Costa Rica Real Estate Investment Funds – Low Risk Investment in Real Estate

Costa Rica real estate funds on the National Stock Exchange and have grown by leaps and bounds in the last few years.

These funds are invested in real estate, which is bought and then rented to yield periodic profits.

They are popular for two reasons: The first is that it allows small investors to buy shares and to diversify their portfolios. The second is that the existence of a real estate fund implies that a business sector, dedicated to this kind of development, can carry out projects, and once finished, rent or sell them to a fund, thus freeing up capital for other projects.

Stability and growth of these funds have been good over the last five years.

An association manages assets, collects rents and distributes them to investors. The association charges a commission, which is paid by the investors, along with other costs such as insurance, taxes, annual assessments, and repairs, among others.

There are always risks and limitations. One of them is the high value of some assets that implies more capital and less diversification, or a cash-flow risk, since a building does not sell as quickly as other kinds of investments.

Therefore real estate funds are “closed.” that is, converting the investment into cash can be obtained only by the investor selling his shares on the secondary market of the National Stock Exchange.

In general, it’s a good opportunity for investors to become collective owners of real estate, which generates rents and profits, offering also a chance to diversify investments.

Advantages and Risks

Advantages include:

1. Lower required minimums to invest.
2. Easier way to diversify personal stocks.
3. Less operating and transaction costs.
4. Professional administration and greater cash flow.

Possible risks:

• Insurable risks: Loss of value because of natural disasters, accidents and fires. But these can be insured against by transferring the risk to insurance companies.
• Uninsurable risks: Fluctuations in general economic conditions (growth, inflation, devaluation, interest rates) that can affect real estate, nonfulfillment of contracts, and in general those factors that pertain to supply and demand of real estate.

Important note from Scott Oliver: It should be noted that the real estate funds in Costa Rica have extremely high management fees in comparison with most REITs (Real Estate Investment Trust) type investments in the USA

Our thanks to Gloriana Gomez and our friends at La Nación – Costa Rica’s largest Spanish circulation newspaper for their permission use this article.

[custom_script adID=97]

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.