Investing in Costa Rica: A Guide for People Who Just Moved Here

You arrived with capital and a plan to do something with it. Within a month somebody has told you to buy a condo and rent it out, somebody else has explained why teak is the answer, and a third person has a friend with a hotel that needs a partner. Costa Rica does not lack for people with an opportunity for you.

This is a plain look at what the realistic options actually are, what each one asks of you, and where lending fits among them.

First, the question nobody asks you

Before comparing returns, it is worth deciding how much of your life you want this to take. That single question sorts the options faster than any spreadsheet.

Some investments here are jobs wearing an investment costume. A rental you manage yourself is a job. A restaurant is very much a job. A farm is a job with weather attached. None of that is bad — but if you moved here to enjoy the place and expected your money to work while you did, buying yourself an unpaid job is a poor trade.

Buying property to rent

The most common plan, and it can work. You own an appreciating asset in a country people want to visit, and short-term rental rates in the popular areas are healthy.

What it asks of you: tenants or guests, maintenance, cleaning, management, marketing, and vacancy. Either you do that work or you pay somebody 20% or more to do it, and either way you are in the hospitality business. Property here also takes time to sell when you want out — this is not a market where you list on Monday and close on Friday.

Buying land to hold

Land is simple to own and produces nothing while you hold it. It is a bet on appreciation, and appreciation here has been real in the right locations and flat in the wrong ones for a decade. The costs are small but the income is zero, which matters a great deal if you need this capital to live on.

Starting or buying a business

Every new arrival considers it. Be clear-eyed: employment rules here are written to protect the employee, with a thirteenth-month aguinaldo, paid vacation and social security registration from day one, and ending an employment relationship is a formal process with real cost. Add permits, seasonality and staff turnover in a tourist town. Foreign-owned businesses do succeed here — usually run by people who already knew the trade elsewhere.

Leaving it in the market at home

Perfectly reasonable, and many people do exactly this. The relevant difference is what you know in advance. A portfolio does not tell you what next month looks like; you find out afterwards. If you have moved to a country where you now need income rather than a growth curve, that uncertainty is felt differently than it was when you had a salary.

Lending against property

The option most new arrivals have never considered, because it barely exists as a retail product back home. You lend to a property owner, secured against their registered property, for a fixed term at a fixed rate.

What it asks of you: read a file, decide yes or no. No staff, no tenants, no permits, no season. Rates run from 9% to 16% and terms from six months to three years, with loans starting at $50,000 and no maximum. To put a shape on it, $100,000 at 12% is roughly $1,000 a month in interest — arithmetic, not a promise.

The trade-off is honest: you are not buying an asset that might double, and your money is committed for the term. In exchange you know the rate and the date before you start, and there is a registered mortgage behind it.

Who is borrowing, and why it should reassure you

New lenders assume borrowers must be people the banks turned down. Here, that is usually wrong. A foreigner living in Costa Rica generally cannot borrow from a bank until they hold permanent residency — a minimum of four years away for a recent arrival. No permanent residency, no bank account of the kind the lending system runs on, no local credit history, no mortgage, however much property they own outright.

So a large share of borrowers are your neighbours: Canadians, Americans and Europeans who own a home here free and clear and have assets back home, shut out by a residency rule rather than by their finances. Costa Rican owners come for a related reason — bank approval takes months, and a sale or a build will not wait.

Who ends up lending

Anyone with capital to put out can lend on Costa Rica property. Our lenders are in Canada, the United States and Europe, and plenty lend from their home country without ever moving here. If you sold a property back home and have capital sitting idle, you are most of the way there. You do not need a finance background and you do not need to learn Costa Rican property law — that part is ours.

GAP reviews the registered title, checks for liens, looks at the property and what it would realistically sell for, prepares the documentation and registers the mortgage. Our work runs from the first document to the closing table, and the door stays open after that. Payments come to you from the borrower, without us in the middle. Our page on how lending works in Costa Rica sets out each step, and hard money lending in Costa Rica covers the loans themselves in more detail.

Why the lower rates get the better files

One counter-intuitive point, since it shapes what you will be shown. GAP advertises from 9% upward, and an owner whose property sits in a sought-after spot, whose title is in order and who is asking for a modest fraction of what the place is worth will not pay the top of the range — they do not have to. The result is that the soundest files gather at the lower end, and the lenders willing to look there are shown the most of them. It is a signal rather than a commitment: after we have studied a property the same file may reach you at 12%. What interest rate to expect covers the mechanics.

Common questions

What if I want to do more than one thing?

Most people do. A house to live in, some capital lent out, perhaps a rental later once you know the country. Lending is often the part that pays for the learning curve on the rest.

Do I need residency to lend?

No, and you need not live here either. Some of our lenders arrived last year; others have never been. Being outside Costa Rica is no obstacle at all to holding a mortgage inside it.

How much do I need?

Fifty thousand dollars is the smallest loan we place, and nothing caps the top end. Most lenders prefer several smaller loans to one large one — different properties, different borrowers, staggered maturity dates.

What if a borrower stops paying?

Your security is a mortgage registered against real property, and foreclosure is an option open to you if it comes to that. Formally our part ended at closing — in practice the phone rings and we help, because we know the property and the people. The process itself is set out in what happens in a foreclosure in Costa Rica.

Talk it through

If you are working out what to do with capital here, look at our current lending opportunities or contact GAP Investments. You look at everything yourself before committing, and nothing here is a promised outcome.

Numbers on a page are easier to judge against a real one. Here is what an $880,000 file beside Tom Brady’s house actually looked like, from the valuation through to the exit.

Where a headline return looks unusually generous, the useful question is what is being given up to produce it. High returns in Costa Rica are covered separately here, including how to work out what each one actually costs you.

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)