Can a US Citizen Buy Property in Costa Rica?

Have you ever asked yourself, “can a US citizen buy property in Costa Rica?”

Buying real estate in Costa Rica can be a lucrative investment or a fantastic place to retire in tropical luxury. There are various areas throughout the country that are thriving economically and would make purchasing property there worthwhile.

Many investors have long seen Costa Rican beachfront as more desirable than those in California and Florida due to its comparatively low price tag, and buyers often experience a much larger return on investment (ROI).

More and more people from North America and Europe have realized the unique potential that Costa Rica possesses, as many buyers from these continents have been moving there in droves throughout recent years.

One of the most common reasons people move to Costa Rica is the beautiful climate located right in the tropics. The beaches are known to be pristine, and the jungle is an exciting and gorgeous adventure for the brave at heart. It’s also ranked as the happiest nation in the world, with nationalized health care and long-life expectancy.

Furthermore, Costa Rica’s government encourages foreign investment because it stimulates the economy for the native population, known as Ticos. Due to the increase in property investment, real estate throughout the country is constantly appreciating, making it an even more attractive choice.

Do I Need to Be a Costa Rican Citizen to Buy Property?

An image of a sunset on a beach in Costa Rica. It shows a wide sandy beach, orange sun hitting the horizon, and an a hill lined with trees to the right

The simple answer is no; foreigners have the same rights as Costa Rican citizens when it comes to owning property. However, American expats and retirees can’t vote in local elections or own an entire property near what is called a maritime zone.

In Costa Rica, a maritime zone is the first 200 meters from the high tide area. These are considered public property and need a special dispensation from the Costa Rican government to be leased. In a maritime zone, a non-citizen is only able to own 49% of the property and only with government dispensation.

Furthermore, foreigners cannot own IDA land, which is government land, often donated to poor farmers. 

Risks of Buying Property in Costa Rica

An image showing a person's hand dangling a model of a house on a hook while another person attempted to grasp it. The image symbolizes the risk of purchasing a house in Costa Rica

Like anywhere else, there are always risks involved when buying property in a new location. These include (but are not limited to) safety issues and fluctuating markets. Let’s take a closer look at more of the risks! 

A Real Estate Agent Is Critical

When purchasing real estate in Costa Rica, it is best to consult the locals’ expertise, such as a specially seasoned real estate agent, as they are well-versed in the government’s culture and laws. Although you have to pay them a commission, it is well worth the investment.

Most importantly, the local real estate agent will be familiar with the various fluctuations within the market. Therefore, hiring a real estate agent may also benefit you financially. 

Hiring a reputable real estate attorney is also critical, as they know the laws and can review contracts for you to ensure you meet all the legal requirements.

Unscrupulous Developers

Although most Costa Rican developers are reputable, it is essential to select them carefully if you are planning new construction. This is another vital reason you should not deal directly with developers and always consult a local real estate agent’s expertise. 

Poor Construction

Costa Rica experiences significant rain, volcanic eruptions, floods, and earthquakes. Therefore, it is critical to ensure that the property you are buying is structurally sound. It is important to request blueprints as well as gas and electric bills to see how the house reacts to the various weather changes.

It is good to note that many houses in Costa Rica experience leaks because of the frequent rain. Therefore, before making a bid on a particular property, you should hire an inspector. Visit the house during the day, night, and while it’s raining to determine the structure’s overall integrity. 

Fiscal Deficit

The fiscal deficit in Costa Rica is one of the primary concerns of interested buyers and can contribute to the cost associated with buying property in Costa Rica. If you are buying a property in Costa Rica, you should research the fiscal deficit and how it could affect your overall return on investment. After all, if the government goes bankrupt, that will invariably affect property values.

Can the Costa Rica Government Seize Foreigners Property?

No, foreign buyers, Costa Rican citizens, and permanent residents have the same rights regarding property ownership. 

Do Property Values Appreciate in Costa Rica?

An image of Edificio Correos in San Josem Costa Rica. It shows a lamp, an ornate white building, and a blue sky

The real estate market in Costa Rica is rather stable. However, the most rapid increase in property values is present in the high-end market due to the steady rise in foreign property owners.

You should also note that because of the rapid influx of buyers from the United States, the market is nearly entirely dependent on buyers from the US. 

The highest appreciation rates are the Alajuela, San Jose, Heredia, Central Valley, and Escazu, as these are closest to the metropolitan areas and beachfronts

For example, in San Jose’s capital, the real estate market has increased by 0.4% each year since 2015. 

However, this excludes condos, as the price has remained somewhat steady. Other popular locations like Drake Bay, Tamarindo, Nosara, Playa Langosta, Santa Teresa, Playa Grande, Mal Pais, Montezuma, Puerto Viejo, and Playa Guiones have seen an increase in foreign investment, which has boosted the surrounding real estate market.  

The Significance of Foreign Investors

Foreign investors significantly impact the country’s real estate market, especially in the large metropolitan areas. Due to the lower median price in the United States, it is now lucrative for Americans to invest in Costa Rica property. In fact, purchasing a beach house in Costa Rica is determined to be an even better investment than buying one in California or Florida. 

Foreign investors flock to Costa Rica due to its natural beauty, beaches, ocean views, and tropical lifestyle. 

However, Costa Rica is more popular for foreigners because they have the same rights as citizens or permanent residents regarding property ownership. Unlike other nations, residency is not required to purchase a property. 

Average Yields

Yields in Costa Rica often span between 7.3%-8.6%. However, the property’s size and location often determine the return on investment. For example, many residential properties in Alajuela and Heredia’s sprawling towns yield between 5.8% for large properties and 6.9% for smaller properties. 

In the sprawling province of Guanacaste, the real estate market increases rapidly. In 2015, real estate prices in Guanacaste increased by 35%. Furthermore, the prices of beachfront houses also rose rapidly by nearly 20%.

If you are on the fence about purchasing a home in the province of Guanacaste, know that your investment will be worth it tenfold. 

Furthermore, beach properties bordering Panama produce the greatest ROI. They are near beautiful beaches that have been nearly untouched by any development and are the country’s most breathtaking places.

Properties like this are skyrocketing in market value, especially those in the coastal towns of Playa Conchal, Manuel Antonio, Playa Flamingo, Tamarindo, and Punta Uva. The interest rates are the lowest in these towns as well, which can increase buying incentives. 

Mortgage Market

Due in part to the large foreign investment, the mortgage market has been skyrocketing throughout Costa Rica. On average, the mortgage market in Costa Rica has increased by a staggering 36% per year until the recession in 2008. It then recovered around 2014 and has been on the increase since.

Three Areas With High Appreciation in Costa Rica

An aerial view of San Jose in Costa Rica showing a few dozen houses, open green pastures, trees, and a series of hills

Appreciation is the highest within the coastal communities of Costa Rica, such as San Jose, Guanacaste, and Limon. These towns are crucial to the country’s overall real estate market and rely heavily on foreign investors. Let’s check out a few towns and provinces throughout the country with high appreciation rates.

San Jose

The capital city of San Jose is one of the most populated and thriving areas of the country. It includes many businesses and is one of the best real estate markets in Costa Rica. Indeed, the housing market in San Jose increased by 3.7% annually up to July 2019.

Guanacaste

The housing market in Guanacaste has increased steadily throughout the years. As of 2019, condos have appreciated within the province by 40.8%. Therefore, it’s no secret that you should definitely consider Guanacaste if you are in the market for a condo in Costa Rica. 

Limon

Limon is a booming community located near the seaside. It is one of the most prosperous places for the real estate market due to its prime location. Investing in real estate in Limon is advantageous, as the housing market has appreciated by 5.8% in recent years.

Related: Panama vs Costa Rica for Retirement?

Three Best Websites for For Finding Property in Costa Rica

Like other locations, Costa Rica has many websites with properties for sale. This is a great way to find your dream property. However, before inquiring about a house, you want to ensure the website is reputable and the prices are accurate for the location.

Let’s check out some reputable sites for finding properties in every corner of Costa Rica!

Realtor.com

Realtor.com is one of the most reputable sites in the industry. You can search by budget, square footage, and just about any metric you could imagine. Furthermore, if you are interested in a property, you can contact the realtor directly from the website. 

Visitcostarica.com

Visitcostarica.com is a great resource for learning about the country’s many provinces and includes various pictures and other resources. This is an excellent resource if you want to do some research before buying a property. It will give you a perfect description of the various towns, cities, and provinces throughout the country. 

Google

Google is the go-to platform for many property buyers. To find properties for sale, you can type “real estate for sale + the area you are looking to buy.” For example, if you were planning to buy in San Jose, you would type in “real estate for sale + San Jose.” 

When you search for properties for sale on Google, you can refine your search to be as specific as possible, which allows you to find properties that pique your particular interests. 

When searching Google, you will most likely get various real estate agencies operating in Costa Rica with properties listed for sale. These sites will also provide you with the different protocols to purchasing a property in Costa Rica. 

Related: Costal Rica Healthcare System

Nine Steps to Buying Property in Costa Rica as an American

A photo of a person's hands holding house keys on one hand and a model house in the other

When buying a property in Costa Rica as an American, there are a few important things to consider. It is crucial to do your research before making an offer on a property to ensure you understand certain aspects like zoning, contracts, and titled properties. 

Let’s go over the steps to purchasing a property in Costa Rica.

Step 1: Titled Properties

Most Costa Rican properties are titled, except property within 200 meters of high tide, called the maritime zone, which is publicly owned and maintained. Although most of the property in Costa Rica is titled (or privately owned), you may find some land either in the maritime zone or donated to farmers through the IDA.

Step 2: Restrictions and Zoning

Like any other place on earth, there are restrictions and zoning laws in place throughout the country. Because Costa Rica has many public reservations, it is important to check the zoning laws in the town or city to ensure no zoning laws will affect your investment. 

It is also crucial for those not familiar with Costa Rica’s purchasing property to get a copy of the zoning plan and a survey map. This is to ensure you don’t encounter any zoning issues. 

Step 3: Hiring an Attorney

Purchasing a property in an unfamiliar country comes with many varying laws you may not be familiar with. It is, therefore, crucial to hire a reputable lawyer to walk you through the process. They will look over contracts, zoning issues, and make the entire experience more stress-free. 

When hiring a real estate attorney, ensure they have a SUGEF(Financial Institution Superintendency) escrow account to avoid any financial issues as you purchase the property. 

Furthermore, most buyers in Costa Rica provide their lawyers with a 10% commission for their efforts.

Step 4: The Property Search

Most properties in Costa Rica are listed online through reputable agencies. Because Costa Rica is a new location for most foreign buyers, you must visit your chosen location often to ensure you really want to purchase it. You can do this by scheduling tours for the areas in which you are interested.

If you are set on a location and have found a property you want to call home, you should get in touch with your banker in advance so that once the deal is closed, they can wire the money to you.

Step 5: Hiring a Real Estate Agent

Hiring a real estate agent is one of the most important aspects of the entire process. They are well-versed in the many different nuances of the country’s real estate market. Furthermore, you will want to hire an agent that is an expert in the area you want to buy, as they will be familiar with the market and the regulations throughout the area.

The only downside to hiring a realtor is that they get a commission. They often receive between 5-8% of the selling price, depending on location. However, often the realtor will receive their commission with the listing agent. 

Step 6: Making an Offer

All offers made must be done in writing through a purchase-sale agreement. Never verbally agree to an offer, and be sure you understand what the deal entails before putting down your signature.

Step 7: Closing and Escrow

You should be present for your property’s closing. However, you can assign someone you trust to purchase the property in your name if you cannot be there. This could be your lawyer’s assistant, real estate agent, or any close connections within the area. 

To ensure your money will be available to purchase your property, it is important to hold it in escrow long before you plan to close. This will prevent any issues with payment and allow you to close on the agreed-upon date.

Step 8: Title Registration

When registering your property title, you can put it in your name, a corporation, or a legal organization. You may also place provisions, so family members cannot sell the property without your permission. Plus, you can share the title equally. 

You could purchase the property in the form of an LLC or with a name representing your IRA or 401K. Of course, you will need to research lawyers carefully if you plan to purchase using an LLC or retirement.

Step 9: Property Taxes

When closing on your new property, you will have to pay 0.25% of the property taxes in your area. Furthermore, every five years, you must reassess your property to be taxed accordingly. It is important to bring proof that you paid the property taxes upon closing. 

Related: What’s the Weather Like in Costa Rica?

How Do I Get a Loan for a Property in Costa Rica?

Although it is possible to get a loan from a Costa Rican bank, it is a long and confusing process with no approval guarantee. Most foreigners who purchase property in Costa Rica either get a loan from a bank in their country of residence, insurance funds, or an IRA. 

You could also find a private lender. However, they will likely request an assessment of the property and cost you anywhere between $500 and $1000. They will often ask for your bank statements for the past year and proof of regular income. 

They will also likely charge you an interest rate of between 8-15% and finance for up to 15 years for a significant administration fee, which frequently adds up to 1.5% of the loan’s entire cost. 

If you can find a seller willing to finance, they will often be more lenient with fees and other processes. They may not even request a property evaluation. However, this usually requires a 50% down payment and a mortgage of only one to three years with interest rates as high as 6-9%.

That said, it is a safer option to purchase the property through a retirement account, such as an IRA, or get funding from your country of residence. 

Related: Cost of Living in Costa Rica

Final Thoughts

As it is with any other location, it is essential to familiarize yourself with the surrounding area. It would help if you also researched the various rules and regulations to ensure you can meet them. 

Costa Rica is a thriving country full of investment potential for the right buyer. The tropical landscape, stunning beaches, and equal property rights for non-residents make the South American country an attractive location for investors and retirees alike.