According to Business Insider of May, 2018* Costa Rica is one the three best countries to buy rental property outside the United States and while that sounds like a great business opportunity, there are some aspects you need to consider in order to get the desired ROA(Return on Investment).
For purposes of comparing BI’s finding here is side by side of Costa Rica and Panama’s by the numbers:
Costa Rica Panama
Rental yield: 7.48% Rental yield: 5.75%
Effective rental income tax: 5.16% Effective rental income tax: 2.08%
Monthly rent: $1450 Monthly rent: $2,075
Everyone who buys property in Costa Rica buys for a different reason and that’s “their reason” therefore, situations and expectations are also unique. Some are looking to spend “lots” of time in paradise, while others are looking to get away from the cold or just get away whenever they feel like it.
If your goal is to rent your property, then it must have some qualities that will entice people to pay you top dollar to stay in it. Does the development have amenities, such as community pools and a beach club is it walking or at least a short distance to the town and to the beach? Many people do not want to rent a care when they go on vacation. Of course, homes with ocean view always drive up ROI. Are you renting during high season (Nov-Apr) or low season?
Most property managers in Costa Rica will tell you that many of their clients are making a 3%-4% ROI. Those who get more involved in marketing their properties see more towards 7% even 8% ROI but they are actively and aggressively involved in marketing their rentals.
More and more ex-pats have decided and rightfully so, to make Costa Rica their home permanently and therefore, those who had properties for rent have taken those properties off the rental market, making it harder for people to find rentals and since Costa Rica is an eco-friendly country, their regulations make it hard to develop properties already so rentals are indeed in high demand.
Regardless of where you are in the process, if you want to buy property in Costa Rica and also make money renting it out whenever you are not here you must hire a reputable property management company. Make sure to ask all the necessary questions and (this one is obvious I know) read the contract. More on property management companies in my next blog.
Bottom line, Costa Rica is a beautiful country with beautiful, friendly people and finding your little place in paradise is not hard once you follow your dreams.
For more information or if you have any questions contact me at email@example.com
*source BI Best countries to buy rental property and earn passive income 2018