Structured Real Estate Investment in Costa Rica: Lend or Own

There are two ways to put money behind Costa Rican real estate. You can own the building, or you can hold the loan against it. Most people arriving here only know the first one, and it is worth setting them side by side before you commit capital to either.

Owning: you take the upside and everything else

Ownership is the familiar shape. You buy, you hold, and if the market rises you keep the difference. The upside is genuinely unlimited, and in the right parts of this country the last decade has been kind.

What comes with it is the whole operation. Somebody markets the property, screens guests or tenants, cleans, repairs, pays the municipal taxes, handles the low season and covers the months when nobody books. Either that somebody is you or you are paying a manager a fifth of the revenue. Ownership is a business with a property attached, and it should be judged as one.

Exit is the other half. Property here takes time to sell — often many months in the coastal markets, longer if the asking price is aspirational. Your capital comes back when a buyer appears, not when you decide you would like it.

Lending: you take a fixed position and hand back the upside

The lending position is narrower by design. You agree a rate and a term before you fund, secured by a registered mortgage against the property. If the property doubles in value, that belongs to the owner, not to you. What you hold instead is a defined arrangement: 9% to 16%, six months to three years, from $50,000 with no maximum.

What you are not holding is the operation. No guests, no repairs, no low season, no manager taking a cut. You read the file, you decide, and the loan runs its term. If the borrower needs longer, a renewal is a conversation rather than a crisis.

The equity cushion is the part worth understanding. A loan is written well below what the property would realistically sell for, and that gap between the loan and the value is what stands between you and a bad month. It is why loan to value matters more than almost anything else in a file — and why a conservative one usually comes with a lower rate.

Side by side

Time it takes: ownership is ongoing; lending is a decision at the start and a payment each month.

What you know in advance: ownership tells you nothing about next year; lending states the rate and the date before you begin. That is not a guarantee — a borrower can fall behind, and property-backed lending has its own risks — but the terms are written down rather than discovered later.

Upside: ownership keeps it, lending does not.

Getting out: ownership needs a buyer; lending has a maturity date.

Doing both: extremely common. Many people here own the house they live in and lend the rest.

Who takes the lending side

The lending side of these files is usually funded by someone who sold up somewhere else. A house in Vancouver or Denver or Dublin becomes a sum of money, and that money needs to earn. Some of those people now live in Costa Rica and wanted an income that did not come with staff and permits attached; plenty of others have never been here.

What they tend to say they value is knowing where they stand. A rate agreed at the start, a date the principal is due, and a mortgage on the register — as against a portfolio whose answer only arrives at the end of the year. It is not a promise of payment, and nothing here removes risk. It does mean the terms are known before you commit rather than after.

Why the borrowers are better than you would guess

The instinct is that anyone borrowing privately must have been refused by a bank. In Costa Rica that is usually wrong. Banks set their own requirements, which can make bank loans harder for newcomers, including people with no local credit history who own property outright. Bank loans can also take many months, if not longer, to close.

So the borrower is often your neighbour: a Canadian, American or European who owns a home here free and clear, with assets back home, who can find bank loans harder to get as a newcomer. Costa Rican owners come because bank approval takes months and a build or a sale will not wait.

How a structured file is actually put together

GAP reviews the registered title and checks for liens, looks at the property and its realistic sale value, sets the loan to value, assembles the documentation and registers the mortgage. That whole sequence, start to close, belongs to us; afterwards we are still on the end of a phone. From closing onward the borrower remits to you, not through us.

Some lenders prefer the loan held in a trust, some use escrow at closing, and some fund in crypto. Our preferred attorneys have handled these loans for years; if you would like your own lawyer to review the work, that is welcome. The sequence is set out on how lending works in Costa Rica.

GAP also arranges project funding and commercial loans, which can be structured with drawdowns — released in stages as a build hits its milestones. See project financing in Costa Rica.

What the rate is telling you

Read the number as information about the collateral rather than as a measure of the deal. Our range opens at 9%, and the borrowers who get offered it are the ones with the position to negotiate — strong location, orderly title, a loan well inside the value of the property. Price and quality move together here, in the opposite direction to instinct. Indicating you would consider 9% costs you nothing and widens what you are shown; the file may still be placed at 12% once the property has been studied. See what interest rate to expect.

The due diligence is our job, not yours

Most people who lend with us have never done it before. They have money from a house they sold, they like the idea of a fixed return secured on property, and they do not want a second career in Costa Rican property law. That is the normal starting point, and it is the whole reason GAP exists. Private lending of this kind is sometimes called private credit, and in the institutional world it comes with a team of analysts. Here, that team is us.

By the time a file reaches you, the work has already been done. Here is what that means in practice.

The title and the lien position. We check the property at the registry, establish what is already registered against it, and arrange for anything outstanding to be cleared so that your mortgage is recorded in first position. It is registered in your name, not held on your behalf by us or anyone else.

The value behind the loan. We establish what the property is realistically worth, and we set the loan well below it. That gap between the loan and the value is your cushion, and it is deliberate.

Where the repayment comes from. Interest reaches you monthly; the principal comes back at the end, and it has to come from somewhere real — a sale, a refinance, a finished project, income elsewhere. If a borrower cannot show us that, the file does not reach you.

Who the borrower is. Borrowing privately here is ordinary for people the banks cannot process: foreign owners with no local credit file, retirees, owners of land or unusual property. That is a good reason, and it is most of our borrowers. Someone who has been turned down for reasons that have nothing to do with being foreign is a different matter, and we deal with that before you ever see the file.

The paperwork. We prepare the documents, the notary records the mortgage, and we walk you through what you are signing before the day you sign it. You are not expected to work out Costa Rican conveyancing on your own.

What happens if payments stop. We explain that timeline before you commit rather than after, so there are no surprises. Our formal role ends at the notary, but lenders in that position ring us, and we help because we know the file.

What you are actually asked to decide

Very little, and that is the point. You see the property, the amount, the rate, the term and the loan-to-value, and you accept the file or you pass on it. No result is ever guaranteed and property-backed lending carries real risk — a borrower can fall behind, and we will never tell you otherwise. But the work of finding that out is ours.

Plenty of lenders have their own lawyer read the file as well, and we are glad when they do — we will send the documents straight to them. It is a sensible second pair of eyes, not something you have to arrange to protect yourself from us. Either way, ask us as many questions as you like. That is the job.

Common questions

Can I lend against a property I would be happy to own?

That is a sound way to think about collateral, and many experienced lenders use exactly that test.

Do I need residency to lend?

Not at all — nor do you need to be in the country. Capital comes from Canada, the United States, Europe and from residents here, and lending remotely from abroad is entirely ordinary.

What happens if the borrower stops paying?

The registered mortgage is what you fall back on, and you may choose to foreclose. Our formal role closed at the notary, but lenders in that position generally ring us and we do what we can from knowing the file. What happens in a foreclosure in Costa Rica walks through the timeline.

See the files

If a structured position against Costa Rican real estate is what you are looking for, browse our current lending opportunities or contact GAP Investments. Every file is yours to accept or refuse, and no result is guaranteed.

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.

WhatsApp us at +506 4001 6413 to get started, call or email info@gap.cr.

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