Costa Rica Real Estate – This is part of our series on buying real estate in Costa Rica. We hope to provide information needed to make an informed decision about purchasing land, condos, houses or commercial property in Costa Rica. If you want more information about this property or buying real estate in general you can request the free e-book, “Secrets of Buying Real Estate in Costa Rica”
Costa Rica’s real estate market is once again on the rise and many foreign investors are already pondering on how they can dip their fingers and make profit in this emerging market. As a foreign investor you cannot be expected to know everything about the real estate market of a foreign country and we know and understand that you have a lot of questions regarding owning a property in Costa Rica, thus we prepared answers for common and frequently asked questions which is designed to help you make an informed decision about your future investment.
* Can Foreigners Legally own a Property in Costa Rica?
Under the Costa Rican law, Ticos (locals) and foreigners have equal rights when purchasing fee simple titled property including beachfront property. Take note though that 95 per cent of beachfront properties are concession properties and are governed by Maritime Zone Law which requires that a foreign national enter into a partnership and own as much as 49 per cent of the property for a pre-determined period of time.
* How does the Property Registry Work?
Titled properties are recorded in Costa Rican Public Registry which is a centralized computer system managed by the government. The information recorded includes the property location, area, ownership, boundaries, mortgages, liens and annotations. The registry records are open for public viewing and are accessible thru the internet.
* What is Due Diligence and Costs Involved?
Due diligence is the process of doing a thorough research or investigation on a property before the purchase process. This is the time when you have to verify the authenticity of the property and ownership status. All liabilities and legal issues pertaining to the property must be unearthed during this time to avoid any complications that you may have to deal with in the future. Furthermore, during this period you have to determine the acquisition process you will use: acquisition thru a holding company or by means if direct transfer of property.
Customarily, attorneys charge by the hour, however some attorneys include their fee for due diligence as part of their fee for the actual closing process.
* Are there Escrow Accounts in Costa Rica?
Property, cash and title to the property are usually held in escrow until all defined conditions are met. When everything has been completed, everybody is paid and the deed has been recorded then the escrow will close.
Escrow and trust accounts are available thru lawyers and escrow title companies like Stewart Title and Chicago Title.
* Can you Explain the Buying Process?
Step 1: Find a real estate agent that will help you find a property that matches your qualifications.
Step 2: Do a preliminary Due Diligence and have your agent begin the negotiation bu doing an offer and counter offer.
Step 3: Sign the sales agreement.
Step 4: Deposit funds into escrow (if available).
Step 5: Complete the Due Diligence process and Conduct Property Inspection.
Step 6: Title research performed by the Notary Public / Lawyer (review if property is free and clear of defects)
Step 7: Closing – Execution of Transfer Deed, Endorsement of Shares and/or Mortgage Deed and disburse funds including payment of necessary stamp taxes and other fees.
Step 8: Register new owner with the Public Registry.
* What Taxes Apply to Property Ownership?
Property tax in Costa Rica is 0.25 per cent of the appraisal value of the property that is recorded by the local municipality which is usually low than the actual purchase amount. Remember though that properties that are registered with value more than two hundred thousand dollars are subject to an annual luxury tax that is to be paid to the Central Government.
Income derived from rentals and other forms of monetary gain thru the property are taxed at a fixed rate of thirty per cent for corporations, while sales tax is thirteen per cent.
* What is the Standard Closing Cost for Real Estate transaction?
Direct transfer of property will cost you 3.65 per cent of the value of the transaction: 1.5 per cent is levied on the transfer of property, 0.9 per cent for stamp taxes and 1.25 per cent for legal and notary fees.
On the other hand, 0.9 per cent for stamp taxes may be waived for acquisition done thru an already existing corporation that holds the property.
* What is a Tourist Visa?
Americans and Europeans are granted a three-month tourist visit upon entering Costa Rica. If after three months you would like to stay in the country then you would need to hop over the border and go to either Nicaragua or Panama and stay there for 72 hours. Upon re-entering Costa Rica you will then be issued a new three-month visa. However, if you wish to stay for a longer period in Costa Rica then you may want to apply for temporary residency.
* How can I get Temporary Residency?
There are different ways for you to apply and obtain a temporary residency. The most common is by claiming pensioner, rentista or investor status, but there is a catch. Those applying for these types of residency permits are required to prove that they are receiving $600 per month from US Social Security or $1000 per month from a private pension program. To get an investor status you have to make a $50,000 investment in a tourism business, $100,000 for reforestation project or $200.000 for other kind of business venture.
* Can I Open a Bank Account in Costa Rica?
You can only open a Costa Rican bank account if you have acquired a real estate property in Costa Rica or have obtained a temporary residency.
Types Is the Property Really for Sale?
What is the Maritime Zone?
Myths About Squatters
Construction, Architects & Engineers
Purchasing Under a Corporation
And so much more……..