Private Equity Investment in Costa Rica: Own or Lend

“Private equity” gets used loosely in Costa Rica, and the loose use hides a real distinction. Buying a share of something is not the same as lending against it — and for most people arriving here with capital, the second is closer to what they actually want.

The two things people mean

Taking equity means buying part of a business or a property. You own a share. If it does well you do well; if it does badly, so do you. There is no date on which anyone owes you anything, and getting out means finding someone to buy your share.

Private credit — lending means putting money out against security, at an agreed rate, for an agreed term. You do not own the upside. What you have instead is a written obligation and a mortgage registered against a specific property.

Both are private, in the sense of not being on any exchange. They behave nothing alike.

Why equity deals here catch people out

The equity opportunities put in front of new arrivals are usually a share in a hotel, a restaurant, a development or a tour business. Some are excellent. The recurring difficulties are worth naming.

You are a minority partner in a foreign country. Your influence over decisions is whatever the paperwork gives you, and enforcing it means engaging a legal system you are still learning.

Exit is undefined. There is no maturity date on a shareholding. You leave when somebody buys you out, which may be years away or never.

Businesses here carry staffing obligations — a thirteenth-month aguinaldo, paid vacation, social security from day one, a formal process to end employment. If the venture struggles, those costs do not politely wait.

None of that makes equity wrong. It makes it a different commitment from the one most people think they are making.

What the lending side looks like instead

A defined position: 9% to 16%, six months to three years, from $50,000 with no ceiling, secured by a mortgage registered against a Costa Rican property and written for meaningfully less than that property would realistically sell for.

You forgo the upside — if the property doubles, that belongs to the owner. In exchange you know the rate and the date before you commit, and there is something real standing behind the arrangement. That trade suits people who want income rather than a stake.

Who ends up on this side

Anyone with capital to place, from anywhere. Our lenders are in Canada, the United States, Europe and here, and a good number have never visited the property their mortgage is registered against — there is no residency requirement and no need to be in the country.

Many arrived holding the proceeds of a house sold back home, looked hard at buying into something, and concluded they wanted an income rather than a partnership. Our guide to investing in Costa Rica compares the options more broadly, and lending versus owning takes the property-specific version of this same question.

Why the borrowers exist at all

It is worth understanding where the deal flow comes from, because it explains the yield. A foreigner living in Costa Rica generally cannot borrow from a bank here until they hold permanent residency — a minimum of four years away for a recent arrival. No residency, no account of the kind the system runs on, no local credit record, no mortgage, however much property they own outright.

So the people borrowing are frequently your neighbours: solvent, propertied, and shut out by a rule rather than by their finances.

What GAP handles

Title read, liens searched, the property valued honestly, loan to value set, documents drawn, mortgage registered. Every step up to and through the closing is ours, and we stay contactable afterwards. From then the borrower pays you directly. Some lenders hold the loan through a guarantee trust or use escrow at closing — see escrow and trust in Costa Rica property lending.

Questions

Can I do both?

Plenty of people do — a stake in something they care about, and lending for the part of the capital that needs to produce income reliably.

Is lending lower risk than taking equity?

It sits differently. A lender ranks ahead of an owner and holds registered security, but no arrangement removes risk — borrowers can fall behind and enforcement takes time.

What is the minimum?

$50,000, with no maximum. Most lenders prefer several smaller loans to one large one.

Do I need to be here?

No, and residency is not required. Lending from abroad is entirely ordinary.

Look at the lending side properly

If the equity opportunities you have been shown are not quite what you wanted, see what the other side looks like: the current lending opportunities, or contact GAP Investments. Every file is yours to accept or decline, and nothing is promised.

This article is for general information only and is not investment, legal, or tax advice. All lending and investment decisions should be made based on independent due diligence and with qualified professional guidance.

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