Common Questions About Investing in Costa Rica Real Estate

11/11/2024

International Outlook

Costa Rica has emerged as a sought-after destination for real estate investment, offering a rare blend of tropical paradise and robust investment potential. International investors – from high-net-worth individuals and family offices to seasoned brokers and executives – are drawn to Costa Rica’s stable environment and growth opportunities. Yet, even savvy investors have many questions about how to invest wisely in this market. Below, we address the most common questions about investing in Costa Rican real estate, providing authoritative insights into the legal framework, costs, opportunities, and best practices for foreign buyers.

Can Foreigners Buy and Own Property in Costa Rica?

Yes. Costa Rica warmly welcomes foreign investors, and foreigners have essentially the same property ownership rights as local citizens. The Costa Rican constitution guarantees equal ownership rights for foreigners, meaning a non-resident can buy, hold title, and sell property outright in their own name (the same rights are protected for foreigners by law). There is no requirement to be a citizen or resident to purchase real estate – even those on a tourist visa can legally own property. This foreigner-friendly legal framework makes Costa Rica one of the most accessible real estate markets in Latin America for international buyers.

All titled properties in Costa Rica are registered in a centralized National Property Registry, which provides a transparent title system. When purchasing, a notary public (who is also an attorney in Costa Rica) will execute a transfer deed and record the sale in this registry, making the new ownership public and secure. It is imperative to hire an independent bilingual real estate attorney to perform due diligence on the title and draft the purchase documents. A thorough title search will confirm the seller’s ownership, reveal any liens or encumbrances, and ensure you are acquiring clean, unencumbered title.

Beachfront and Maritime Zone Restrictions

The only significant ownership restriction for foreigners involves certain beachfront properties. Costa Rica’s Maritime Zone Law declares that the first 200 meters from the high tide line along the coast are public or concession land. The first 50 meters of shoreline are public and not for sale at all. The next 150 meters is the “restricted” zone where properties are held via government concessions (long-term leases) rather than fee simple title. Foreigners can invest in concession property, but a foreign individual cannot directly hold more than 49% of a concession’s ownership rights (requiring a Costa Rican partner or corporation for majority ownership). In practice, many international investors form a Costa Rican corporation (with a local partner owning at least 51% of shares) to lease properties in the restricted zone. It’s crucial to have legal guidance for any beachfront acquisition to navigate these concession rules. Outside of the maritime zone, however, almost all real estate is titled and available for outright purchase by foreigners with no special conditions.

Ensuring a Safe Purchase: Due Diligence

Although the laws are favorable, investing in a foreign country demands extra due diligence. Costa Rica’s real estate market is less regulated than the U.S. or Europe – there is no nationwide MLS system and no mandatory licensing for real estate agents (the industry lacks a unified listing service). Therefore, investors should enlist reputable professionals to protect their interests. Always work with a qualified real estate attorney (not the seller’s attorney) to verify title, check for any zoning or environmental restrictions, and draft purchase agreements. It’s common to first sign a purchase option or promissory contract with a deposit (held in escrow) while conducting due diligence on the property. During this period, your team will review municipal records, confirm boundaries with a survey if needed, and ensure there are no surprises such as unpaid taxes or building permits issues. Only after all checks out will the closing proceed, at which point the notary attorney formalizes the transfer. By taking these precautions and working with experienced local advisors, foreign buyers can feel secure that property ownership in Costa Rica is as safe and protected as in their home country.

What Are the Costs and Taxes of Buying Property in Costa Rica?

Investors should budget for several transaction costs and ongoing taxes when purchasing Costa Rican real estate. Overall, the purchase costs are modest by international standards. There is a one-time property transfer tax of 1.5% of the purchase price, plus modest registry and stamp fees (around 0.8-1% combined). Legal fees for the closing (notary/attorney fees) are typically about 1-1.5% of the sale price. In practice, it’s customary for buyer and seller to split these closing costs 50/50 – but this can be negotiated. All told, total closing costs usually amount to roughly 3-4% of the property value, which is often lower than in the U.S. or Europe. Notably, real estate agent commissions (commonly 5-6% for residential, or negotiable for commercial) are paid by the seller in Costa Rica, so the buyer generally does not pay the agent’s fee (commissions are typically covered by the seller).

Property Taxes and Ongoing Ownership Costs

Costa Rica’s property taxes are very low – only 0.25% per year of the registered property value (approximately a quarter-percent annually). This annual property tax (municipal tax) is paid to the local municipality and can be paid quarterly or annually. For example, a home registered at $500,000 might incur just $1,250 per year in base property tax. In addition, owners of high-end luxury homes may be subject to an extra “luxury home tax,” a progressive annual tax ranging from 0.25% up to about 0.55% on ultra-luxury properties above certain value thresholds (luxury properties over ~$730,000 are taxed on a sliding scale). Even this tax is relatively modest (for instance, a $1 million villa might owe around 0.3% in luxury tax). Aside from taxes, other carrying costs include utilities and HOA fees (if in a condo or gated community), which are generally reasonable. Notably, Costa Rica does not levy any annual property owner fee or second-home tax on foreigners – you pay the same property tax rates as locals.

Capital Gains and Income Taxes

For many years Costa Rica had no capital gains tax on real estate, but today a capital gains tax of 15% applies to most real estate sales profits. An important exception is that the sale of your primary personal residence is exempt from capital gains tax under current law. Investors should plan for this 15% tax on any appreciation when they eventually sell investment property. It’s worth noting that this rate is still quite investor-friendly – and foreign investors can often utilize strategies to minimize taxable gains (such as holding the property in a corporate structure or deducting capital improvements – professional tax advice is recommended). Rental income from Costa Rican property is also taxable as local income. However, Costa Rica operates on a territorial tax system, meaning it only taxes income earned within Costa Rica – any foreign-sourced income is not taxed by Costa Rica. If you earn rental income locally, it will generally be subject to income tax (with rates for corporations or individuals typically ranging from 10-25% on net income, or a flat withholding in some cases). Many expenses like maintenance, property management fees, and mortgage interest can be deducted against rental income, so effective tax rates on well-managed rental investments can be quite low (owners can deduct many expenses to reduce taxable rental income). As always, consulting a tax professional familiar with both Costa Rican and home-country tax law will ensure you remain compliant and optimize your after-tax returns.

How Can You Finance a Real Estate Purchase in Costa Rica?

Most foreign real estate buyers in Costa Rica pay cash or use offshore financing, as local financing options are limited. Costa Rican banks do offer mortgages to foreigners, but they typically require the borrower to either have residency status or significant local credit history. Local mortgage terms are often less attractive: interest rates in Costa Rica are usually higher than in the U.S. (often around 7–10%+ annual interest), and banks may lend only 50%–70% of the property value, requiring a large down payment (loan-to-value ratios are often 50% or less for foreign borrowers). Loan terms might run 15–25 years. Because of these hurdles, many U.S. and Canadian investors choose to tap equity or financing in their home country (such as a home equity loan or cash-out refinance) to fund a Costa Rica purchase, thereby benefiting from potentially lower interest rates at home.

Alternatively, seller financing and developer financing are not uncommon in Costa Rica, especially for high-end or development properties. In a seller-financing arrangement, the buyer might negotiate to pay, say, 50% of the price up front and the remainder over 1–3 years at an agreed interest rate. Some new resort or condominium developments offer payment plans or financing to early buyers as well. Private lenders and financing companies also exist, catering to foreign investors with shorter-term bridge loans or construction loans (though interest rates will be higher, often in the high single digits or low teens). In any case, if financing is needed, it’s prudent to explore options well in advance. Engage with local banks to understand their requirements, and consider consulting mortgage brokers who specialize in expat financing. As a cash buyer you may have more negotiation leverage on price, but if financing, ensure your deposit and purchase agreements have appropriate contingencies. Also, all international transfers for purchases should be done through a regulated escrow service – standard practice in Costa Rica – to ensure funds are handled securely during closing.

What Are the Best Places and Property Types to Invest In?

Costa Rica offers a diverse range of real estate opportunities, from bustling city assets to beachfront resorts. The right investment depends on your goals – whether you seek rental income, long-term appreciation, or a personal retreat that doubles as an investment. On the commercial side, hospitality and tourism properties are top draws: boutique hotels, eco-lodges, resort condominiums, and vacation rental villas can yield strong returns given the ever-growing tourist arrivals (tourism remains one of Costa Rica’s strongest economic drivers). Coastal areas like Guanacaste’s Gold Coast (Tamarindo, Flamingo, Papagayo Peninsula), the Nicoya Peninsula, and Manuel Antonio/Quepos are hotspots for high-end vacation homes and hotels, thanks to their popularity with international travelers. Investors in these regions can capitalize on both rising property values and lucrative rental income during peak tourist seasons. Land banking and development is another strategy – savvy investors sometimes acquire undeveloped parcels in strategic locations (for example, ocean-view land or tracts near upcoming infrastructure projects) and hold for appreciation or future development. Given Costa Rica’s focus on eco-friendly development, there is interest in sustainable projects like wellness retreats and eco-resorts that blend with the natural environment.

Meanwhile, the luxury residential market is thriving, fueled by an influx of affluent expats and remote professionals seeking the pura vida lifestyle. Gated communities and estate properties in areas such as Escazú and Santa Ana (upscale suburbs of San José), or beachfront luxury enclaves in Los Sueños, Playa Hermosa, and Peninsula Papagayo, cater to high-net-worth buyers. These properties often feature luxury amenities – from infinity pools and solar power systems to concierge services – and can serve as both vacation homes and income-generating rentals. It’s not unusual for luxury homes in prime locations to appreciate steadily as demand for quality outpaces supply. For instance, oceanfront estates in Guanacaste have seen consistent interest from North American and European buyers, and trophy properties can command prices in the multi-millions.

Top Regions for Real Estate Investment

Guanacaste (North Pacific Coast): This “Gold Coast” region is a favorite for foreign investors. It boasts beautiful beaches, a dry tropical climate, and the Liberia international airport for easy access. Areas like Tamarindo, Flamingo, and Papagayo have luxury resorts, golf communities, and high-end condos. Hospitality and vacation rentals here benefit from Guanacaste’s popularity as a tourism and retirement destination.
Central Pacific (Jaco, Manuel Antonio): Closer to San José, the central Pacific coast offers established tourism infrastructure. Jaco is known for its condos and nightlife, while Manuel Antonio is famed for its national park and luxury villas. Both areas attract steady tourist traffic, supporting investments in hotels, vacation rentals, and even multifamily or mixed-use developments.
San José Metropolitan Area: The capital region, including San José, Escazú, and Santa Ana, is the commercial and financial hub. Here investors find opportunities in office buildings, shopping centers, and high-end residential towers. Escazú, often called the “Beverly Hills of Costa Rica,” offers luxury homes and condos popular with executive expats and wealthy locals. With new highway improvements and a growing tech sector, the San José area offers solid long-term demand for commercial real estate and rentals.
Southern Zone and Others: The southern Pacific Zone (Dominical, Uvita, Ojochal) is more boutique and remote, but it’s emerging as an eco-luxury destination with spectacular rainforest meets ocean settings. This area offers opportunities for land investment and eco-conscious developments. Additionally, regions like Arenal and Monteverde cater to eco-tourism and could be attractive for niche hospitality projects. While these areas are less liquid markets than Guanacaste, they can yield high rewards for investors targeting the growing eco-tourism segment.

Regardless of location, investors should evaluate each opportunity’s fundamentals: accessibility (road quality and proximity to airports), availability of utilities, and local market trends. Costa Rica’s market does not have a centralized MLS, so tapping into local expert knowledge is key to finding the best deals and understanding true market values in each region.

Is Costa Rica Safe and Stable for Real Estate Investors?

Absolutely. One of Costa Rica’s greatest strengths is its long-standing political and economic stability. Often dubbed the “Switzerland of Central America,” the country is a stable democracy with over 70 years of peaceful governance and no standing army since 1949. Instead, government resources focus on education, healthcare, and infrastructure – creating a well-educated population and reliable institutions. For investors, this stability means property rights are well-established and respected. In fact, foreign investors are explicitly protected under the law, and there’s a history of zero expropriations; ownership is secure and backed by a strong legal system. Contracts are enforceable in court (though the legal process can be slow), and corruption is relatively low by regional standards.

From an economic perspective, Costa Rica has a diversified economy (tourism, agriculture, technology, and services) and a strong track record of growth. The currency, the Costa Rican Colón, is stable and freely convertible, with US dollars widely accepted in real estate transactions (many property deals are actually priced in USD, which helps insulate foreign investors from currency risk). Repatriation of profits is generally straightforward – foreign investors can freely remit rental income or sale proceeds out of the country, subject to standard bank transfer regulations. Additionally, Costa Rica offers a relatively high standard of infrastructure for Latin America: modern telecommunications (high-speed internet is common even in many coastal areas), a solid road network that’s continually improving, and quality private healthcare and schools that attract expatriates. Recent infrastructure projects, such as highway upgrades and expanded airport facilities in Liberia and San José, further enhance connectivity and long-term property values.

In terms of personal safety, Costa Rica is considered one of the safest countries in the region. It enjoys a low violent crime rate and is generally very welcoming to expatriates and tourists. Like anywhere, petty crime can occur, so investors should implement basic security at properties (many upscale homes have alarm systems or community security). But overall, thousands of foreign property owners live part- or full-time in Costa Rica without issue, enjoying the country’s famous “Pura Vida” lifestyle. For added peace of mind, many gated communities offer 24/7 security and managed environments. The combination of political stability, friendly locals, and a well-developed expat community makes Costa Rica a safe haven for investment.

Do You Need Residency to Buy Property, and Can Investing Get You Residency?

No, you do not need to be a resident to buy property – ownership and residency are separate. Foreigners can purchase and own real estate in Costa Rica with just a tourist visa. That said, many investors who plan to spend significant time in-country or retire there pursue residency options. The good news is that Costa Rica has an investor-friendly residency program. By investing a certain minimum amount in Costa Rica (qualifying investments include real estate), you can apply for the Inversionista (Investor) Residency. As of recent laws to attract foreign investment, an individual who invests $150,000 or more in Costa Rican real estate (or a business or certain assets) is eligible to apply for temporary residency (the threshold was lowered from $200k to $150k). This investor visa grants temporary residency for an initial period (typically 2–3 years) and can be renewed; after 3 years of maintaining your investment and temporary status, you may qualify for permanent residency.

Securing residency by investment offers several perks. Residency lets you stay in Costa Rica year-round without border runs (tourists are generally limited to 90-day stays). It also provides easier access to local banking and credit, the ability to work or operate a business locally, and pathways to eventually obtaining citizenship if desired. Moreover, under a recent law, new investor residents enjoy incentives like duty-free import of household goods and even tax breaks: for example, the law grants a one-time exemption on import taxes for your personal household items and up to two vehicles, and a partial exemption on property transfer taxes for properties you buy during your residency period (new incentives have been implemented to encourage foreign investors). It’s important to note that you don’t automatically become a tax resident by obtaining legal residency – Costa Rica will tax you only on local income, as mentioned, unless you spend enough time to be considered a tax resident. For many high-net-worth individuals, living in Costa Rica can be attractive from a tax planning perspective, since foreign-sourced income (like investments or business income from abroad) isn’t taxed locally.

Other residency categories exist as well, such as Pensionado (for retirees with a pension income) or Rentista (for those with sufficient passive income). These have different requirements (e.g. pensionado requires $1,000/month in lifetime pension income). But the investor route is straightforward if you’re purchasing real estate above the threshold. Many investors find that gaining residency enhances their long-term investment – it’s easier to manage your property when you can come and go freely. Even if you don’t seek residency, rest assured your property rights remain the same. But if you do, Costa Rica’s policies make it relatively easy to settle in this friendly country and enjoy the benefits of living in paradise.

What Risks Should Real Estate Investors Watch Out For?

Like any investment, buying real estate in Costa Rica comes with certain risks, but with proper precautions these can be managed effectively. One risk is the lack of a centralized MLS and formal licensing – this means the onus is on the investor to ensure they’re getting accurate information and fair deals. Property valuations can vary, and an overpriced listing might not be obvious without local comparables. It’s essential to work with experienced local brokers who know the market and have a good reputation. Look for agents who are members of professional associations (like the Costa Rica Global Association of Realtors) or who come recommended by other investors. Always be cautious of deals that seem “too good to be true,” and if you’re not fluent in Spanish, ensure you have translation for any documents you sign (by law, the official transfer deed will be in Spanish). Never skip the step of having your attorney verify the property’s title and survey plan in the National Registry. Occasionally, issues like old liens, boundary disputes, or even forgery have cropped up in the past for unwary buyers – but a competent lawyer will check all these issues.

Another consideration is environmental and regulatory compliance. Costa Rica is renowned for its environmental protections. If you plan to develop land or even remodel, you may need permits from local municipalities and environmental agencies. Some properties, especially raw land in rural areas, might have protected forest or be in a designated maritime zone or wildlife corridor where building is restricted. Always inquire about any zoning plans or environmental restrictions on the property. Water is another key factor – in some rural areas, securing a water letter (guarantee of water service) is crucial for getting building permits. Ensuring your property has legal water and electricity access is part of due diligence. Coastal properties should also be vetted for any concession status as discussed earlier. And if buying a condo or in a community, review the homeowner association bylaws and financials to ensure the project is well-managed and has no looming issues.

On the ownership side, foreign investors should be aware of asset planning and liability. It’s often advised to hold property via a local corporation (Sociedad Anónima or SRL). While not mandatory, a corporation can provide liability protection and also make it easier to transfer the property (you can sell the corporation or add partners without changing the property title). It can also be useful for inheritance planning, and some utilities or services prefer dealing with a corporate entity. The annual maintenance cost for a corporation is low (usually a few hundred dollars for the corporate tax and registered agent). Finally, consider your exit strategy: the real estate market in Costa Rica is less liquid than major U.S. cities, so selling a property might take longer, especially if it’s a niche luxury home. Be prepared for a marketing period and work with brokers who have international reach when you decide to sell. Despite these risks, thousands of foreign investors have successfully profited from Costa Rican real estate. By being thorough, patient, and getting the right local guidance, you can mitigate these risks and enjoy the substantial rewards of investing in this market.

How Should You Choose Real Estate Professionals in Costa Rica?

Building a trustworthy local team is perhaps the most critical step for foreign investors. Start with a qualified real estate agent or broker who specializes in the type of property you seek. Since real estate brokerage isn’t tightly regulated by the government (no license required), look for signals of professionalism: membership in the Costa Rican Chamber of Real Estate or NAR affiliations, a solid track record and client testimonials, and deep knowledge of the area. A good agent will not only find suitable properties (including off-market opportunities through their network) but also provide guidance on market values and rental prospects. They should be able to explain local market quirks, such as why one beach town commands higher prices than another or what upcoming infrastructure might boost an area’s values. Don’t hesitate to interview multiple brokers until you find someone who communicates well and understands your objectives.

An independent real estate attorney is indispensable. Choose a reputable attorney who specializes in real estate transactions – many will be part of well-known law firms in San José or regional firms in popular areas like Guanacaste. Your attorney will handle title research, draft or review contracts, set up any corporate ownership structure, and ensure a smooth closing. They will also coordinate with a secure escrow service to handle deposit and purchase funds. In Costa Rica, it’s standard (and highly recommended) to use a third-party escrow company to hold all funds until closing, protecting both buyer and seller. Never agree to pay funds directly to a seller before the property transfer is properly executed. Using escrow also helps satisfy anti-money laundering requirements by documenting the source of funds, which is important for larger transactions.

You may also consider obtaining title insurance, offered by international companies for Costa Rica properties. While a proper legal due diligence makes title fraud unlikely, title insurance can provide extra peace of mind, especially for high-value transactions. Finally, if you’re not living full-time in Costa Rica, engage a reliable property management firm to look after your investment. Many investors rent out their homes when not in use – a professional property manager will handle marketing to tourists, guest screening, maintenance, and bill payments on your behalf. Management fees typically range from 10% to 20% of rental income, which can easily pay for itself by maximizing your occupancy and keeping your property in top condition. Even if you don’t rent, having a manager or caretaker check on the property, pay utilities, and maintain the garden will protect your asset. By assembling a strong team – agent, attorney, escrow, and property manager – you effectively create an end-to-end support system for your real estate investment, ensuring the process is as seamless and secure as possible.

Investing in Costa Rica real estate can be both financially rewarding and personally enriching. The country’s combination of stable governance, favorable laws for foreigners, low taxes, and a booming tourism sector creates a fertile ground for high-return investments. From idyllic beach villas to commercial eco-resorts and city developments, opportunities span a broad spectrum. The key to success is being well-informed and well-advised: understanding the legal landscape, knowing the costs and benefits, and partnering with seasoned local professionals. With proper due diligence and strategic planning, international investors can confidently navigate the Costa Rican real estate market and potentially enjoy not only strong returns but also the unparalleled lifestyle that comes with owning a piece of paradise.