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Everything you need to know is included in our Costa Rica Property Pack
Costa Rica, with its majestic mountains, lush rainforests, and welcoming people, attracts many foreigners looking for real estate investment opportunities.
Nevertheless, understanding the complexities of buying property in a foreign country can be difficult, particularly when it comes to the legal framework and regulations involved.
That's why this guide is here to help! We'll explain how the property market works in Costa Rica in a straightforward and easy-to-grasp manner, covering everything you need to know.
Also, for a more in-depth analysis, you can check our property pack for Costa Rica.Can you purchase and own a property in Costa Rica as a foreigner?
If you are American, we have a dedicated blog post regarding the property buying and owning process in Costa Rica for US citizens.
In Costa Rica, foreigners have the opportunity to purchase real estate, and the process is quite straightforward, although there are some nuances to be aware of.
Firstly, foreigners have the same rights as locals when it comes to buying and owning property in Costa Rica. This means you can own land outright, without the need for a local partner or corporation.
This is a significant advantage compared to some other countries where foreign ownership is restricted.
However, there are certain areas, particularly near the coast and borders, known as the Maritime Zone, where there are special rules. In these areas, foreigners cannot own property directly, but they can lease it for long periods (up to 99 years).
This zone includes land within 200 meters of the high tide line. The first 50 meters are public land, and the next 150 meters can be leased but not owned outright by foreigners unless they have resided in Costa Rica for at least five years.
Another aspect to consider is that your rights as a foreigner do not depend on your country of origin. Costa Rica does not discriminate based on nationality, so the process and rights are the same whether you're from North America, Europe, Asia, or any other region.
Regarding residency, you don’t need to be a resident or have a specific visa to purchase property in Costa Rica.
Many foreigners buy property while on a tourist visa. This makes Costa Rica an attractive destination for investors and retirees from around the world.
However, it's important to note that owning property in Costa Rica does not automatically grant you residency. If you wish to reside in Costa Rica, you'll need to go through the standard immigration process, which is separate from the property buying process.
There's no specific authorization from a governmental institution required for foreigners to buy property, but standard property purchase processes apply.
This includes conducting due diligence, such as ensuring the property has a clear title, and using a reputable lawyer to facilitate the transaction.
As for a minimum investment, there’s no set amount that you must invest to buy property in Costa Rica. The market is quite diverse, offering options from affordable lots to luxury estates.
Can you become a resident in Costa Rica by owning a property?
Costa Rica offers a pathway to residency for those who invest in real estate, known as the "Investor Residency" category.
It's a specific program designed to attract foreign investment, and it has its own set of rules and requirements.
To qualify for investor residency, you need to make a minimum investment in real estate. This amount was set at $200,000 USD.
This investment can be in any type of property, whether it's residential, commercial, or land. The key is that the total value of your investment meets or exceeds the required threshold.
Once you've made your investment, the next step is to apply for residency. This process involves submitting various documents to the Costa Rican immigration authorities.
These documents typically include proof of your investment, such as property deeds or valuation reports, as well as personal documents like your passport, birth certificate, and a police clearance certificate from your home country. You’ll also need to show proof of income or financial stability.
It's important to note that this residency is initially temporary. Typically, investor residency is granted for a period of two years.
During this time, you're expected to maintain your investment in Costa Rica. After the initial period, you can apply for renewal, and eventually, you may be eligible for permanent residency.
Permanent residency is a separate status that you can apply for after maintaining your temporary residency for a certain period, usually three years.
Once you have permanent residency, you no longer need to renew your status every two years, and you have fewer restrictions on your activities within the country.
Regarding citizenship, having residency in Costa Rica can eventually lead to eligibility for citizenship, but it’s a separate process with its own requirements.
Generally, you need to have been a permanent resident for at least seven years before you can apply for citizenship. Citizenship grants you the right to vote in Costa Rica and obtain a Costa Rican passport.
It’s hard to pinpoint exactly how many people have used this scheme, as the numbers can fluctuate year by year.
However, it's a popular option among expatriates, especially those from the United States, Canada, and Europe, who are looking to invest in Costa Rican real estate and enjoy the benefits of living in this beautiful country.
Remember, the process of obtaining residency through investment can be complex, involving various legal and administrative steps.
Thinking of buying real estate in Costa Rica?
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Market data
You can find fresh and updated data in our pack of documents related to the real estate market in Costa Rica.
By examining the the the GDP per capita indicator, we can see that Costa Rican people have become 7.2% richer over the last 5 years.
As people's wealth grows, the demand for real estate could rise, resulting in potential price increases down the road.
Looking at the data reported by Numbeo, we can see that rental properties in Costa Rica offer gross rental yields between 5.3% and 8.0%.
These strong rental yields reflect a positive rental market environment, which can foster long-term sustainability and growth.
To know more, you can also read our dedicated article: is it a good time to buy a property in Costa Rica?
The life as an expat
Living as an expat in Costa Rica is an incredibly rewarding experience.
The country is known for its stunning natural beauty, with lush rainforests, stunning beaches, and breathtaking mountain ranges. It is also home to some of the most friendly and welcoming people in the world.
Costa Rica is a great place for expats, as it offers a safe and secure environment, with excellent infrastructure. The cost of living is relatively low, and the quality of life is very high.
Expats can find a wide range of activities to enjoy, from exploring the local culture and cuisine, to enjoying the great outdoors. For those looking to work, there are plenty of job opportunities and a good business climate.
All in all, living in Costa Rica as an expat is an incredibly rewarding experience.
What are the best places to buy real estate in Costa Rica?
This table summarizes some of the best places to buy a property in Costa Rica.
| City / Region | Population | Average Price per sqm (USD) | Strengths |
|---|---|---|---|
| San José | ≈ 1.4 million | 1,500 - 3,500 | National capital, cultural hub, bustling city life, central location |
| Escazú | ≈ 60,000 | 2,500 - 4,500 | Upscale neighborhood, expat community, luxury properties, proximity to amenities |
| Tamarindo | ≈ 6,000 | 2,000 - 4,000 | Popular beach town, surfers' paradise, vibrant nightlife, tourist attractions |
| Manuel Antonio | ≈ 2,000 | 3,000 - 6,000 | Natural beauty, national park, wildlife, ecotourism, beachfront properties |
| Jaco | ≈ 10,000 | 1,500 - 3,500 | Beach destination, water sports activities, entertainment options, close to San José |
| La Fortuna | ≈ 20,000 | 1,500 - 3,000 | Arenal Volcano, hot springs, outdoor adventures, lush rainforest |
| Guanacaste | ≈ 400,000 | 1,000 - 3,000 | Beautiful beaches, resort towns, golf courses, surfing spots |
Want to explore this further?
- Is it worth it buying property in Guanacaste (Costa Rica)?
- Is it worth it buying property in Tamarindo?
Do you need a lawyer to buy a property in Costa Rica?
While it's not legally required, it is highly recommended to hire a Costa Rican lawyer when purchasing property in Costa Rica.
Acquiring real estate in a foreign country can be complex, and having a knowledgeable lawyer by your side is crucial. They can protect your interests and ensure a smooth transaction.
A Costa Rican lawyer specializing in property law can assist you in several ways. They can review important legal documents such as the escritura (property deed), contracts, and other agreements. They can also conduct due diligence to verify the property's ownership and check for any existing liens or encumbrances specific to Costa Rica.
Moreover, a Costa Rican lawyer can guide you through the legal requirements and procedures involved in property transactions. This includes registering the sale with the National Registry and ensuring compliance with Costa Rican laws and regulations.
They can offer advice on tax implications, including any unique tax regulations related to property ownership in Costa Rica, and help you understand your rights and obligations as a property owner in the country.
By hiring a lawyer, you gain peace of mind and minimize the risks associated with property purchases. They act as your advocate, negotiating on your behalf, and helping resolve any potential disputes or issues that may arise during the buying process, taking into account the specific legal framework of Costa Rica.
What are the risks when buying real estate in Costa Rica?
We've got an article dedicated to the risks associated with purchasing property in Costa Rica.
1. Property Title Issues
Costa Rica has a unique land registration system, and it's important to thoroughly investigate the property's title history.
Some properties may have unclear or disputed titles, which could lead to legal complications or potential loss of ownership. Ensure that the property has a clear title and consider hiring a reputable lawyer to assist with the due diligence process.
2. Zoning and Land Use Restrictions
Costa Rica has specific zoning regulations and land use restrictions that vary across different regions.
It's crucial to verify that the property you intend to purchase is appropriately zoned for your intended use. Additionally, certain areas may have environmental protection laws that limit construction or development activities.
3. Infrastructure and Access
While Costa Rica generally has decent infrastructure, some remote areas or properties located off the beaten path may have limited access to basic amenities and services.
Consider the proximity of the property to roads, hospitals, schools, markets, and other essential facilities. Accessibility can significantly impact your quality of life and potential resale value.
4. Property Taxes and Maintenance Costs
Research and understand the property tax system in Costa Rica before purchasing.
Additionally, evaluate the potential maintenance costs associated with the property, such as landscaping, security, and ongoing repairs. These expenses can significantly impact your overall budget and should be factored into your decision-making process.
5. Natural Disasters
Costa Rica is susceptible to natural disasters such as earthquakes, volcanic eruptions, and tropical storms.
Some regions are more prone to specific hazards than others. Assess the property's vulnerability to these risks, and consider obtaining insurance coverage for natural disasters to mitigate potential financial losses.
6. Changes in Government Policies
Political stability and government policies can impact property ownership and investments.
Stay informed about any potential changes in laws, regulations, or taxation that may affect property ownership, foreign investment, or residency requirements. Engage with local experts and legal professionals to stay updated on relevant policy developments.
7. Cultural and Language Differences
Moving to Costa Rica involves adapting to a new culture and potentially a different language if you are not already fluent in Spanish.
Familiarize yourself with the local customs, laws, and social norms to facilitate a smoother transition and avoid misunderstandings or potential conflicts in the future.
Everything you need to know is included in our Costa Rica Property Pack
What are the required documents for a real estate transaction in Costa Rica?
When buying a property in Costa Rica, the following documents are typically required:
1. Copy of the Seller’s Passport and/or National Identity Card
2. Copy of the title deed (escritura) or land certificate (cedula de vecindad)
3. Copy of the property tax receipt (predial) and municipal license (licencia municipal)
4. Copy of the seller’s purchase contract (contrato de compraventa)
5. Copy of the seller’s declaration of ownership (declaración de propiedad)
6. Copy of the seller’s warranty deed (poder notarial) for the property
7. Copy of the seller’s certificate of payment of stamp duty (certificado de pago de timbre)
8. Copy of the buyer’s passport and/or national identity card
9. Copy of the buyer’s purchase contract (contrato de compraventa)
We review each of these documents and tell you how to use them in our property pack for Costa Rica.
How should you approach negotiations with individuals from Costa Rica?
When negotiating to buy a property in Costa Rica, it is important to consider the key aspects of Costa Rican culture that can greatly influence the process. Costa Rica is known for its warm and friendly culture, so embracing these characteristics can significantly enhance your negotiation experience.
Respect for others is highly valued in Costa Rican culture. Demonstrating respect for the property seller and their perspective can establish a positive foundation for negotiations. Also, hospitality is deeply ingrained in Costa Rican society. It is customary to engage in friendly conversation and offer refreshments during meetings. Embracing this hospitality and reciprocating with gratitude and genuine interest can foster a welcoming negotiation environment.
Patience is essential when negotiating in Costa Rica. The pace of business may be more relaxed compared to other cultures.
Taking the time to build rapport, understand the seller's needs, and engage in open discussions can lead to mutually beneficial outcomes.
Indirect communication is common in Costa Rican culture, and it is important to be attentive to non-verbal cues and implied meanings. Hence, maintaining a friendly and polite tone, while being clear and assertive in your intentions, can contribute to effective negotiation dynamics.
Furthermore, understanding the local real estate market and legal procedures is vital. Conducting thorough research, seeking guidance from local experts, and being well-informed about property regulations and customary practices will empower you to navigate negotiations successfully and ensure a smooth property purchase process in Costa Rica.
Are bank loans available to foreign nationals in Costa Rica?
Yes, foreigners can obtain property loans in Costa Rica. The Costa Rican government allows non-residents to apply for property loans, subject to certain conditions and requirements.
The specific conditions and requirements for a foreigner to obtain a property loan in Costa Rica may vary, but typically they need to have a valid residence permit, provide necessary documentation, such as proof of income and identity, and fulfill the criteria of the lending institutions in the country.
Some banks in Costa Rica that can grant mortgages to foreigners include Banco Nacional de Costa Rica, Banco de Costa Rica, and BAC Credomatic.
However, it's important to note that mortgage rates in Costa Rica for a 20-year term range between 8% and 12%. While they are a bit high, they are still feasible. Look into other countries for potentially better financing options.
What are the taxes related to a property transaction in Costa Rica?
Here is a breakdown of taxes related to a property transaction in Costa Rica.
| Tax | Description | Calculation | Who pays |
|---|---|---|---|
| Property Tax | Annual tax on the property's value | 0.25% of the registered property value | Owner |
| Rental Income Tax | Tax on rental income generated from the property | 15% on 85% of the total rental income | Owner |
| Value Added Tax (VAT) | Tax on the transfer of real estate properties | 13% of the property value | Buyer |
| Property Transfer Tax | A tax imposed on the transfer of property ownership | 1.5% of the property value (split between the seller and buyer) | Seller and Buyer |
| Stamp Duty | A stamp duty tax on the legal documents related to property transfers | 0.85% of the property value (0.5% national stamp, 0.2% municipal stamp and 0.15% agrarian stamp paid by both parties) | Seller and Buyer |
| Capital Gains Tax | Tax on the profit made from the sale of a property | 15% on the net capital gain and 10% if the property is held for more than two years | Seller |
What fees are involved in a property transaction in Costa Rica?
Below is a simple breakdown of fees for a property transaction in Costa Rica.
| Fee | Description | Calculation | Who pays |
|---|---|---|---|
| Notary Fees | Fee for the notary's services in handling the property transfer | From 1% to 2% depending on the property value (split between the seller and buyer) | Seller and Buyer |
| Real Estate Agent Commission | Fee paid to a real estate agent for facilitating the property transaction | Typically around 5% of the property value (split between the seller and buyer) | Seller and Buyer |
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