Caribbean side...the next boom.

Many of us who visited Costa Rica before, like most travelers, just went straight for the crowded Pacific coast skipping Caribbean side.

“There's nothing over there…no infrastructure…bad roads...it takes too long to get there.” Those were the Caribbean stereotypes of the time. But as any successful overseas investor knows, negative stereotypes are the property-buyer's best friend.

How come?

Because the stereotypes can be slow to die despite the changing times, holding the prices down until word gets out to the mainstream that things are different.

This is the case with the Costa Rican Caribbean. The truth is that it's now less than 2.5 hours from the capital of San José on a new, modern highway. The international airport re-opened in 2006. Serious investors are buying coastal land, and the first luxury resorts and residential developments are springing up.

The Caribbean town of Limón is fast becoming a boomtown. Take a look at some of what's happening: In January 2007, the Costa Rica Tourism Institute decided to invest $5.7 million in the local tourist infrastructure. A short time later, the Construction Chamber of Commerce announced that there was a staggering 122% increase in new construction in Limón. But the big news came just a few weeks ago when the World Bank agreed to extend a huge $72.5 million loan for the purpose of revitalizing this port city. The government claims that the 250 cruise ships that now arrive annually will double over the next five years. No doubt about it, the “Caribbean side” is on the move.

And this is only the beginning. Two multimillion–dollar marina projects for Isla Moin and Puerto Viejo are currently going through approval process. Developers of Isla Moin, the $500 million, 208 acre marina with approximately 850 residences and space for 500 yachts and mega-yachts could break ground within coming months. This marina could produce 3,000 to 5,000 jobs, either directly or through industries spun off to cater to the incoming luxury crowd. Beyond an injection of jobs, Isla Moin could also fatten public coffers. According to mayor of Limon the income would be used to develop the province of Limon through road improvements and trash pick-up among other services.

Moin was not developer’s first choice for developing multimillion-dollar marina. The developer originally was looking to the Pacific coast, but changed his mind after talking to a friend in Miami about the Caribbean coast’s potential. With 84 percent of yachts traveling in the Atlantic Ocean and Costa Rica being in Hurricane Free Zone, Southern Caribbean was an obvious choice for new marinas. Isla Moin will feature more than 600 low-rise condos, 100 beach and waterfront villas, and 110 waterfront estate homes Residences for a presale price of anywhere from $175,000 to $2 million. According to developer, these are selling rapidly and 70 percent of Isla Moin Phase 1 residences have been reserved, but exact number would not be released.

Before the first brick is laid, the marina project must pass a few legal hurdles. The Inter-Institutional Commission on Marinas and Tourist Dock (CIMAT) and the local municipality have to give their approval. The commission, formed of five government institutions, has two months to pour over the developer’s proposal and make another site visit to Moin. Once all requirements are met, developer must request a construction permit form the local government.

Interest in Southern Caribbean is running high, as more and more people discover the values on this side of Costa Rica.

Driving in Costa Rica

Driving in Costa Rica can be one of the most intense experiences in one's life. Driving there seems like chaos, but once you understand the difference between what you are accustomed to and the driving habits of Costa Ricans, you will feel more comfortable.

Costa Rica is a very small country and most tourist destinations are within a few hours drive of San José. Not only will you drive through beautiful countryside, but some small, out-of-the-way places will only be discovered by car. The adventure lover will appreciate the freedom to explore.

If you are only staying in San Jose it’s not recommended to rent a car. Traffic and parking can be difficult and finding your way around is almost impossible, as most buildings don't have addresses. Taxis are not only relatively cheap, but the drivers know where everything is. Driving outside of San José is considerably less frantic but still a quite experience.

A combination of unpredictable road conditions, aggressive drivers and changing weather calls for tourist drivers to be cautious. Driving over the mountains to either coast at night, especially your first night in town is not recommended. During the day you will have the problems of potholes, cars passing where they shouldn't and being stuck behind a banana truck doing 5 mph. However, if you allow plenty of time and drive with care you shouldn't have any difficulty. So many tourists rent cars, that at times none of the 40 car rental agencies have one available. Very few tourists have problems, although there are some real horror stories.

The law requires you to drive on the right hand right of the road, the same as the United States. When driving in Costa Rica, lanes are not always used so it is important to understand that you must always signal other drivers with your turn signal in order to show your driving intentions.

Speed limits in Costa Rica are posted in Kilometers Per Hour (km/h) and the basic math formula to calculate Kilometers Per Hour to Miles Per Hour is to multiply the posted Kilometers speed by .62, for example 60 Kph is equal to roughly 36 mph. The speed limits in Costa Rica are much lower than those in the United States with the fastest speed usually not being over 80 km/h.

You should have a valid American or international driver's license before driving in Costa Rica. There are few reasons you may consider to get Costa Rican driver license. To obtain a Costa Rican Driver's License, all you need to do is go to MOPT, which is the equivalent of the DMV in The United States, and apply for a license using you current U.S state issued driver's license.

When parking your car, often there is a man shouting at you to guide you to park. These guys that help people parked, more often at night, are called Wachiman or Wachi. They make their money by watching your car while you are away. Sometimes these men do absolutely nothing to watch your car. However, you are obligated to tip them. Remember, to only tip a wachiman if you come back to your vehicle and nothing is missing or wrong with the car. A typical tip for a wachiman is between 100 and 300 colones depending on your generosity. Remember to keep your car locked and do not leave any belongings in the car where they might be spotted by passersby. Theft is a big problem in Costa Rica.

Pull over if a police officer signals you to do so. Police officers may ask you to stop if there is an accident ahead, a checkpoint or if you are violating the law by not carrying a license plate or exceeding the speed limit, for example.
Your personal documents and the vehicle's registration papers are private property and may not be retained by police officers for any reason.

Incorporating in Costa Rica

The typical limited liability company (“Sociedad Anónima” or “S.A”.) must be incorporated by at least two people before a Costa Rican Notary Public. After such incorporation, the shares may be transferred and it is legally feasible to have a corporation in which one person is the owner of all shares.

The incorporators must choose a name (which must not be similar to any existing corporate name); appoint a Board of Directors (which, by law, must have a minimum of three members, President, Treasurer and Secretary) and a Comptroller. Each one of these positions must be occupied by a different person; however, the initial incorporators may occupy them.

Other crucial issues to be decided are the capital of the corporation (the higher the capital, the more registration taxes are to be paid); the number of shares composing such capital (a share cannot be divided according to Costa Rican Law -fractions of shares are not acceptable-; thus, it is advisable to have a number of shares that would permit future distributions of the participation in the company) and the representation of the newly formed company (there must be at least one representative of the company with powers of attorney to act on its behalf; however, at the time of incorporation, or later on, the powers of the company's representatives may be limited, for example, to specific actions or amounts).

Costa Rica has what we like to call a "hybrid" corporate system. The incorporation deed, as well as all changes to the company’s By-Laws, are to be recorded in the Public Registry, where any person has access to them. However, all transfers of the company's shares are recorded in the Shareholders Registry Book, which is kept by the corporation and is only available to company's shareholders and officials; all other parties can only review it with a Court order.

When you are buying real estate, it is advisable to do it on a corporation's name. In this case, transfers could be made easier and the structure may be more flexible for other transactions and for organizational matters.

Purchasing Real Estate Through Corporation

Most common practice in Costa Rica is to acquire properties through a new corporation or through an existing corporation that currently owns the property of interest.

The process of setting up a corporation is not complicated, but does require a knowledgeable attorney who understands the exact protocols and procedures necessary to properly set up the corporation. The advantage of this system is that it allows a buyer to protect their asset anonymously. Further, if a purchaser acquires a property through an existing corporation that already owns the property, there are no government transfer taxes and stamps to pay. The reason is that transfer taxes and stamps must be paid anytime that there is a change in the ownership of the property. If a buyer acquires the shares of an existing corporation, technically there is no change in the recorded owner of the property (i.e. the corporation still owns the property). However, if a property is acquired through forming a new corporation to buy the property, the transfer taxes and stamps must be paid because the name of the property owner has changed. The risk for the buyer in acquiring an existing corporation is that the corporation might have other liabilities and there is no way to verify 100% that the corporation is clean.

When buying a Costa Rican corporation, it is important to keep in mind that there are other obligations and responsibilities that must be addressed. Examples include yearly tax declarations (even if the corporation is inactive), payment of income taxes if any, and keeping the legal books of the corporation up to date and in order.

Hurricane Free Zone

Most of Costa Rica and all of the Southern Caribbean coast is immune from hurricanes. One of the reasons is that Costa Rica is at a fairly low latitude (8-9 degrees), but that lack of hurricanes there is also caused by something different. Most hurricanes in the northern hemisphere tend to move west, north, or some direction in between. Since the huge land mass of South America is south and east of Costa Rica, there is no path across an ocean for a hurricane to take before making landfall in Costa Rica. But Nicaragua is just north of South America, so hurricane can move due west across the Caribbean and make landfall there.

The rotation of the hurricane is caused by the coriolis force, which makes it rotate counterclockwise in the northern hemisphere and clockwise in the southern hemisphere. At the equator there is no coriolis force, which is why tropical cyclones tend to weaken if they get close to the equator.

Above NASA map shows the tracks of all Atlantic hurricanes which formed between 1851 and 2005 (click to enlarge). The points show the locations of the storms at six-hourly intervals and uses the color scheme below from Saffir-Simpson Hurricane Scale.

And remember hurricane has never hit the southern Caribbean Costa Rica area!

Weather Patterns

The Mountain range that runs down the middle of Costa Rica allows the 2 different oceans on opposite sides of the country to control the 2 distinct weather patterns on each geographical side of the country.

The Pacific side of the country has distinct dry and wet seasons, with the dry season between December - May.

Northern Pacific Region
In the Northern Pacific Region, 'Dry Tropical Forests' are predominate, while in the Southern Pacific region, 'Humid Tropical Forests' are predominate. The Central Valley, where San Jose is located, also enjoys about 6 months of dry season (December to May). The wet or rainy season on the Pacific does not mean rain all day long but rather mid-afternoon rain showers like clock work almost every day from the middle of May to late November much like the summer weather in the south of the U.S. September to mid-November is the wettest time of the year on the Pacific side of the country, with October traditionally the wettest month. The average temperature on the coast is 27°C (81°F) and 17°C (63°F) up in the mountains. Average day time temperatures along the coast are at their highest between January and May, reaching 32°C (90°F), and generally, temperatures never drop below 22°C (71°F) at night. Meanwhile, up in the mountains, the temperature can drop to 9°C (48°F). The relative humidity here is relatively constant at 85%. During January and February, it drops to between 75 and 80%, and reaches its peak of 90% (+/-) in June, September and November. At least the hottest months do not coincide with the highest humidity levels. Winds from the south dominate the days, while the nights are usually calm with slight breezes from the east.

Central Pacific Region
The Central Pacific Region includes the western parts of the San Jose and Puntarenas Provinces, extending south from the Tarcoles River to the Mouth of the Baru River (which is just north of Dominical). This zone includes Jaco, Quepos, Manuel Antonio and Parrita.
This area has less continuity in climate than the other climatic regions because it includes coastal and high mountainous regions (0 to 1880m, 0 to 6167 ft. above sea level). The dry season is from January to March, with February being the driest month. The rest of the year is technically the rainy season, October being the rainiest. But, despite the long “rainy period”, there are (on average) five hours of sun during the rainy months. The days begin sunny and pleasurable, with rains moving in the afternoon or night. The average temperature on the coast is 27°C (81°F) and 17°C (63°F) up in the mountains. Average day time temperatures along the coast are at their highest between January and May, reaching 32°C (90°F), and generally, temperatures never drop below 22°C (71°F) at night. The relative humidity here is relatively constant at 85%. During January and February, it drops to between 75 and 80%, and reaches its peak of 90% (+/-) in June, September and November.

South Pacific Region
The South Pacific has a shorter dry season and experiences more intense afternoon storms than its northern counterpart, the North Pacific. From the end of December until April, the dry season is marked with 75% humidity, and average temperatures of 26°C (79°F) along the coast (average daytime temps of 31°C (88°F) and night time temperatures of 22°C (71°F). In the lowlands during the rainy season, May through November, 4000mm (157 in.) of rain falls annually and on the Osa Peninsula, more than 5000mm (197 in. - that’s 16.4 feet ) of rain falls annually. This region maintains an average humidity of 75% during the dry season, escalating slightly during the rainy season, reaching 90% in July, October and December. Strangely enough, late June or July typically experiences a "veranillo" (little dry season) with a dramatic decrease in rain but is one of the most humid months.

Caribbean Region
The Caribbean or Atlantic side of the country has no real prolonged dry or wet seasons. The least rainy months tend to be February/March/April and September/October. "Normal" in the Caribbean is clear mornings with late afternoon or evening downpours. Similar to summer weather in the south of the U.S. or in Hawaiian Island of Kauai or Hawaii. Even in the rainiest months there are usually some hours of sun to be found. Temperatures are relatively constant all year ranging from 25 to 27°C (77 to 81°F) on average. May, June and October are the warmest months with average daily highs of 31°C (88°F) and the coolest day time temperatures are found during January, February, July and December, with an average of 29°C (84°F). Days are blessed with trade winds that help buffer the humidity. Night-time temperatures range from 20 to 22°C (68- 71°F) and are usually cool and comfortable.
Humidity values are fairly constant throughout the year. January through April tend to be least humid months at 80%, while the rest of the year experiences averages around 85%. June, July, November and December are the most humid with values reaching 90% (these are also the rainiest months).

Northern Zone Region
Northern Zone Region includes all cities north of the central valley to the Nicaraguan border and Lake Nicaragua including Monteverde, La Fortuna (Arenal), San Carlos, and the northern part of the Alajuela and Heredia Provinces. Altitude affects the quantity of rain received, but the rain patterns are the same between the lowlands and the mountains. January through April are the driest months in both locations. Decreased humidity levels coincide with decreased rain and are at their lowest from March until April with an average of 75 %. The rest of the year, relative humidity levels average 85% in both the lowlands and mountains. Temperatures are definitely affected by altitude. In the lowlands, temperatures hover around 30°C (86°F) (daytime) whereas in the mountainous regions, daytime temperatures average 21°C (70°F). Nights get quite cool in the mountains dropping to as low as 13°C (55 °F) at night, but only to 20°C (68 °F) in the lowlands. Winds are usually from the south averaging 5.5km/h (3.4mph) throughout the year, but as you go up in elevation, wind speeds increase. Monteverde can be very windy during the dry season.
Central Valley Region
The Central Valley Region includes parts of the provinces of Heredia, San Jose, Alajuela and Cartago, including popular cites like San Jose, Heredia, Escazu, Santa Ana, Cartago, Barva and Grecia (among many others). The average annual temperatures are between 22°C (72°F) and 24°C (75°F), and these do not vary much throughout the year. The max usually averages 29°C (84°F) and the lowest averages 18°C (64°). Relative humidity averages about 75%, dropping to 69% during the dry season. The dry season is December to March, with April and November being months of transition. July tends to be the driest of the wet months and is referred to as “veranillo” (little dry season). This said, we can summarize and say that the dry season generally extends from December until April. During this time the humidity is lower. This time of year (Jan- March, more specifically) is also marked with persistent NE winds (as high as 30 km/h) and lots of sun (eight hours or more per day). The rainy season (May through November) is characterized by less sun and lots more rain. Usually, you get at least four hours of sun in the morning (6 a.m. until 10 a.m., or later) before the afternoon storms develop. September and October are typically the rainiest months (averaging 650mm (26 in.) per month) of the year and the most humid. The humidity never really goes above 80%.

Requirements to Open Personal Bank Account

With a handful of state-owned banks and around 19 private commercial banks, there is no lack of options if you’re looking to open an account in Costa Rica. All of these banks offer services to foreigners, whether residents, students or workers. The majority offer accounts in colones or dollars, and in some cases, euros.

The first decision you’ll probably want to make is whether to open an account with a private or a state bank. State-owned banks guarantee all deposits and have the most branch and ATM locations. For example, Banco Costa Rica (BCR) offers the most ATM locations – 400 scattered all around the country. While there are a number of advantages to state banks, there is one very important downside to keep in mind: long lines.

Patience is the first requirement when doing business with state-run banks in Costa Rica. The experience will either build your patience or drive you completely insane. Adjusting your mentality to expect a long wait, and bringing a good book or a few Sudoku puzzles can greatly alleviate any destructive desires that crop up as you wait in a line that barely snakes forward. If you’re able to bear this one main disadvantage, state-run banks may be a good option.

If you simply do not have the time or patience to wait, consider one of the private banks, such as the Canadian-owned Scotiabank. In addition to much shorter wait times, many of the private banks are more likely to have a banker or teller that can assist you in English if your Spanish is limited. One disadvantage to the private banks: very limited number of bank branches.

What do you need to open an account? Whether you’ve chosen a state-run or private bank to open a savings account (checking accounts generally require a few more hoops to jump through), there are a number of guidelines we can offer.

• Identification - All banks will require your passport if you’re not a resident, and may ask for an additional form of identification, such as a driver’s license (from country of origin is acceptable).

• Utility Bill - You’ll also need to obtain a copy of a utility bill that confirms the address where you reside. The bill not necessarily needs to be in your name.

• Purpose in the Country - This requirement varies bank to bank, but if you’re a retired resident, you’ll want to bring your residency card or some document from immigration or your lawyer that shows you’re in the process of obtaining it. Students should provide a letter from the institution where they study stating their purpose in the country, and any foreign workers should provide their orden patronal – a small document that reports income and proves payment into social security, or La Caja. If you are an investor and own shares of Costa Rican corporation, the corporate documents showing your name will also meet this requirement.

• Initial Deposit - This amount varies widely, ranging from $100-500.

• Letters of Reference - Most banks will require an average of two reference letters. There is some variation in what is expected, but in general, these are letters from other banks where you have made deposits. They can also be as simple as letters from friends who have accounts in the bank where you are applying, stating your relationship and their confidence in your reliability. In fact, if you can talk this friend into it – by buying them coffee, dinner, or both – it can help facilitate the process if they can accompany you to the bank.

As long as you’re not rushed and have all your required documents, you will find most bankers and tellers to be very friendly and helpful.

Banking in Costa Rica

Whether you’re planning to settle in Costa Rica for the long term or simply looking for a safe place to exchange a few dollars, an important decision you will need to make is "What Bank Should I Use?" Costa Rica offers a wide range of banking and financial services catering to personal as well as business banking. Recent government reforms and the introduction of private banking have also made Costa Rica an attractive choice for investing.

Costa Rica’s banking system consists of the central bank; three state-owned banks, which account for nearly half of total banking assets; a state-owned mortgage bank; 18 commercial banks; four mutual house-building companies; 12 private finance companies; and 27 savings and loans cooperatives. In addition, there are 30 investment and retirement funds or trusts run by both state and private commercial banks and the state insurance company.

The Central Bank of Costa Rica is in charge of establishing banking policy. It is then up to the SUGEF (the General Supervisory Agency of Finance) to enforce compliance with Central Bank policies. All banks (both public and private) are subject to the policies dictated by the Banco Central de Costa Rica.

When choosing a bank, take into consideration both personal convenience and what fees the bank charges. Get information on the types of accounts available and their associated fees from several banks. Internet services offered by both state run and private banks have improved in leaps and bounds over the past couple of years.

Most banks in Costa Rica now offer savings and checking accounts in Dollars and Colones. Banks do differ, however, on the amount of time it takes to cash foreign checks and the availability of ATMS. It is also very important to note that while interest is much higher on colón accounts, there is a monthly devaluation of the colón to the dollar, so you might not be earning as much as you expect. Many also offer Credit or Debit cards, if you meet the requirements (but not all are internationally accepted). All banks will also have different requirements for opening accounts or obtaining credit cards, possibly including banking or personal references, identification, and most likely minimum deposits. Opening hours for most banks are from 9 am to 3 pm.

State run banks are backed by the Costa Rican government and are therefore usually considered safer. They are also located in practically every town in Costa Rica. On the down side, long lines are frequent and bilingual staff is not always available (especially outside the central valley).

Private banks usually offer quicker and more personalized service, shorter lines and English speaking staff. However, they may have fewer branches available outside of the central valley. The great majority of private banks are connected with banks outside the country so that transfers can be done relatively quickly.

State Owned Banks

Banco Nacional de Costa Rica
Established in 1914, the Banco Nacional is the largest state commercial bank in both assets and number of branches.
www.bncr.fi.cr

Banco Central de Costa Rica
Regulates Costa Rican banking policies
www.bccr.fi.cr/flat/bccr_flat.htm

Banco de Costa Rica
With branches throughout the country, Banco de Costa Rica is considered the most profitable and probably best-run state commercial bank.
www.bancobcr.com

Banco Crédito Agrícola de Cartago
Is the smallest of the state run banks.
www.bancreditocr.com

Private Banks

Scotia bank
www.scotiabank.com

Banco Cuscatlan
www.bancocuscatlan.com/costarica/index.html

Banco Cathay
www.cathaybank.com

Banco Promerica
www.promerica.fi.cr

Property Ownership in Costa Rica

Property Ownership and other common forms of possession

Just like in the US, Canada, and Europe, there are different types of property available to buyers. Understanding the various types that are available for purchase is critical in the evaluation process. This post highlights the property types that can be purchased in Costa Rica and the implications of each type of ownership for the buyer.

Fee Simple:

The most comprehensive form of property ownership in Costa Rica is fee simple ownership. (titled property). Fortunately for foreigners, the conditions for this type of ownership are the same for Costa Rican nationals as they are for foreigners. The concept of fee simple ownership is the same in Costa Rica as in the US. Basically, fee simple ownership gives the owner of the property the absolute right to materially own the property, use it, enjoy it (i.e. usufruct), sell it, lease it, improve it (i.e. transformation), etc., subject only to conditions outlined in the Costa Rican Laws. Fee simple also means that if the owner is obstructed from enjoying any of his/her rights to the property, he/she has the right to be made whole, in other words, have the property restored in its original condition. Buyers who purchase fee simple title have the most rights under to law to enjoy and use the property as they see fit.

Concessions in the Maritime Zone:

Concession property is more commonly known as beachfront property. In Costa Rica, 95% of beachfront property is considered concession property and is governed by the Maritime Zone Law and other specific regulations including but not limited to special dispositions stated by municipalities and the ICT (Costa Rican Institute of Tourism). These legal dispositions set forth the conditions under which foreigners and local residents can own concession property. A concession in Costa Rica is defined as the right to use and enjoy a specific property located on the maritime zone for a pre-determined period of time. The state, through its respective municipality, grants this right. Note that the first 200 meters measured horizontally from the high tide line defines the boundary of the maritime zone. This zone also includes islands, pinnacles of rock, mangroves, estuaries, small islands and any small natural formation that overcome the level of the ocean. This 200 meter zone is divided into two areas:

1. Public Area: The first 50 meters measured horizontally from the high tide line. This zone is not available for ownership of any kind. No kind of development is allowed except for constructions approved by governmental entities. Further, this area is deemed a public area and any individual wishing to utilize this area for enjoyment has the right to do so. In other words, there are no truly private beaches in the Maritime Zone.

2. Restricted/Concession Area: The next 150 meters. This area is available for Concessions to be granted. A concession is in essence a “lease” on the property granted to the lessee for a specific period of time. Normally the concession period is granted for 20 years. An owner of a concession may build on that concession, subdivide the concession and perform other acts to the property. However, appropriate permits from the local municipality must be obtained.

3. Ownership Limitations: Unlike fee simple property, foreigners do not have the same rights as citizens when it comes to purchasing concession property. The law establishes that foreigners cannot be majority owners of a concession property. A foreigner can, however, enter into a partnership with a Costa Rican citizen where the ownership is divided 49% / 51% between the foreigner and Costa Rican respectively. One exception is if a foreigner has resided in Costa Rica for at least five years, then they may be majority owners of a concession. Both foreigners and Costa Ricans alike are required to purchase all Maritime Zone property through concession.

Properties in Condominium:

When US citizens think of Condominiums, they normally think of large apartments or townhouses. In Costa Rica, however, there is a specific law called “Condominium Law” that provides certain benefits to developers of many different types of properties, including single family residence projects, finished lot projects, condos, etc. This set of laws allows a developer to restrict and regulate certain aspects of the development. Each Condominium developments has its own by-laws containing all of the restrictions, limitations and privileges that can be enjoyed by individuals who purchase a property in such a development. Ownership of property “in condominium” is fee simple ownership, but usually carries with it a few additional restrictions set forth by the developer. It is advised that you require the owner of the property to give you a copy of the by-laws to check for architectural guidelines, land use restrictions, and other limitations that may be placed on your property. Most often, developers use the condominium laws to allow them to build private roads in a development and set architectural guidelines. For the most part, condominium laws are designed to protect the integrity of a development and maintain the “look and feel” of the project.

Untitled property

... also called "possession" land. Most of the land in Costa Rica falls in this category. Even though many lands are untitled, it does not mean that they do not qualify for title. Some do and some don’t. In a possession scenario, it is the recording of the legal transaction that establishes possession or ownership rights...not a title. The reason for this is that for many years, farmers and settlers (for any number of reasons) never applied for their title but possessed them in a "legal manner", established boundaries and transferred rights through private documentation. When properly recorded, these rights are completely legal, fully transferable and can qualify for inscription in the national registry as fee simple title. Legitimate possession rights can be demonstrated by researching the history of ownership recorded through private documentation. This is done through a properly recorded bill of sale in a lawyer’s protocol book. The bill of sale or carta de venta shows transfer of ownership and describes the property in words relating to the surrounding properties and well defined landmarks. Pages from the lawyer’s protocol book are then registered in the national registry.
The other side of the possession issue, are lands occupied and claimed by illegitimate settlers or "squatters"; someone claiming rights of ownership but have no "ownership documentation", only that they occupied the land for a certain amount of time. In these cases, there may be some form of rights established but it is more difficult to define. Costa Rica does have a homestead law or precario law that sets the guidelines, however it is outdated and needs to be modified. Sometimes there is a clear distinction between "legitimate possession" and "illegitimate possession" and sometimes there is not!
In 1941, a titling procedure called Ley de Informacion Posesoria was created by the government as a means for landholders to record or "register" their land that has been "held in possession". Many lands have been registered using this procedure. Minimum requirements to qualify for a registered title to possession land are a registered survey and verifiable history of legitimate possession "passively and publicly" for a minimum of 10 years with no disputes. The remaining parts to complete the title process are notarized statements from adjacent property owners along with a judge’s inspection and review of all documents. This process, done with the help of a lawyer, can take up to a year (possibly more) and cost between $1,500 and $3,000 depending on the size of the land. NOTE: Possession lands cannot be liened or mortgaged as they have not yet been recorded in the national registry.
In some cases, a buyer will pay for the title process after the sale or even make it a condition of the sale or escrow. Keep in mind that not all cases are alike. It takes a good understanding of the history of ownership for each property. In general terms, it is a good rule to not buy untitled property if you are not clear about how it works. However, considering that most of the land in the country is untitled, it is logical that most of the land transactions have to do with untitled land. Many people have safely bought possession lands including foreigners.

Time Share:

This option allows an owner the right to use a property for certain weeks of the year. In most cases the time-share ownership grants similar rights as implied in the condominium regulation except that in the time-share it is limited to certain weeks during the year. In this manner one single unit is subdivided into parts and sold individually. Time-share resorts are not common in Costa Rica.

Can you hear the sound of global economy crashing?

The global greed and buying more than you can afford, lending more than you can collect, and printing mountains of money have finally sent the world financial system down the chute.

However, there are some ideas that will brighten people personal future despite the current crisis.

New ideas?...hardly...but people around the world have practiced these ideas for years, some without even knowing it.

Simplify:
By Simplify, I mean lighten your personal load of useless garbage. Stop buying and doing things that waste your time and money. This can be hard to do. Most of us have been brainwashed into believing that we keep the world turning by running around like chickens with our heads cut off and burning through as many consumer products as possible. It’s not true, no matter what your television tells you. One very efficient way to simplify is to move overseas. It makes you think hard about what you really need to take with you. There’s nothing like relocating to a little beach house or mountain cabin in a foreign country to burn off the useless garbage piled up in your garage, attic, and appointment book.

Preserve:
By Preserve, I mean preserve your wealth. Stop chasing the quick hit, the sure thing, the one stock that will put you on Easy Street by this time tomorrow. Get into value investments. Get into safety. And do something even more radical...save. This is stuff our grandparents knew, but again, it can be tough to do. We’ve all been tempted to roll the dice by a decade of seemingly endless upside and idiot-proof profits in the markets. Now we know the game was rigged. Believe me, the days of chasing triple-digit returns on hot stocks or bizarre trading strategies aren’t over...but they should be for anyone who wants to sleep well at night. Lowering your cost of living is one sure way to preserve your wealth, and depending on your lifestyle, there are places in the world where you can live comfortably on half what it costs in the U.S. and Canada.

Get Real:
By Get Real, I mean put part of your wealth in things that don’t go away when global financial managers crash the bus. Real estate and gold are the obvious choices. Their relative value may change, but they never disappear, and they’re always worth something. The price of gold is just what it is. But the price of real estate varies wildly from place to place, and there are places around the world where it is remarkably cheap. That makes it much easier to have this hard asset as part of your financial plan.

Sorry if this all sounds a little gloomy, but by gosh, it was a gloomy couple of weeks.

You Can Use Your IRA Dollars to Own International Real Estate

Contrary to what you have probably been told by your broker or banker, you can own real estate in your IRA, including non-U.S. real estate. Over the years, advisers have wrongly convinced many people they cannot own real estate, as well as a number of other alternative investments, inside their IRAs or other retirement plans.

Nothing could be further from the truth. In actuality, the IRS allows a great deal of flexibility when it comes to investing the assets of your retirement account.

The trouble comes if you don’t have a “self-directed” IRA or if you work with a custodian who imposes his own investment restrictions. Most of these restrictions have nothing to do with the code governing retirement accounts but are instead employed to make life easier for the custodian.

What's Allowed--the Real Skinny

The truth is, the rules governing the ownership of real estate are simple...and you can own virtually any kind of real estate in your IRA or other retirement account, including:

• Raw land
• Condos
• Office buildings
• Single-family homes
• Multi-family homes
• Apartment buildings
• Improved land

Prohibited Transactions and Self-dealing

The IRS has some simple and straightforward rules that define what you cannot do. A simple rule of thumb is that your retirement plan is meant to benefit you at retirement and not before. You may not, therefore, deal with yourself or a disqualified person directly or indirectly.

What does this mean? In short, that you cannot lend money, extend credit, or furnish goods, services, or facilities to yourself or any other disqualified individual. In other words, you can invest in any type of real estate you want as long as it is an investment and not for your own use currently.

"Currently" is an important part of this puzzle. Let's assume you have found your dream retirement home or the piece of property you would like to build it on. And remember, the property doesn’t have to be in the United States--it can be anywhere in the world. Someday, when you retire, you would like to own the property personally or have it for your own use. No problem. You can take possession of the property at that time, in effect taking it as a distribution of your plan. You would be taxed on the value of the property at that time. Of course you could sell the property outright at any time as well.

Other Requirements:

• You may not purchase the property from yourself.
• You may not purchase the property from family members, with the exception of siblings.
• Neither you, your business, nor members of your family may lease or live in any investment property owned by your plan.
• Only retirement funds may be used as the down payment or good-faith deposit.
• The title must be in the name of the retirement account.
• Fractional ownerships are allowed.

Who is "Disqualified?"

The relevant IRS code disallows dealing with yourself or a “disqualified person.” A “disqualified person” is an owner, direct or indirect, of 50% or greater of:

• The capital interest of a partnership.
• The total value of all shares of stock of a corporation including all classes.
• The combined voting power of all classes eligible to vote.
• A member of the family, with the exception of siblings.

These are the basic definitions of a disqualified individual, but there are other details related to this that you should understand depending on your personal circumstances.

Special Exemptions

One of the most exciting aspects of this idea of investing is that there are 10 government-approved blanket exemptions to the “prohibited transactions” outlined above. Amazingly, these exemptions have been granted in areas that seem to contradict the “self-dealing” provisions of the code.

In one exemption, a retirement plan was allowed to purchase the mortgage for the participants’ primary residence with plan assets. In a second, plan assets were used to purchase the existing mortgage on a property currently being used for the participants’ business. You, too, can make use of these blanket exemptions by following the government-approved process.

How to Own

There are many ways to purchase real estate. You can own the real estate fully or you can own a fraction of it, with other entities or investors owning other fractions. You can purchase an option on the real estate or you can buy it outright using a land trust, L.L.C., or similar entity. All of these options are allowed for the kind of investment I’m describing.

Furthermore, you can pay for the property using retirement assets, or you can finance it. If the property is financed, you must structure the purchase correctly to avoid adverse tax consequences down the road. The down payment must be paid for by the plan, and all future payments must come from the plan assets, new contributions, and/or income produced by the property.

If the property is fractionally owned by the plan, the down payment and an equivalent amount of the ongoing payments must come from the plan. There are detailed instructions on how to accomplish this from a custodian who allows these types of investments.

Taking on Debt

If you wish to use your retirement plan to invest in real estate but do not have sufficient funds in your IRA, your IRA can incur debt. This debt/mortgage must be in the form of a non-recourse loan where the only recourse for default of the loan is the underlying real estate.

You can obtain your non-recourse loan from a lending institution, a private investor, or the seller of the property. (The loan, however, cannot originate from you or any family member of direct linear descent--for example, your grandfather or grandmother, father or mother, husband or wife, son or daughter, etc.) You cannot personally sign for the loan.

Managing the Property

As a result of a recent tax ruling, some custodians will now allow you to act as your own property manager. You can collect a “reasonable fee” for this service from your retirement plan, and you will receive a 1099 at the end of the year for these fees. Any income from the property must be returned to the retirement plan as a profit of the plan, less any expenses incurred. The plan assets can be used to pay administrative and recordkeeping expenses as well. Conversely, you can hire an outside property manager to perform this service, provided they do not fall under the “disqualified person(s)” definition.

How Do I Do This?

The good news is you can find the property of your dreams anywhere in the world, purchase all or part of it with your retirement assets, and take ownership of it--all completely legally. But, yes, you will need to make sure you do not violate any relevant codes or take any missteps that will cause tax problems for you later on.

It will cost you about $100 to establish an account with a qualified custodian, including the first year’s annual fee. Thereafter, you’ll be charged an annual fee of $100 to $400, depending on the custodian and value of the account; a one-time fee of $100 to review a real estate purchase; and a one-time fee of 1% of the value of the transaction ($500 minimum).

Costa Rica

In the last couple of years many of you heard about Costa Rica from the news, travel magazines or friends who visited this country. Why Costa Rica got so popular all of sudden? I think the main reason is that we got tired of big resorts, all inclusive vacations and are looking for something more than just to hang out at the beach in Maui or Cancun. We are also looking for this affordable tropical paradise spot where we could have our own palm tree and a small cabana, near secluded beach. Where we can spend our free time with the family and friends and evenutaly retire. Place where people are friendly, where friends are easy to find, where the foods are organic and where we let our kids and grandkids play without worrying that something bad will happen to them. Since Hawaii and Mexico got too expensive and overcrowded we found this new place which is only about 3 hours from southern states of the U.S.

Here are some quick facts about Costa Rica.

- The country is relatively small and is situated between Nicaragua, Panama, and the Caribbean and Pacific oceans.
- It is a country of peace and democracy with an exemplary environmental protection policy.
- Over 25% of the country has been designated as a national park and since 1948, Costa Rica has legislated measures to insure this paradise remains untouched.
- The capital and largest city is San Jose. Other major cities include Puntarenas and Limon.
- The population of the country is estimated at nearly 4.5 million.
- Over 20,000 American citizens reside in the country.
- Of the more than one million tourists who visit the country annually, more than 600,000 are American citizens.
- The climate is mild in the central highlands, and tropical and subtropical in the coastal areas.
- The government is a democratic republic with over 60 years of uninterrupted democracy. It is one of the most stable countries in Latin America.
- The literacy rate is 95%, one of the highest in Latin America.
- The primary language is Spanish, with a southwestern Caribbean Creole dialect of English spoken in some parts.
- Costa Rica protects over 25% of its national territory within national parks. It also posses the greatest density of species in the world. While it has only about 0.1% of the world’s land mass, it contains 5% of the world’s biodiversity.
- The unit of currency is the colon (CRC).
- Costa Rica has the same time zone as the central part of the United States.
- The country has not experienced a hurricane in over 100 years and, therefore, is a natural haven for boaters.
- A valid passport is required to enter Costa Rica.
- All major credit cards are accepted by businesses in the country.
- Electrical outlets are 110 V with standard U.S. 2-prong plugs.
- You do not need to be a citizen of Costa Rica to buy and sell Costa Rican real estate.

Best Bailout

Pura Vida All!

This blog is being started with purpose of educating people about real estate investments in Costa Rica as well as introduction to some investment opportunities there. Myself, I purchased first real estate investment in Costa Rica in early 2005. My main reason to purchase the property was to have vacation house outside the U.S. located near the beach. As the time went by I found many other reasons to own investments overseas. Some of them were tax advantages, financial privacy which is currently removed by Patriot Act in the United States, double digit appreciation on my investments, no capitol gains on sales of properties. And current financial and political situation in the U.S. allows me to have plan B.

Like many people who invested overseas I had tons of questions and worries before I wrote the first check. This is one of the main reasons I'd like to share with you my experiences and what I learned throughout the time. I'm looking forward to your comments and questions.