Buying Costa Rica Investment Property with your Self-Directed IRA and Equity Lines of Credit.

What goes up, might possibly slide down.

With the current stock market at an all time high, many people are looking to diversify. This morning I had breakfast with a client, who was upset that the DOW hit a bump last week, and he lost some money.           

There is wide spread concern, and an overall agreement, that the market cannot continue to climb at these astronomical numbers. It HAS to come down, at some point. So many people are looking for an alternative investment in which to move their funds.

So, we are seeing many of my clients moving their net worth, out of stocks and back into Hard Assets like real estate. What better place to park your money than paradise? Last year was the best year we have had since 2007, as more and more people are investing in Costa Rica.

Many clients are moving here and making this their full time home. They are also looking for ways to live down here, without touching their life savings; rental properties. You only need to own 2 rental properties in Costa Rica, to cover ALL of your living expenses.

That’s right. So many of my home buyers, after they get settled, are coming back to me to purchase a condo or two, which could generate some cash flow, and off set their expenses.

But lots of people, are still years from retiring and living in paradise. Yet they want to get in the game and move some money to the land of PURA VIDA. A lot of these people, are not sitting on cash, and it is impossible for a foreigner to obtain a mortgage here. So, what can they do?

Many of my USA clients do not realize, that they can use their 401k and purchase a Costa Rica investment property. Personally, I have done dozens of these transactions for my clients in the last couple years. It is actually a quite simple process.

There are many companies that specialize in what is called a Self-Directed IRA. It allows you to get to this money, without taking a tax hit for early withdrawal, and roll it into a vehicle that can purchase an investment or rental property outside the United States of America.

We work with a couple of the most reputable companies back in the States, and I can personally introduce you for more information. If you have money in a retirement account, NOW is the time to look into this.

Most of my Canadian clients are sitting on a gold mine of money, as they have had a 2-decade ride of real estate growth. That bubble too, is starting to stagnate. All of my Canadian real estate friends are telling me their markets are slowing down, as they have flat out priced themselves out.

When an average couple cannot afford to buy a property, that is when the market turns. So, dozens of my Canadian clients last year, went to their local bank and obtained an equity line of credit. This allows them to get to the “cash” that is just sitting in their back yard. They are using this money to purchase a Costa Rica investment property, either a home or a condo.

Both the USA stock market and the Canadian Real Estate market have peaked. You have ridden that wave as long and as high as it can go. Now is the time, to take that money out of one ride while you are at the top, and put it into the next curve, as it is just starting its early climb.

And with it getting harder and harder for new projects to get permitted and built, it only makes sense that the current inventory will rise in value over the next decade.

Above are some of the best rental properties that are currently on the market. Please contact me directly for more information on these and other, great investment opportunities.

Hope to see you soon.

Come on down baby.

Pura Vida.

Michael Simons

How much are HOA fees in Costa Rica?

Most properties are located in a gated community, with a formal and legal Home Owners Association. The HOA provides the necessary services to run the community; security, administrator, landscaping, garbage pickup, water and sewage systems, accounting, insurance and maintenance of the common areas and amenities (if applied). This of course costs money that must be shared by the property owners in the development, whether it is a condominium or lot / home development.

Most of these are fixed costs. In other words, items like security are the same price per hour or price for 24 hour period in any development. The difference is, if that guard service is being divided by 12 owners or 24 owners, determines many times, the difference in fees between one development and another. Also, developments with multiple swimming pools, larger landscaping to maintain, and other amenities like gym or beach club, will also be the difference in price between one community and another.

Small condo developments with only one amenity, like a community pool, usually run about $200 per month.

Fancier condo developments, with multiple pools, gyms, beach club etc, run around $500 per month.

These fees usually cover EVERYTHING outside of your condo; maintenance of the building and roof; insurance; common areas etc and all items listed above.

Residential home subdivisions, usually run around $150-275 per month, depending again on how many properties are in the project, and what type of amenities are offered. These fees cover everything that is common in the development. In this type of project, the home owner maintains their own personal properties, paying for their owner landscaping, pool service, and maintenance of the house.

Fortunately, we have no snow removal fees.

Compared to North America, HOA FEES are very reasonable. A nice condominium building in a first class city like Toronto or Miami, can easily run $1500-2000 per month.

Many of my clients come from single family house communities in North America where there are NO HOA fees. Everything is paid for and maintained by the government. But in reality, you are paying for these services in the form of property taxes. Take Boca Raton Florida for example. My property taxes when I lived there were 2% of the house value. So a $500,000 home was $10,000 a year in taxes. For these fees, the city of Boca Raton would supply all the necessary services for the area. When the road needed to be fixed, they did it. They would pick up trees that feel down and make sure the street lights were working. So as an owner, I never had to do anything except pay my taxes.

In Costa Rica, property taxes are VERY low. They are .25% of the value. So that same home would only be $1250 per year! This also means that the local municipalities don’t have a lot of extra money. So they use it to maintain the major thoroughfares, schools, hospitals, fire trucks, police etc; the important things. Smaller roads, inside our subdivisions, we have to look after ourselves. So the HOA fees help to maintain the infrastructure within our communities.

When there is a pot hole in the road, we fill it ourselves. We maintain our own water systems, street lights and do upgrades to the internet cables ourselves. And if a cat is stuck in a tree, we just get our own ladder to help the little dude down. We don’t call the fire department.

So if my HOA fees for my house are $250 per month that equates to $3000 per year. Add that to the $1250 and my grand total for maintaining my development and my taxes are $4250. So it is best to just look at HOA fees as a portion of your property taxes. Compared to the $10,000 you would be paying, you are still substantially lower than if you stayed in North America.