Creative Financing in Costa Rica – The key to generating eye-popping returns

Creative financing is the key to generating eye-popping returns on real estate investments. I should say “financing is the key”, because all financing is a way to leverage a large asset with a small amount of out-of-pocket capital.

Although creative financing is used every day by investors, many home buyers don’t understand the full range of their financing options.

Institutional (bank) financing is rapidly expanding mortgage products to foreigners in Costa Rica. This added capital is a true sign of an up-cycle real estate market, as opposed to the U.S. where housing capital is quickly evaporating. However, the costs of obtaining financing from Costa Rica mortgage lenders can be more expensive.

The more common way buyers find bank financing for a property in Costa Rica is through a low cost HELOC (Home Equity Line of Credit) leveraged to their U.S. property. This is a nice option for some people who wish to split time between Costa Rica and the States. Even real estate investors use the HELOC financing method because appreciation in many parts of Costa Rica outpaces their low financing costs.

In addition, more and more people are discovering that they can roll their retirement funds into self-directed IRAs in order to purchase real estate in Cost Rica. This is a relatively new concept to the IRA industry that offers huge potential for many retirees and investors alike.

Using tax deferred IRA funds for real estate in Costa Rica gives investors opportunities to make double digit returns safely. Investing in tangible assets like real estate is considered far safer than securities markets. It is nearly impossible to find a paper investment in the States that can compete with the returns of up-cycle real estate markets.

For the buyers who do not have access to any of these traditional financing methods, creative financing techniques can open doors for you in Costa Rica. Using straight options, lease options, seller financing, private financing, and seller partnering can help you find a great property and investment in Costa Rica.

All sellers have certain financial motivations to sell, however it is more relevant to know their needs in order to negotiate a creative deal. Creative financing terms can be shaped many different ways. You must negotiate down payments, interest rates, monthly payments, term lengths, balloon payments, and legal terms.

Creative deals exist all over Costa Rica. In our area alone, many building lots can be bought with seller financing, there are rent-to-own homes available, seller financed homes, and various properties offered on options. Even more sellers are receptive to these types of offers as along as their needs are met.

Negotiating this type of deal is a delicate procedure when dealing with a seller who doesn’t understand these concepts. There is a tendency to make the purchase sound more complicated than necessary. It is imperative to keep the explanation of the terms as simple as possible for an “all cash” seller.

Using the ultimate form of real estate leverage, creative financing, results in huge cash-on-cash ROIs for investors, and opens doors for buyers with less capital for down payments.

At risk of sounding self-promoting, I will say it is crucial to use a real estate professional who is savvy enough to understand, recognize, explain, negotiate, structure, and protect your interests in a creative offer.

Considering The Atenas Area For Your Home In Costa Rica?

The AARP (American Association of Retired Persons) ranks Atenas as one of “The Best Places to Retire Abroad.” For more information about homes and land for sale in the area please contact our Recommended Realtors in Atenas by using the simple form below:

Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.