Appreciation of market value

[yanner]

Hello everyone,

My concern is:

I’m looking to buy and operate a small hotel in Jaco Costa Rica.I’m 44 and my wife 40.

What about the appreciation of my investment in 10-15 years?

Do you think Costa Rica is capable of returning value despite the economy?

The asking prices of purchase are still high regarding the revenues and cash flow…

Thanks for your help!

[Andrew]

How much higher is the asking price compared to the sales price of comparable hotels? Do you know?

What sort of valuation are you using to determine the ‘value’ of this hotel?

Scott

[yanner]

Hello Scott,

I’m glad that you take the time to answer me.

I look for an hotel to buy for more than a year now in different countries (Costa Rica (visited in summer 2013),Panama (next trip in december 2014 or Mexico (visited a few times). We are in the process to sell our properties here in Canada.

It is just that I see a lot of hotel for sale in Costa Rica and these hotels are on the market for more than a year or more. What I read is that the good time is gone to invest in Costa Rica for different reasons (economy, less expats advantages regulations ect)

My wife is a person of numbers and she scared that if we buy a million dollar hotel today, it’s going to worth a million or less in a couple of years.

We really like Costa Rica but we have a concern about the value appreciation!! Is the good time is really gone to invest in CR?

Thanks again Scott!

[bogino]

Investment involves RISK. Your question is no different than asking: “If I buy Apple stock today do you think it will be worth more than what I paid for it at some point in time?”. Who the HECK knows! Do you have a past history of making these types of investments (buying hotels) or is this your first foray into this sort of venture? If you are selling your property in Canada to buy a hotel in Costa Rica (by the way—personally [b]I would not TOUCH Jaco[/b]) are you committing most or all of your capital to this one project or do you have other savings and/or investments elsewhere so that you are diversified?

The reason so many properties sit on the market for so long in Costa Rica is because markets in Costa Rica are illiquid and inefficient (unlike in many developed economies), therefore, that involves much greater risk so it is IMPERATIVE that you know what you are doing to avoid a bad investment decision.

Your comment: “[b]it’s going to worth a million or less in a couple of years.[/b][i][/i]” suggests a “[b]short-term[/b]” time horizon. If you are concerned about the value of that sort of investment after a “[b]couple years[/b]” then my suggestion is [b]DON’T[/b] do it. A “real estate” or “business” investment should be a “[b]long-term[/b]” investment unless there is such economic chaos occurring (as during the financial crisis of 2007/2008) that you get one of those rare opportunities to buy on the really…really…cheap. [b]THAT[/b] is not the case currently in Costa Rica.

[Andrew]

[quote=”yanner”]Hello Scott,

I’m glad that you take the time to answer me.

[/quote]

I did take the time to answer you yes Yanner, however you did not answer either of my two questions which leads me to think that you are not thinking this through at all well which can only lead to disaster.

Question #1: How much higher is the asking price compared to the sales price of comparable hotels? Do you know?

Question #2: What sort of valuation are you using to determine the ‘value’ of this hotel?

Question #3: I may be wrong but I’m guessing that English is your second language and that’s fine, but how’s your Spanish which you will need if you plan on being in business in a Spanish speaking country?

Scott

PS. bogino gives some good advice in his comments …

[yanner]

Hello again!

We live in Quebec which is the french part of Canada, so english is my second language and my spanish is improving…but my wife speeks perfectly 5 languages and had already worked in Costa Rica for Barcelo selling villas in Quepos.

She is a general contractor, real estate agent and financial advisor and I work in sell for a bank and I m a lawyer as well.

We both worked in hotel and restaurants in our 20e..Our goal is to relocate and operate a small-medium hotel ang generate enough revenues to leave decently. We are in the 40… We have a 5 years old son.

We already visited hotels in different regions of Costa Rica (Puntarenas) and talked with the ownesr or managers in the summer 2013.

We met a lawyer in Jaco to get more infos, about regulations…

However, I`m just trying to get infos about the market in Costa Rica, which is our first choice. I didn’t talk about a specific hotel.

What I notice in general is that the price seems to be high (+100K a door)regarding the revenues. But it’s like everywhere else, sellers might be negociable!!!

Thanks again for you comments but beleive me we are serious in the process. We are convinced that we can be successful in our goal and dream!!

[costaricafinca]

[url=http://www.costaricalaw.com/Immigration-and-Residency/residency-general-information-and-summary.html]Applying as an Investor[/url] and being under 55 will make your mandatory CAJA fees [u]very[/u] high…possibly in the $900 a month or even more… due to the value of your investment.

Knowing too, that [url=http://www.costaricalaw.com/Working-in-Costa-Rica/]you cannot, legally, physically work[/url] including answering phones or tending to the front desk, in your business must also be taken into consideration until you have gained Permanent Residency which will take approx. 5 years from your initial application.

While your wife in the past ‘worked’ selling condos possibly without a work visa or legal residency, this is not so easy to do as very high fines are now in place.

So many hotels have opened and many are struggling…so are now up for sale, some for years as you have noted.

With the many condos now being available, many tourists are using them for vacationing.

[url=http://www.costaricalaw.com/Labor-Law/]Staffing costs[/url] can be a big issue.

[Author]

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