Moving to Costa Rica but Can’t Work Yet? You Can Lend Your Money

“I’m not here to retire, Glenn. I’m only in my forties. What do I do for a living?”

I hear that question all the time. Somebody sells the house back home, packs up the family and lands in Costa Rica with real money in the bank. Sometimes it’s a few hundred thousand dollars. Sometimes it’s a few million. They’re not ready to sit by the pool for the next forty years. They want that money working, and they want an income.

Here’s the good news. You have options, and you don’t have to open a business to have them.

You can’t work yet. You can lend.

Here’s the rule a lot of newcomers don’t know: you can’t take a job in Costa Rica until your residency allows it, and that doesn’t happen the day you arrive. It takes time. Our sister company CRIE can tell you exactly where you stand and what your options are.

But here’s what people are always surprised to hear. You don’t need residency to lend your money. Anyone from any country can lend money on a Costa Rica property loan. A tourist can do it. A new resident can do it. You can do it in your first month here.

So while you wait for your residency, your money doesn’t have to sit in a bank account doing nothing.

Why not just open a business?

You can, once you’re legal. I’ve watched a lot of people try. The beach bar, the café, the little hotel, the tour company. Let me tell you, running a business in a country you don’t know yet is a whole different game.

• The aguinaldo. Every worker gets an extra month’s pay every December, by law. It’s like paying 13 months a year. If you have 30 staff, that’s 30 extra months of wages, every single year.
• The labour rules. They’re written to protect the worker, and they’re nothing like back home.
• The permits. Municipal permits, health permits, a landlord, all in Spanish.

None of that is unfair. It’s just Costa Rica. But it catches newcomers who only budgeted for wages. You would never open a business back home in a town you’d lived in for three months, so why do it here?

How lending with us works

Lending is the easier way. No staff, no permits, no store to open every morning. It’s simple:

1. Tell us your range. How much you’d like to lend, from US$50,000, and for how long, from 6 months to 3 years.
2. We do the homework. We check the title, the property, its value and the borrower before a loan ever reaches you.
3. You decide. We show you the property, our valuation, the loan-to-value and the borrower’s plan to pay it back. You say yes or no.
4. We handle the closing. Your loan is registered, and you earn interest every month, in US dollars.

You can read the full steps on our How Lending Works page.

The property is the guarantee

This is the part I like best. Every loan is secured by a first-degree mortgage registered in the National Registry (Registro Nacional). You’re always in first position. We never arrange second-position loans.

And the property is worth far more than the loan. Our lenders tell me they prefer about 30% loan-to-value or less, and 50% is the most we consider. At 30%, the property is worth more than three times your loan.

Costa Rica is a good country for this. Everything goes into the National Registry, and the process is clear. Not every country in Central America works this way. If you want to know exactly what happens if a borrower stops paying, read What Happens If a Borrower Doesn’t Pay?

What does it pay?

Our loans pay between 9% and 16% a year, agreed in writing before you lend a dollar. Here’s the simple math. A loan at 12% a year pays about US$1,000 a month for every US$100,000.

If you’re new to this, start with our most conservative loans, around 9 to 10%. I call it levels of comfort. Lower loan-to-value, a strong property, a clear plan to pay it back. That’s where most of our loans are, and it’s where I tell every new lender to begin. Once you’re comfortable, you can look at the others.

And the interest is yours. The borrower pays our fees, not you. A loan agreed at 12% pays you 12%.

One more thing. As with any money you earn abroad, ask your own tax advisor what you need to declare.

A few things to sort out first

• Getting your money here. We explain it step by step in Getting Your Money Into Costa Rica to Fund a Loan. Your money goes to the loan, never through our account.
• SUGEF. If you plan to lend regularly, read Do Private Lenders Need to Register With SUGEF? We’ll walk you through it.
• We do it all. We take care of absolutely everything for you, from start to finish: the title, the valuation, the papers and the closing. That’s what you come to us for.

Long story short

You moved here for a better life, not a second job you can’t legally do yet. Get your residency started. Find your town. A lot of our people pick the Central Valley, with the spring weather, the hospitals and the beaches a few hours’ drive away. And let your money earn while you settle in.

When you’re ready to buy a home, our team at GAP Real Estate can help with that too.

If you’d like to see what loans we have right now, take a look at our lending opportunities. Or send us a WhatsApp at +506 4001 6413 to set up a time to talk, or email [email protected]. We value your call.

Glenn Tellier, founder, GAP Investments. More than 25 years in Costa Rica.

Photos, relit: Haakon S. Krohn (CC BY 4.0) and Victor Quirós A (CC BY-SA 3.0), via Wikimedia Commons.

Article by Glenn Tellier (Founder of CRIE and Grupo Gap)