Planting Money in Fertile Soil – Costa Rica Land?

People buy real estate for different reasons.

Maybe to build the house that will eventually be their home, or to invest in a sound economy with future profit in sight. If you are looking out for a property for the reasons mentioned, we have good news for you.

Economists, investors, and real estate developers agree that investing in a piece of land will always be a good deal “if” you paid the right price for the land to begin with. According to Mr. Robert Laurent, a real estate appraiser, there are also other reasons for it being a profitable business.

Among them is the rising tendency to sell property for US dollars, which guarantees a constant increase in value against the Costa Rica colone. Another one is the steady increase in population, which therefore increases demand as well, therefore adding value in time.

Costa Rica Real estate as a “savings account.”

Spurred on by this idea, new buyers can see their investment grow, even if they do not plan to build on the land themselves, but are looking forward to reselling it.

According to Kattia Madriz, sales manager of La Laguna Real Estate, these investors are of a particular profile: “Usually younger persons, single, with a certain acquisitive potential and the habit of saving internally, are those who look for the benefit in the real estate venture.”

These reasons motivate them to buy in the preliminary, ‘pre-sale’ stage in order to obtain a better price; investing in developments rather than in condos (to save on the maintenance costs) and only in projects of high probability profits. As far as the property itself, they prefer level, rectangular terrains, with an ample street front.

“Earth-matters.”

On top of the location or the shape of the property, the buyer also has to consider a series of other factors that increase the value, says the real estate appraiser Mr. Laurent. Among them is the topography, the irregularities of the land itself, the type of soil, etc..

Although most people look for level and uniform property to build upon, higher-up or mountainous land does not necessarily mean it will have a lesser value; it all depends upon the project and the possibilities to adapt the topography to the design and environment.

Mr. Luis Ramírez, executive director of the Association of Topographical Engineers, recommends staying away from clay soils and landfills, which, if not properly cemented, will lead to distortions and crack in the building.

According to Mr. Ramírez, the difference in height from street level to the land itself should not be more than 50 centimeters (aprox. 20 inches), and the least possible distance to the nearest river or ravine on the property should not be less than 15 meters (aprox. 50 feet).

Look out for steep or high slopes on the rear of the property. Otherwise the neighbor’s waste waters could make their way through to your terrain. In the same manner, properties with a slope towards the back could eventually lead to problems with the neighbors. Therefore, make sure that collectors for residual waters (black, soapy, rain) are installed, instead of a septic tank.

If you are looking for a scenic view and the land is very steep, you will have to consult an architect for the best location of the house. The rates for an hour are around ¢10,000 (about $21 per hour), according to the Federation of Engineers and Architects.

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A fair price:

Traditionally the value of property in our country follows the market principle. Comparing transactions of equal or similar properties establish an amount. First, what is called a “homogenous zone”, around the potential property is analyzed taking into account the overall environment.

Mr. Laurent explained that this could be, for example, the development plan, the fractioning, the condominium, where the property is located. From the ensuing analysis, a “model lot” is extracted, representing a virtual overview of all the properties in that “homogenous zone”.

However, the location of a piece of property is not the only cost-factor. Its size, its layout, panoramic view, accessibility, and public services are components that influence its value.

Other important factors are the overall availability of public and municipal services, commercial zones, leisure zones, health services, transport availability, socioeconomic level, ease of access, climate, etc., and specific characteristics like the layout of the property, slopes, extension, street front and depth, soil type, road quality, availability and quality of water, electricity, telephone, sidewalks, gutters, drain pipes, are taken into account to obtain an estimate.

Nowadays even cable TV, cellular signal, and access to the Internet are important.

The documents:

Once the initial analysis of a prospective property is done, and before a contract is signed, the buyer has to be aware of the ensuing formalities and the paperwork. First recommendation is that the buyer contacts the Registro de la Propiedad (Registry of Ownership) to verify who is the true landowner, and if there are impediments like pending mortgages, lawsuits, access rights by third parties, etc.

Next step is to obtain a location plan from the property registry, because this document establishes the exact boundaries and dimensions of the acreage. It is advised to contract a professional topographer to re-measure and thus avoid invasion of adjacent properties. The buyer has to verify that all property taxes and all other services (water, electricity, payments in case of a condominium, municipal services) are up to date.

It is recommended that the buyer also contract a real estate appraiser, before making any kind of down payment. The appraiser can advise you about the investment, which you are going to make. Properties can be located in a housing development, a division of a bigger lot, or be part of a condominium. In the last case, the buyer has to be aware of possible restrictions in the contract and of regulations set up by co-owners.

Last but not least, the buyer has to be fully aware of his financial capabilities, because the types of property to be bought are depending on these. If financing is required, the buyer has to be aware of all the options available on the market (interest rates, monthly payments, financing in dollars or colones, additional benefits, etc.) especially about the fact that financial institutions will provide only 60% to 90% of the total amount, therefore making it necessary to provide the difference.

Additional costs are added to the total value of a property, such as setting up a mortgage, bank commissions, fee for evaluation, and in some cases a life insurance policy. Parallel to these legal fees arise, which are usually split between seller and buyer, but others have to be carried by the buyer alone (mortgage).

More or less value?

Features that will increase value: A good soil quality for the intended use (building, agriculture, etc.) Convenient access roads, proximity to public services (school, hospital, supermarket, bus stop, etc.) Permanent security services, like those offered in condos or in some closed housing projects. To be assured of a good resale value in the future, the land buyer has to think about whether he plans to build homes on his land or perhaps just divide the lots for resale.

Features that will decrease value: Proximity to airports, garbage dumps, dangerous rivers or ravines, roads with high traffic nearby, unsafe locations, etc… The lack of a septic tank for outgoing waters. That the property is within the approach path of an airport.

Our thanks to our friends at La Nacion – Costa Rica’s largest Spanish circulation newspaper for their permission to use their article in English.

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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.