that, but you can visit your property, you know, a few weeks or months out of the year and then rent it the rest of the time and put some money in your pocket.

[Richard Bexon]

Yeah. I mean, what type of returns, because people are always, you know, looking at, you know, returns, how much return they're going to get on their money. I mean, what kind of returns do you think that you'll get on your condo there in Flamingo?

[Rebecca Clower]

I think I'm going to make about 10%, which I think is very respectable.

[Richard Bexon]

But you're managing it yourself though as well, right?

[Rebecca Clower]

No, believe it or not. Okay. I actually sold my property management company last year.

So I have it, I have it with my old property management company and people say, well, why aren't you going to manage it yourself? And it's like, no, no.

[Richard Bexon]

It's a lot of work.

[Rebecca Clower]

It's a lot of work. And I'm trying to simplify my life. And even then I still think I'm going to make 10% because the price point is lower.

What a lot of people don't realize is, you know, I wouldn't be able to, that's the reason we don't really long-term rents the beach, because what can I possibly ask for an Oceanview one bedroom condo? A couple thousand a month, maybe? Maybe 1,800, 2,000.

But I can easily rent it for 150, 175 a night in high season. And it will be full. It will be full.

Just because of the location, it's directly across the street from the marina and you can see the water and you can walk to a semi-private beach. And so that kind of thing, you know, I think is a great investment as well as higher end properties that house larger groups, much like what you have. You know, I've seen big return on investment on those types of properties, because you don't have that much competition.

When you start getting up above four bedrooms, your competition really drops. And obviously when you're traveling with a big group, those people tend to have a higher budget. Therefore, you know, it's all relative.

You can ask to hire per night on your property, but yeah. But I would say on average for return on investment, again, there are some properties you can definitely make 10% or more, but the average, what I've seen, at least from my 15 years experience in doing property management was more like around four to 6%, which maybe doesn't sound that great, but you have to take into consideration that most of the owners will come down for several weeks a year, you know, that's after you pay absolutely everything.

And so, you know, can you really put a price tag on that? I mean, and not to mention the appreciation of the property.

[Richard Bexon]

Well, you should put a value on that trip, because again, if you're spending $10,000 a year for a vacation, now put that on top of your returns as well. Now you're four to 6%, it's probably jumped to seven to nine. So, you know, you can't just look at it, the return you're getting, it's what you're not expending as well now, because you have a place to go on vacation.

[Rebecca Clower]

Exactly, yeah. You got a free vacation out of it, a good investment. Not a half bad place to go, exactly.

[Richard Bexon]

It's not bad, not bad. I mean, maybe you've just answered this, Becky, but I mean, you know, in Guanacaste, if you were looking to invest over 10 years, you had mentioned some stuff about, you know, the opportunity maybe in areas where the roads are not as developed, where it's kind of dirt roads. I mean, what areas would you be looking at?

[Rebecca Clower]

Well, the areas of dirt roads.

[Richard Bexon]

Yeah, anywhere with dirt roads then, right?

[Rebecca Clower]

Anywhere with dirt roads. So no, I mean, you're, well, believe it or not, there's not that many places with dirt roads, meaning like at least the main roads leading into town. So again, the only real places like that are Puerto Viejo de Conchal, South End of Conchal, Valle de los Piratas, Playa Minas, okay?

And then as you go south, dirt roads start basically at Playa Avellanas, Negra, you know, Junkillal. Basically, Junkillal now has a pave road that goes up at least towards Paraiso. So not far from the pavement.

So basically like all those areas there, and then you can even start going further south, you know, Marbella, Playa Azul, like all those areas there, which are really beautiful as well. I feel like you can get a lot of bang for your buck. And again, you know, we talked about how we have properties in different parts.

I'm looking to buy also a lot near Arnal, which I think is also a great area of investment.

[Richard Bexon]

I agree.

[Rebecca Clower]

Now, again, with Arnal, I'm buying it, understanding that I'm happy to build a small property, rent it out and just cover my costs. I truly believe, and I know, that you're not going to get the return on investment, for example, at the volcano that you would at, or at the lake, I should say, that you would at the beach. Because we definitely, you know, my property here is going to blow that property out of the water in terms of return on investment.

But again, it's all relative. It's also a different lifestyle. But it is a great part of the country.

And I think if you build your client base right, you could do really well over there as well.

[Richard Bexon]

Well, I mean, one thing that's always been a bit of a, over the past couple of years, that's been difficult for people is to find long-term rentals. Are you seeing more long-term rentals coming on the market now, or it's still that there's just not that many?

[Rebecca Clower]

There's not that many. We have a huge demand. We have a lot of families coming down, especially from North America.

And so it's been really difficult. And even from Europe, in South Americans, we have people coming from all over the world. There's a serious shortage for long-term rentals, especially at the beach.

And so what people have started to do is start to go inland a little bit, even if it's, you know, five, 10, 15 minutes. And they get, again, more bang for your buck. They're still really close to everything.

And, you know, there's just more options. Listen, there's such a shortage right now of long-term rentals that I've had some clients that simply just bought a house, even though it wasn't their initial goal. They said, well, we'll rent for a year, but then they realized, well, there's really not anything.

No, and honestly, people say, well, where can I look for long-term rentals? There's not one centralized place we can look for long-term rentals. And the reality of it is, even where I live in the GATA community I live in, there's definitely a handful of long-term rentals, but these people have been here for a year or two or going on their third year.

So they keep renewing, renewing, renewing. You won't, the best time to look, at least in our area, because a lot of families are renting, I would say is really around April, April or May, because most of those people are here for an entire school year and they've signed a one-year lease from June till June or July till July. So that's really when you need to start saying, okay, well, when should I start looking?

That's when I would suggest to start looking because you'll know those people always have first rate of refusal generally. And then even in that case, some people have had their rentals turn into a real estate for sale and that's also put them in a predicament. So yeah, it's a little tricky right now, to be honest with you.

[Richard Bexon]

Yeah, I think it's tricky everywhere. I mean, it's just, at the beaches, there's just so much demand and just not enough supply. I mean, here in the city, of course, there's still, there's always a lot of supply, but yeah, at the beaches, it's difficult.

[Rebecca Clower]

It's difficult at the beach. Well, mainly because most of us, including myself, I have two properties that I could long-term rent, but I choose not to.

[Richard Bexon]

Well, I mean, financially, it's short term.

[Rebecca Clower]

No one's going to pay me, like we just said, why would I rent out my one bedroom condo for 1800 a month if I can short-term rent it and bring in $3,000 a year or a month, excuse me. So it just doesn't make sense.

[Richard Bexon]

I think the only way that you would do it would be is if you didn't want a property management company, you just wanted to simplify. Like, look, here's the keys. I'm going to be back in a year.

You can long-term rent it, but you need to take care of the place.

[Rebecca Clower]

Oh yeah, if I didn't have a property management company, I would do long-term. It is a lot easier. It is a lot easier, I will say that.

Your profits are greater. If you don't have to deal with the day-to-day though, it's phenomenal.

[Richard Bexon]

Definitely. I mean, I've been talking a lot recently to a lot of people about businesses that are missing in certain markets. The reason being is we've had this influx of people come in, but with that, all these ancillary services, such as storage, dry cleaning, these things.

I mean, what are some of these services that you think are missing in the area? Because I think a lot of people that are looking to relocate want to start a business and work as well. So, I mean, what stuff would you think they should be focusing on?

[Rebecca Clower]

Storage, for sure. We actually have a shortage of storage. Yeah, actually we have, well, as you know, we're a building and we have all our furniture that's already arrived in country in two bodegas, two storage units.

There's nothing left, at least in the Mar Vista. I know for a fact that also at one down the road, they're totally sold out. And yet people still keep coming here.

So we definitely need that. In terms of, well, we don't need dry cleaning because it's the beach. I don't think too many people are doing dry cleaning.

Oh gosh, I also joke that it would be phenomenal to have a drive-through car wash.

[Richard Bexon]

That would be cool. That would be cool.

[Rebecca Clower]

I think it'd probably be expensive too.

[Richard Bexon]

What about the kids, Becky? Because again, a lot of people are moving there with families. What stuff do you think that the children are missing?

[Rebecca Clower]

Well, in Guanacosta, we actually obviously have beautiful weather. We have over 300 days of sunshine a year, but when it does rain, it rains and it would be nice to have more indoor activities for that. So I joke, but not really.

It would be wonderful to have a jump park in some city things here. Dare I say like Chuck E. Cheese or something.

Yeah, I get what you mean.

[Richard Bexon]

I get what you mean.

[Rebecca Clower]

When I go to San Jose, my kids love that stuff. They love Chuck E. Cheese.

They love the jump parks. Obviously, we have a plethora of outdoor activities here. We don't need help where that's concerned, but when it's raining, it would be nice.

We do have movie theaters now and we have indoor restaurants as well because everything, not everything, many things are open air. Yeah, it would be nice to have those options.

[Richard Bexon]

I think that's great because again, a lot of people that are moving there are looking to start a business. I mean, there is, as they say here in Costa Rica, there's money in the street. You just need to pick it up.

[Rebecca Clower]

No, I'm telling you, a jump park, some sort of recreation center, indoor center would be amazing, truly. And it would stick. It would stick with the locals.

It would stick with the foreigners. I really, truly believe that.

[Richard Bexon]

Well, my last question for you that I love to ask everyone, but I think I may already know the answer, but if you inherited $500,000 and had to invest it into a business or real estate in Costa Rica, what would you invest in it, Becky?

[Rebecca Clower]

I think I'd buy another condo at the marina. Seriously, either land or a condo that you could just go right into that maybe is already in a rental pool where you already have rental income on the books. I think that's kind of a no-brainer.

The land is great because there's not a whole lot left and you can always land bank and not have to necessarily build right away and let the land appreciate over time. So those would be my top two. Obviously, everybody has different needs, but I'm just speaking for myself personally.

[Richard Bexon]

I think it's a question I always like to ask because everyone's perspective is different and viewpoint. And I think that's what people have been said that this is the podcast. It's just great to get all these perspectives.

[Rebecca Clower]

I'd invest in the kids park.

[Richard Bexon]

That's a great idea. I mean, it really is. Well, Becky, thank you very much again.

My kids would as well. They often ask to go to the... It's Chuck E.

Cheese and Junk Park as well. I think we have the same kids.

[Rebecca Clower]

Exactly. We do, we do.

[Richard Bexon]

Well, anyway, Becky, I'll let you get on with your day. I really appreciate you taking the time to chat with me on the podcast. And anyone who wants to contact Becky, I'll put all of the contact details in the description and have a great day.

[Rebecca Clower]

Thank you so much.

[Richard Bexon]

Thanks very much, Becky.

[Rebecca Clower]

It's a pleasure. Take care. Bye.