Posted: Wednesday, October 25, 2023
Author: JW Robinson, Associate Broker | Licensed in WY
Costa Rica sits in the southern part of Central America. It offers miles of coastline along the Pacific Ocean and the Gulf of Mexico, 28 National Parks, and temperatures that stay favorable year-round. Being easily accessible by air from a wide range of destinations and offering extraordinary scenery and adventure has made it a thriving tourist hub. With a stable economy and the longest-standing democracy in Central America, Costa Rica is experiencing an influx of money coming into the country from foreign investors — everything from retirement chalets to Airbnb beach homes or self-sustaining agricultural land. The country's welcoming nature, comparatively low prices, and protective real estate laws make it an attractive option. Here are three compelling reasons why some investors are choosing Costa Rica.
Reason # 1 – Welcoming to Investors
Before putting money in foreign soil, most investors would ask if it is a secure place to invest. Most investors would not pursue a real estate investment if they weren't reassured that they were investing in a stable and welcoming place. Costa Rica not only boasts a long history of economic and political stability but also promotes foreign investment through several benefits and initiatives aimed at supporting and facilitating foreign investors.
Supportive Legislation and Organizations – The government and country encourage foreign investments. One way they do this is through the Free Trade Zone Regime, which offers a set of incentives and benefits the Costa Rican government grants to businesses making new investments in the country, including tax incentives on income, imports, and exports of goods, among many others. The area welcomes outsiders when you come willing to invest in their country. Through the Costa Rican Investment Promotion Agency, CINDE, a non-profit organization, businesses have received guidance on navigating Costa Rica's streamlined regulatory environment for over 40 years. CINDE has been recognized globally for its leadership in attracting foreign direct investment and was even given recognition at the United Nations International Trade Center. The country has seen benefits come through foreign investors and, therefore, continues to endorse and advocate for it.
Zero Ownership Restrictions – Foreigners can absolutely own a free and clear title to property in Costa Rica. The legal framework around purchasing property in Costa Rica is crafted to safeguard the rights of both local and foreign buyers. Citizenship, residence, or presence in the country is not required for land ownership. Costa Rica recognizes that investors often provide more jobs, revenue, and opportunities. So long as Costa Ricans can preserve their natural land and maintain their "pura vida" lifestyle, they welcome you to join them.
Reason # 2 – Enticing Financial Rewards
With a welcoming government and local population, the foreign land investor would next ask, "What financial rewards may be possible from investing in Costa Rica?" There are several enticing financial rewards with both return on investment (ROI) and cost of living (COL) that have attracted foreign investors. Some of these include:
Steady Increase of Real Estate Values – In the last 20 years, Costa Rican real estate has seen steady appreciation. With the number of tourists increasing and zero ownership restrictions, there has been a strong demand for property. Both internationals and locals continue to purchase property across the country. With investors purchasing ag land as portfolio balancers, high long-term rental returns, and a booming vacation rental industry, experts agree that appreciation will continue.
Incredibly Low Property Taxes – The annual property tax in Costa Rica is 0.25% of the assessed value. This is significantly lower than the US or Canada, making a foreign real estate investment even more appealing.
The 1031 Exchange – While the US does tax revenues that a US citizen makes in a foreign country, the good news is the 1031 tax exchange may be available for real estate revenues earned in a foreign country. According to the 1031 code, the US considers any property outside the US to be like-kind with any other similar property outside the US. So, it is possible to 1031 exchange profits from a home in Costa Rica for another home in Costa Rica – or in Ecuador or Panama, for that matter.
Cost of Living – Although dependent on your lifestyle and needs, most people will find Costa Rica an affordable place to live in comparison to the US. Housing, food, services, and medical care are notably less expensive than in North America. On average, the cost of living is 30-55% cheaper than the cost of living in the US.
Reason # 3 – An Inviting Lifestyle
While the openness to investors and the financial potential are both good incentives, many investors also want to enjoy the place they are investing in. So, another important question that arises is, "What lifestyle does it offer?" Costa Rica has no shortage of enchantment, adventure, and fun. It provides amazing weather, warm water temps, and outstanding vistas. The Costa Rican lifestyle is difficult to communicate in a short synopsis. However, the following highlights can whet the appetite.
Natural Beauty – Costa Rica's stunning natural landscapes, including pristine beaches, lush rainforests, and diverse wildlife, make it an appealing destination. With 28 national parks and 25% of the country protected through a national effort to preserve the forests and wildlife, Costa Rica has cemented itself as a tourist destination for generations to come. There's no shortage of beautiful and biologically diverse places to explore.
Adventure Activities – The country is well-known worldwide for outdoor adventure. It is filled with breathtaking ziplines, extreme hikes to large waterfalls, and diverse wildlife viewing. It offers year-round sport fishing in the Pacific Ocean and the Gulf of Mexico and fantastic freshwater fishing along the banks of its rivers. Snorkeling, swimming with sharks, surfing, and scuba diving provide other styles of water adventure. There is also a growing number of motorsports like Razors, jet skis, and 4-wheeler rentals. Nearly everyone visiting Costa Rica looks for some kind of adventure. Rest assured, there are plenty of adventure options in Costa Rica that will keep you busy and wanting more.
High Ranking in Happiness and Sustainability – A recent study by the New Economics Foundation found that Costa Ricans had minimal environmental impact, a longer life expectancy, and overall happiness about life. When they released the Happy Planet Index, it was no surprise to see Costa Rica at the top of the list.
Pura Vida Culture – Pura Vida translates to "pure life" and is often used synonymously with "the happy and simple life." This unofficial motto can sum up the lifestyle of Costa Rica. The phrase often used as a greeting or goodbye encapsulates the laid-back, stress-free life the locals strive for. In a world dominated by fast action, instantaneous responses, and immediate gratification, "pura vida" offers an unparalleled alternative approach to life and invites anyone who comes to Costa Rica to live the same.
It's always critical to conduct your own due diligence when making an investment decision, especially when looking to invest overseas. Understanding local regulations and market trends and working with experienced professionals can help navigate the process successfully. However, with its welcoming nature, steadily increasing market, and adventure-packed yet easygoing lifestyle, it's no wonder that investors are considering Costa Rica.
