Buying Property in Costa Rica
by Nathan Jackson
Purchasing property here in Costa Rica has become a very transparent and straight forward process. Advancements in technology and more organized regulations have made for a fairly streamlined process, however it is still important that you have the correct guidance to help you along the way. The information below is a great introduction into the purchasing process. As always, our team of dedicated and knowledgable staff is here to help you along the way.
Unlike many other countries, foreigners in Costa Rica have the same rights as locals when it comes to purchasing properties. Properties are owned either under your own name, or under a corporation name. It is not required that you have a local partner in ownership, except when the property is considered a concession property.
When purchasing property in Costa Rica a large benefit is its central land registry which allows your lawyer to confirm that there is a clear title to your property. During this process they will also research if there are any restrictions or issues with the property.
CHOOSING AN AGENT
Choosing an agent in Costa Rica is very important as he/she will be working with you on your behalf and making sure your interests are fully protected. It is very important that your agent knows the community in which they are representing. What sort of experience does the agent have? Do they know the local market? Are they representing a certain company or agency? And most importantly, do they respect the same values that you do? Finding an agent in Costa Rica who appreciates the same aspects of the country as you do will help to insure that there is a mutual understanding of what it is that you value in a property.
Due to the fact that real estate agent status is unregulated, licensing for agents is not required. Its important to do your research and make sure that the person representing you is a good honest person with a respected reputation in the area.
SETTING UP A CORPORATION
There is nothing to prevent you from owning property under your own name, however the majority of buyers create a corporation. The benefits of creating a corporation are as follows: It may be more beneficial to have any rental income taxed within a Costa Rican Corporation rather than having it taxed personally. It also allows for a more simple estate planning in which you can give or will shares of your corporation to other members of your family or friends. Lastly, if you ever decide to sell your property, you can avoid paying property transfer taxes a second time by simply transferring the shares of the corporation to the new owner. The costs for this is typically $600-$1000 and will be covered in the buyer's closing costs.
MAKING AN OFFER & CLOSING PROCESS
A formal written offer of is written up by your broker with your contingencies added and then presented to the seller for approval. Once an offer is accepted your broker will refer you to an attorney. The broker and attorney will work with you throughout the entirety of the transaction. The attorney will provide detailed knowledge about the property and make sure that there are no problems. The attorney will then assist you with forming a Corporation.
10 Days after the offer is accepted a 10% deposit is due and is transferred into a Costa Rican escrow account managed by your attorney. The typical closing period is a minimum of 30 days from the time the offer is accepted, however this can be adjusted if agreed upon by the buyer and seller. At the end of the closing period the remainder of the purchase price is due.
At this time the buyer will pay the closing costs which are around 4-5% of the total purchase price. This goes to various fees associated with taxes, the attorney's due diligence, and the cost for setting up a corporation. After the final amount is deposited to the seller the title is signed over and ran through the national registry and transferred to the new owners.
Property taxes in Costa Rica are extremely low when compared to North American and European countries. At only 0.25% of the appraised value, owning property in Costa Rica is very affordable. You will pay your property taxes based on the appraisal that the municipality designates necessary. This amount is almost always lower then the market value. You will be required to pay your property taxes on a quarterly basis, however you WILL NOT be notified of this in any way. It is important that you keep your taxes up to date every 3 months or arrange with someone who can take care of this for you.
APPLYING FOR RESIDENCY
The foreigner and direct family can apply for this type of residency once the foreigner has invested $200,000 or more into Costa Rica. Investments can include tourism, reforestation, shares in a CR corporation, or in most cases property purchases.
The foreigner and direct family can apply for this type of residency if the foreigner receives $2,500 minimum monthly income for at least a 2 year period. The other option is to have $60,000 present in a Costa Rican bank account.
The foreigner can apply for this type of residency if he/she is entitled to a lifetime retirement pension of $1000 per month from their country of origin. The foreigner must obtain proof of this pension and have it authenticated.
ESTIMATED TIME REQUIREMENTS FOR RESIDENCY
The length of time it takes to acquire temporary residency varies according to the speed at which you submit the required documents. On average, it takes approximately 1-2 years. All 3 types of residency require at least 3 years of valid temporary residency before permanent residency can be applied for.