Thursday, February 23, 2012

Costa Rica Real Estate Market Trends

Costa Rica Real EstateCosta Rica is situated in Central America to just south of Nicaragua and north of Panama. This area possesses some of the beautiful beaches, wildlife, waterfalls, rain forests and numerous thundering rivers, and excellent lakes for windsurfing and boating.
Costa Rica Real Estates are the private companies’ deal in all types of real estate business in Costa Rica like selling and purchasing of property, rent out a property and many other options. Within a last few years Costa Rica real estate has turned into a profitable real estate business. American’s CIA declared it is among the top 5 best real estate investments. So people start investing their money here for better out return and to get huge profit on investment. In fact Costa Rica is a 'Central American success story', and the government of this country is keen to expand on the country's success and have announced the implementation of a seven year plan for the economic expansion of the country.
Why someone invest in Costa Rica? The answer lies in the fact that it is the most safe and beautiful part of the Central America having very low crime rate as compared to other countries of United States. Similarly the tax rates, investment terms and conditions and other property ownership laws are also very lenient and easy to follow.  Costa Rica land investment has seen average gains of 30% per year for 10 years and many investors in the right location have doubled or tripled their investments quickly and continue to do so.
Costa Rica recently signed Central American Free Trade Agreement (CAFTA), so investments in the business sector are likely to increase. Most Costa Rica real estate is registered with the Public Registry through a computer system known as the Folio Real. Investors should perform a title search in the Folio Real before considering any property purchase. The title search can also be done at the Public Registry office in San Jose (Capital of Costa Rica).  Different websites and blogs of Costa Ricareal estate are also live on internet  where many buyers and sellers from all over the world communicate with each other and real estate agencies guides them properly about all the issues and give them information regarding investment in this area.
Costa Rica real estate agencies also deal in commercial real estate business here in Costa Rica. Many groups of people combined together and made a huge investment in commercial projects. Mainly there are two areas for investment. One is wild life refuge and other is hot spring resorts. I would suggest you if you have a handsome amount of money and you want to invest it in a business then make up your mind and invest in Costa Rica realestate

Tuesday, February 21, 2012

Costa Rica Real Estate

Costa Rica is very beautiful country of Central America and is situated just south of Nicaragua and north of Panama. Costa Rica possesses some of the beautiful beaches, wildlife, waterfalls, rain forests and numerous thundering rivers, and excellent lakes for windsurfing and boating.
Costa Rica has taken a shape of strong Real Estate Business. Many private and government real estate agencies opened their offices in Costa Rica and their responsibilities include guiding their customers about investing in Costa Rica Real Estate business and serving their customers with highly respect and professionalism. If someone wants to sell his property in CostaRica Real Estate then as a seller he should require to have a good presentation of his or her property, photos, creatively written description and he would also ensure that all the real estate agencies in Costa Rica  has the required information of his or her property. Similarly if anyone wants to buy a property in this area like houses, lots, villas, condos then he should contact with the Costa Rica Real Estate agencies which would guide them properly.
Costa Rica real estate agencies take the advantage of modern means of technology and improve their standard and status by building the websites, blogs, and forums etc where all the information regarding Costa RicaReal Estate property is present i.e. property rates, buying and selling options, rent a property options etc. User just goes to the website and access all the necessary information from it. Similarly online blogs and forums are also formed where buyers and sellers from different area of the world communicate with each other and discuss the issues regarding Cost Rica Real Estate, bargain with each other and take help from Cost Rica Real Estate agents.
Real Estate in Costa Rica has always attracted a fair number of people of North America, Europe and Canada. In this area the Motto of Costa Ricans is “Pura Vida” means Pure Life. So people of various countries and states prefer to invest their money in Costa Rica where they get a huge profit by selling and purchasing the property.
As far as the commercial Real Estate in Costa Rica is concerned it is also increasing day by day.  Large number of group of people together invest their money in huge projects like building Golf area, constructing restaurants and motels etc form where they get high out returns.
At the end if you have the plan to invest your money and you are in search of high profit then make up your mind and start investing in Cost Rica and stay connected with the Cost Rica Real Estate. I ensure you that this is the best decision you have ever made. 

Thursday, February 9, 2012

“Cash Is King” In Costa Rica Real Estate

The inspiration for this post came from a recent article fed from LinkedIn.  The title was “38% of Homes Purchased in 2011 Bought with Cash.”  I thought to myself,38%?!  That number seemed high, so I did I little more research.  According to another article in USA Today, that number was as low as 12% just three years ago thus confirming a significant jump in cash purchases. According to the article, investors in the U.S. are keenly tuned intoyield or ROI.  That return on investment is realized through improving and flipping properties or some variation of a rental/income strategy.  The latter has become increasingly popular for those foreign retirees and families who are looking to relocate here.
Got Financing?
All of that got me thinking about our Costa Rica real estate market.  Land purchases financed through a Costa Rican bank (at least in The Zone) was virtually unheard of when I started back in 2006. For a variety of reasons, most buyers had cash before the downturn.  Four+ years later, the picture is very clear.  Property values around the world decreased (dramatically in some areas), and buyers couldn’t use the equity in their homes, not to mention the banks tight grip in their purse strings.
Recently (think- the past two years), we’ve seen an increase in the number of buyers who only have a portion of the purchase price.  These new buyers, typically foreign investors, need the seller to carry paper.  For those new to real estate investing, carry paper means the seller is willing to finance part of the purchase price and receive payment (often with interest) over time.  This legal arrangement is completed by a lawyer in the form of a trust or a mortgage here in Costa Rica. If the buyer defaults on the terms of deal (e.g., misses payments), a legal process can be initiated by the seller… just like a bank in a foreclosure process, although quicker. For more information on this topic, check out our article on Seller Financing Opens The Door To Home Buyers.
I don’t have a number, but I’d bet the number of non-Tico bank-financed purchases in the area is less than 1%.  Interest rates on Costa Rican bank loans, when you can get them, are more than double what you currently find in the States.  There are various reasons for it, but I’ll leave that for another article.
The good news is… buyers need financing and some sellers need to sell, so seller financing continues to increase in The Zone.  Some deals don’t even include interest, simple an extended term to complete the sale.  When there is interest and an extended term involved, the number of years almost always tops out at 5 years.  There are real estate transactions taking place in The Zone primarily because (1) land values are now around half of peak values and (2) both parties are getting creative, as described above.
There are a select few (and I mean few) who are flipping houses here in The Zone, however, many investors are looking for income generating properties, both hotels and vacation rentals.  The yield varies greatly, but there is opportunity to make a nice living in the hospitality here in The Zone.
But, What Does All Cash Mean For Buyers?
It means you need to think of Costa Rica, at least for the time being, as a place to land bank or move your cash. There are economies and currency (think- Europe and the Euro) with a cloudy future.  The current wave of concern is so real, we have recently seen an uptick in European investors and relocators contact our office.  Without getting metaphysical, I also wonder how much 2012 is playing into people’s decisions. We call this group “End Of The World Buyers.”  Good and abundant water sources, good environments for growing crops, and pleasant temperatures throughout the year draw these type of buyers to Costa Rica and our area in particular.
Whether this trend continues or declines remains to be seen.  Simple put, Costa Rica, especially the Costa Ballena, is a wonderful place to relocate for both economic and lifestyle reasons.  There are many, happy foreigners living either full time or part time in Costa Rica.  If you are interested in why so many expats are buying and relocating to The Zone, this articleWhy Buy Property In The Zone offers a few of the top reasons.

Costa Rica Real Estate

“How much is my property worth?”
Right from the Guys in the Trenches.  Here is how we evaluate property, and where we/I think property values are going. Please note that this article is written by me, Ben, and that these ideas can vary from one real estate professional to the other, even within a single office. Rod may have contrasting ideas on these points.

Replacement Cost:

The starting point the Costa Rica real estate professional uses in order to evaluate a property in today’s market is to calculate Replacement Cost.
Raw Land: We assign a value to the land. This value is based on market knowledge – ongoing efforts to sell, and of course, actual sales of land in the area. The value of a piece of raw land will get a surprisingly consistent evaluation amongst various agents polled. However, I’ll be putting a bit of a challenge on this point in a bit.
Construction Value: After establishing the value of the land as though there were nothing on it, we then measure the square footage of the house and assign it a price per square foot. Such is the life of a Costa Rica expat real estate agent. We live in a world where land size is referred to in metric (square meters – hectares) and houses in U. S. units (square feet).
The square foot value of a house is going to be bracketed somewhere around the $100.00 (USD) per foot. Contributing factors to this evaluation are: finishes, distance up the hill, steepness of the hill.
We are assuming that the basic foundation, drainage, and wall construct are dictated by universal laws that aren’t negotiable from one house to another. In Costa Rica you’ve got a few material choices, but the prices don’t really vary that much between them.  Concrete block is likely the most common. Cement panels are gaining some traction. Structural insulated panels are used by a number of builders. The use of wood in building is growing with Balinese architecture enjoying a fashionable presence in the market.
The construction of the roof can vary quite a bit and consequently can affect the per foot value. I know of one house in the zone that has a poured cement roof. This is cool stuff – absolute quiet during heavy duty rain storms, but we are talking HEAVY.
Less expensive roofs vary from the poured cement, to insulated sandwich layers, to tin with a dropped ceiling (the noisiest).
It is, arguably, the finishes that have the most direct effect on the value of the house. Granite counter tops – really fine plumbing fixtures, tiles and the details of the pool will push the bracket into the “over $100 per foot” range.
A pool adds $20,000 to $30,000 to the price.
Here is an example evaluation that I just did yesterday in my offce:
Raw land, $110,000
A 2,600 square foot house at $120 per foot. This particular house is located in an area that requires four wheel drive, so the shuttling of materials increased the per foot price quite a bit -
+ $110,000
Pool – $30,000
Replacement cost – $455,000
So, what do we do with this number? These people have dedicated a year of their lives to building this house.  They flew to Costa Rica every 6 weeks to check in on the progress and of course, make the innumerable decisions that need to be made in such a project. What is that worth?
Well, frankly, this is the part that the Costa Rica real estate market doesn’t really pay much heed to. The big consideration at this point is, do we offer to sell your house at replacement cost, above replacement cost, or below? In today’s world, pushing the price above replacement cost is a function of the real estate Guy’s market insight. We are in a Buyer’s Market.
The agent will consider the desirability of the property. The view, the access, the privacy, the air motion and so on – the general niceness of the property are all considered.  Based on this criteria, there can be some upward movement from the raw replacement cost.
Here is where it can get a bit strange. There are some houses that are priced belowreplacement cost.  How can this be?!? The land has an asset value, and the construction costs are fixed and don’t vary too awfully much from one source to another.
I am working on a new theory about this phenomenon in evaluating Costa Rica real estate
In my ruminations of this topic, I have come to conclude that there are two rational areas that we might have misjudged the value of a property. There is a third that can simply be explained by the seller being intensely motivated by desperation.
The Rational Considerations
Consideration #1 – The seller ran amok with making their construction and design a declaration of their individuality and so nobody in their right mind is going to want to live in such a structure. In order to buy the property and then live in it, the buyer will be taking on some serious expenses in order to make it livable for their purpose. The sale price is going to have to be adjusted down to accommodate these expenses.
Consideration #2 – I got the value of the land wrong. It’s not really worth what I said it is. This is the one that gets me, and brings about some interesting questions. Is land value here in Costa Rica really lower than what we are willing to admit? Hmmmmm…
What is NEVER factored in:How much the seller has into the property.
I’m going to write more on evaluation of property in our Costa Rica real estate market place. We have had some interesting discussions as of late with the vibrations of increasing buyer activity here in The Zone.


We all should be using business and social networks to be prospecting for investors and clients but once you find someone or they find you, it can be difficult to exchange contact information and tedious to use webmail within the social/business networking system.
Do you find the WEBMAIL interface on Linkedin or other networking sites to be inefficient, the inbox search function to be terrible, find it tedious to constantly ask people for their contact info or give them yours, and just don’t have time to add people to your contact database? Here are some tips!
  1. First and foremost, always include your signature in every single email you send out to anyone you ever want to hear from again. A default signature can be created in any email program you use whether it is Outlook, Gmail, Yahoo Mail, etc. It is 2010 and I receive business emails every single day from people who do not have their contact information at the bottom of their message. Not only do I find it frustrating but I immediately question their level of competency as a business person. Be professional and use a signature!
  2. Every word processing program such as MS word has a multiple item clipboard today. Always have a customized signature available on your clipboard with not only your contact info, but a message stating: “To insure we can continue to build a valuable business relationship, please include your contact information when you respond to me.” Keep your clipboard minimized all day as you work and have the signature available to paste into every social and business networking outbound message you send. (We are all in a hurry and don’t want to type it all in replying for instance to a message on Linkedin) Since these sites don’t want you to leave, you have to make an effort to communicate offline and they know that. Beat them at their own game!
  3. If you don’t have a signature and text grabbing tool, its time to get started. I use a great time saving free software program called copy2contact which lets you grab, review, and save new contacts and appointments in just seconds. It works withSalesforce, Blackberry, Outlook, NetSuite, and Palm Desktop. Linkedin also has free productivity tools where you can get a text grabber, and create a beautiful signature with professional graphics. I think these free tools are an EXCELLENT free find! Click on the “tools” link at the bottom of any Linkedin page to find them another time.
  4. I have all my webmail on Linkedin filtered and forwarded to a folder called Linkedin within Outlook so I can grab peoples signatures and send my signature whenever I reply.
If you have other tips to add, please be my guest. Please consider becoming a follower of my blog as well.
To your wealth!
Russell Roesner *President*Equity Coalition*415 680 3454*San Francisco, CA

Raising Money for Structured Real Estate Deals

As I’m sure you know by now, my focus is creating structured bridge financial transactions for real estate investors. This article will attempt to explain common industry terms and how a deal is structured. I can’t count how many times I hear the term investor used to describe 3 different players in the same transaction. For example, is the investor the equity participant, is it the lender, or is it the real estate operator setting up the deal? Let’s go through it step by step by describing a typical transaction.
Sponsor: The company or individual who is looking to raise money and has identified the real estate to be purchased or improved.
Investor: The money partner, sometimes an individual, sometimes a company, (private equity group) who is putting up the cash above and beyond leveraged or bank money. However, if 100% of the money needed to complete the project is debt, then the term investor might be used to describe the lender or debt partner.
Lender/Debt partner: The institution putting up the loan.
Structured Financial Transaction: Any deal structure where debt and equity are both used together to finance a deal.
Debt: The capital piece structured as a loan. It could be based on a percentage of purchase price (LTV or loan to value basis) , the future value once the project is finished, or it might be based on the cost to purchase in combination with the improvement costs and project expenses (LTC or Loan to cost)
The most asked question I hear is, “What does the equity share partner want in return for their money?” There are an infinite number of ways to structure a deal but I’m going to explain the two most common ways to calculate that number.
Pari Passu: Example 1: $1 million is the total cost projected for a purchase rehabilitation project on a 5 unit apartment building.
Use Of Funds: $595,000 purchase price*$250,000 for rehabilitation*$90,000 for Real Estate Broker Fees*$15,000 for mortgage brokerage fees*$25,000 for interest reserves*$25,000 for legal costs. Let’s say the sponsor has secured a $600,000 loan and put up personal guarantees for that loan. There is now $400,000 still needed to cover the project.
If an investor brought in $200,000 total and the sponsor put in 200k of his own money, then the deal would be split 80/20. 80% going to the sponsor and 20% going to the investor. 600k bank loan credited to sponsor. 200k credited to sponsor. 200k credited to investor = 80% to the sponsor and 20% to the investor.
Pari Passu: Example 2: $1 million is the total cost projected for a purchase rehabilitation project on a 5 unit apartment building.
Use Of Funds: $595,000 purchase price*$250,000 for rehabilitation*$90,000 for Real Estate Broker Fees*$15,000 for mortgage brokerage fees*$25,000 for interest reserves*$25,000 for legal costs. Let’s say the sponsor has secured a $600,000 loan and put up personal guarantees for that loan. There is now $400,000 still needed to cover the project.
If an investor brought in the 200k and the sponsor brought in 200k, the deal would be split 50/50. Why the big discrepancy? Some investors count debt brought into a deal as money contributed by the sponsor while others do not. In this example, the 400k remaining gets 100% of the deal so 200k equals 50% of the deal and the sponsor and investor split the deal 50/50.
Understanding the subtle deal points and perspective of both sides of a deal empower both an investor and a sponsor. If you are providing the service of helping raise capital for your clients, you earn your commission and placement fees by helping structure the transaction through understanding the deal points.
Preferred Return: Many sponsors offer a preferred return to their investors based on an annual percentage. This is the investors guarantee. All profits beyond the preferred return can be sliced and diced based on negotiation. Some sponsors keep 100% of those profits. Some do a split.
There again are many more deal points when structuring a real estate investment but the Pari Passu and Preferred return examples are a great place to start. Remember, if a sponsor is looking for investment capital and is asking for more than a lender will loan, typically more than 60% LTV or LTC, then the investor who brings money to the table to bridge that gap deserves a higher return than the bank. If the sponsor is asking for equity, they will have to pay for it.
To your Wealth!
Russell Roesner
Equity Coalition President
San Francisco, CA 94121

Hard Money-What is it and how to get it

Hard Money is a term for a loan product offered by private companies instead of the banks. It is also referred to as Private money, Private lending, and Bridge money. Usually the capital comes from private investors that live locally to where the loans are being made. Although the loan process is similar to a bank, there are distinct differences.

First let’s compare bank money with hard money:

Bank Money Drawbacks
Bank Money Benefits
Hard to get
Low interest rates: 4-6%
Takes a long time (45-60 days)
Low Closing Costs: 1-2% of loan amount
Minimum Credit Scores Imposed
Long Term: Up to 40 years
Property must be in good condition
Small down payment: As little as 3%
Only 4-6 loans per person
Available Nationwide
Personal Guarantee is required
Money is always available
Borrower cannot be a company
Hard Money Drawbacks
Hard Money Benefits
High interest rates: 9-15%
Easier to get and to qualify
High closing costs: 4-8%
Quicker to close: 15-30 days
Short Term: 12-60 months
Credit not as big of a factor
Limited Area: Only lend locally
Borrower Can be a company: LLC, Corp
High down payment: Up to 40%
Personal guarantee variable
Property can be in any condition
Why use hard money?
Most borrowers who use hard money do it for the following reasons:
  • They personally cannot qualify or the real estate does not qualify for a regular bank loan.
  • They do not have time to wait for a bank loan to be approved.
  • They want to borrow money with a business entity and/or do not want to personally guarantee a loan
Even though the rates can be high, hard money can be quite useful when an investor has an opportunity to buy a property for a low price and sell it for a profit. Simply put, hard money even with its drawbacks can be a great tool in providing the capital necessary to be a real estate investor.
How do find a private lender and get a hard money loan?
Please review the loan programs section of our website where you can learn more and inquire about a getting a hard money loan. Our contact information is below.
Russell Roesner
Equity Coalition President
San Francisco, CA 94104
415 680 3454