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Sorry Scott, but that is merely semantics in my opinion. My intent was not to insult Costa Rica in any way. I love that country. They have made large strides but still have a long way to go.
One other thing. I don’t know what the fees are like at developments like Reserva Conchal are but the preliminary fees assessment was quite high for a third world country, more than here in Canada.
No problem Rob.
We are currently in negotiations, with the deal set to go conditional after Easter, in Flamingo.
CC&R’s (Covenants, Codes & Restrictions) are the set of documents that administer the condo project. Similar to condo bylaws and disclosure statements in Canada/US.
My father and I both reserved units (in escrow) in this development. The property is very nice and IF, Bella Collina finishes the property the way they have indicated, it will certainly be a nice project. We found that for our purposes, the project was SO FAR FROM COMPLETION that we opted to explore other alternatives that are set for completion in a shorter time line.
The group marketing the property is somewhat professional. They did refund our money when asked, however it took longer than expected. Nonetheless, it went well.
The hurdle we couldn’t get over was the absence of CC&R’s and the uncertainty of their completion. Certainly any deal (that I would do) would be conditional to the approval of such regulations. We just felt that, at that point in time, there were too many uncertainties about the project. What isn’t uncertain is the beauty of the location. One thing is certain, they need to pave the road to the location or it will be all for not. My opinion is that this group is on the level but might its eyes might be bigger than its stomach. Again, just my $0.02, for what its worth.
Edited on Mar 19, 2008 13:36
None of us have a crystal ball but the facts that we can all agree on are these:
1. Largest purchaser of CR real estate are Americans.
2. American liquidity has been vastly diminished over the past 8 months.This would (and has), at minimum, raise a yellow flag for me.
Yes Scott may have just sold a penthouse property for over $1MM to a New York investment banker, but individual does not represent the average American. The average American may start to look for lower priced, well located, retirement properties at home where all services are first world, currency need not be converted and English is the first language. The cash buyer of high end assets will likely not feel much of this current crunch.
My $0.02 is (and really, that’s all its worth), if you are going to buy in CR, buy “A” Class, quality assets. With the values of American soil dropping like lead balloons, American markets (i.e. AZ, FLA, CA, etc) are being eyed by international and national investors and boomers. In fact, I represent a private equity group from Canada. We have raised $100MM+ to catch some of those balloons. However, if the Fed continues to cut rates the US economy may never recover. Tread lightly.
Interesting article.
I like much of what you say. The world ought to be scared to catch a cold. Like you said the US is the largest economy in the world…when it turns south so too does the global economy.
I beg you to ask that Mercedes dealer 9 to 12 months from now that same question. With all due respect, you are somewhat contradictory when you say, “The luxury buyer has not been affected, and even if they were, Mercedes will just lower the prices on the leases and stickers and all should be fine.” You are making a claim the economy will not be affected but if Mercedes lowers prices, does this not lower margins…at least in the midterm? Nobody escapes a downturn in the American economy. I like my position right now here in Alberta, a commodity based economy, but I too will feel at least some negativity throughout this process.
The panic has set in but reality will unfold over the next year or so. To think the luxury consumer will not be affected is a great oversight. In fact I just saw a story on an affluent late 60’s lady that was advised by her planner to invest in a fund with exposure to ABC paper and she lost $400,000. To think that this was a one off incident is blatantly turning a blind eye on the reality of the situation at hand.
Yes the Fed is slashing rates but and yes that aids the domestic monetary situation but it creates havoc for the US on the commodity import side of the equation. The fact remains that jobless claims are up, interest rates are coming down and commodity inflations remains strong in relative terms. Furthermore, slashing rates is one thing but it does not increase the pool of capital available to lend, nor does it qualify home buyers that should have never been qualified in the first place in the subprime market.
Yes CR is still an attractive place to put capital for numerous reasons, however, over the next 3 to 5 years there will be less capital available. But like I said, this will provide some of us with opportunity in CR so long as we weren’t pigs in what has been going on in the US over the last 5 years. Stability is on the side of CR and you are right, in the long run, it is positioned well. However, I can’t with any level of prudence say that prices won’t soften in the short term.
I agree 100% with your comment, “If you are buying in CR for the long term, there will most likely be some good opportunities coming up, but still, if you wait to long, many of the premium properties will be gone. There is only so much ocean front property. And when it is fully developed, The premium attached may be more than some are willing to spend.” Thus I shall stand pat for the time being, as I believe that there is a greater than 50% chance that the prices will go down (slightly) than go up at all.
Is there anyone in Costa Rica that regularly follows this issue and publicly?
Diversifying into other markets is wise, not only now in the face of recession, but always. However, the US being the market it is, directly affects the global economy. Thus in the case of US recession, it is inevitable that the global economy, including Central America and Costa Rica, will feel the trickle down effect, especially in light of the US being the recipient of the majority of CR’s exports.
Furthermore, what Costa Rica is selling is luxury, and therefore may, like all other luxury goods in times of recession, be the first to feel the pull back.
Is it fair to say that 60% of the foreign real estate buyers in CR are Americans? Regardless of the actual proportion, lets analyze just one of the countless scenarios here. So over the past few years Joe and Joanna America have built up a fair amount of equity in their home. They bought their home in 2005 using an ARM at $300k and in March of 2007 it was worth $500k. They had so much gain on their home that they bought an investment property as well in the US by taking some of the equity out of their home and putting it into his investment property.
In the mean time Joe and Joanna visited CR and fell in love, thus his plans were to take the profit from their US investment property, once they realize it, and buy a nice ocean view retirement villa in the hills of Guanacaste. In March of 2007 Joe paid $200k the investment property expecting it to be worth $250k when it was finished being built.
Fast forward 10 months later to today. The house is finished and Joe is set to close on it. Joe closes, starts making payments and puts the investment property on the market to find that he can only get $125k for it, a far cry from the $50k gain he was anticipating.
Furthermore, Joe and Jo’s home is now only worth the $300k they paid for it back in 2005. To make matters worse, Joe and Joanna’s ARM is ready to reset. So now they are in a position whereby not only did they increase their net debt level by taking a loss on their investment property, but they are also facing a tremendous interest rate increase. Thus, they are forced into MUCH higher payments on the same house that is worth only what they paid for it in the beginning (at best). Lets just hope Joe or Joanna don’t work in the luxury auto sales or technology industries. The dream of Guanacaste is gone-acoste (sorry couldn’t resist), they are just now hoping to keep their jobs and not foreclose on their home.
Now I am not saying that there are days of gloom and doom ahead for CR, but there are definitely days of gloom and doom on the horizon in the US. And if CR’s primary resort property purchaser is experiencing days of gloom and doom it is only logical, reasonable and prudent to conclude that CR will at least feel some of that. After all, it is already estimated that tourism will suffer because of the US recession, are we to assume that real estate is immune to the same pressures that tourism experiences? Prices will soften and there will be opportunity. I am just hoping to take advantage of some of the widespread panic being seeded in the general populous by the media. And as for the the person that mentioned the 40% cash position, I like your thinking.
Thanks Perrogrande! My intention was not to make you feel defensive. I truly appreciate all posts. And yes we understand that you were only posting what you heard and not claiming it to be true. I will be touring the site in December. Completion for the unit I am looking at is 12 months from now so I would presume that construction in the area would be commencing quickly if it has not already.
They are likely building the amphitheater and piazza out of their own capital and then awaiting so many presales before they get full development financing. So the fact that they haven’t started on the condos yet does not surprise me. I work in the development business in Canada so I understand the business on a basic level…my error is assuming that it works the same way in CR…which usually isn’t the case.
Anyways, thanks for the time and thought you have put into your posts. Enjoy paradise…I hope to be joining you folks all very soon.
Am I to assume that the pictures located at this web address are not actually Bella Collina? http://www.bellacollinacr.com/site/index.html because to me it look in these pictures that ground has been broken. Forgive my ignorance but I have never been on site so I am honestly asking if ground has been broken.
You’re right, the Tuscan theme is a personal choice. But it is unique and pretty popular worldwide. But, in the end, its a personal choice.
perrogrande you seem somewhat scorn by this development? Is there a particular reason why?
Thanks to all for the discussion.
Edited on Nov 21, 2007 13:23
Macfarlane, as others have noted…this is not as simple as crossing from the US to Canada or anything of the sort really. Unless you are fluent in Spanish don’t even think of doing this on your own. And you can not take a rental car across. We went with a group and a guide. Knowing very little Spanish, I could have not done this on my own. In fact I would not have know how to fill out the paper work properly.
Navigating from the CR side to the Nica side is also a little confusing. You actually have to drive your vehicle through some sort of sanitary spray before you are allowed in the country. I found this fairly amusing considering that Nica is smothered in garbage and filth in that area, to the extent that I felt compelled to write my minister of foreign affairs asking for aid.
Once on the Nica side I have no idea what happens. We stayed on the bus and sent out passports in with our guide. We though he was trustworthy, and he was. The whole crossing seemed a little shady…but went smoothly.
Safety? Well, I don’t think I would classify the area as SAFE. We encountered no issues but we had a well respected Nicaraguan guide that took care of everything. It may be unfair to say that it is not safe but there is an abundance of unique individuals loitering around the Costa Rican side. It looks nothing like the rest of Costa Rica. My wife said that she did not feel safe. But again, we did not encounter any issues. There are plenty of police officials on site but probably not enough to control a crowd. Advice: don’t wear expensive jewelry or show off electronics.
Traffic is pretty crazy there as well. You will likely be waiting in line at the CR side for an hour. Coming back into CR for some reason didn’t take as long although the traffic was crazy. It seems like people, including the semi truck drivers, totally disregard the rules of the road in that area, driving on whatever side of the road they deem most suitable. The road is also very small so not really much room to navigate around them. To further complicate matters there was a sizable fire at the crossing as well.
One thing we all noticed was the stark contrast between the CR and Nica people. CR people do not typically get in your face where as the Nica people were running after us and plastering themselves across our bus. It didn’t bother me but some of the ladies were quite intimidated by this.
Overall we rather enjoyed our short stay in Nica but it certainly isn’t on my top 10 places to revisit.
Hi Jerry, thanks for the reply.
My work experience is predominantly in real estate. I am extremely passionate about it as well. I am (and have been) a financial analyst for real estate companies. My primary focus has been on analyzing financial factors, negotiating and facilitating large scale real estate transactions. I have managed the sale or purchase (oh behalf of my firm) about $750MM worth of real estate over the past 5 years. I know I could take my skills down to CR and employ them there but real estate is a capital intensive business and we have a maximum of $400,000 of seed capital. Also, we are both looking for new challenges. My partner runs a flooring company here in Canada (for the past 10 years) and has an abundance of hands on business skills.
There doesn’t seem to be the tourist business tax incentives in CR that are in place in Panama. I am assuming that this is a product of the already present tourism boom in CR. I have been researching the costs associated with starting up business in CR. The legal costs do not seem material.
Clearly CR is a “want” environment as opposed to a “need”.
Jerry, please also email me if you could at jzielinski@unitedcommunities.com
Thanks,
Jarrett Zielinski
Hey Rick, thanks for the reply.
Can you please zip me a quick email to jzielinski@unitedcommunities.com
Sorry Scott, just didn’t want to bother you with the potential of somebody offering legal advice or advice that could perhaps violate in some way the forum policies.
But with the prices these properties are going for…is this sustainable? If the global economy takes a dip…which isn’t unrealistic…properties like this may feel a bigger pinch. Would this type of development be comparable to Los Suenos? I know there isn’t a marina but with regards to quality…where would it stand in relation to Los Suenos?
