Home vs Land: What should I buy in Costa Rica?
Are you deciding whether you should buy an existing home or just a piece of land in Costa Rica? Many people want to live in a home that’s perfectly suited for their family size, goals and design preferences. Here are three reasons, however, why expats looking to move to this beautiful country might consider buying a home built by someone else.
#1 Up-front Cost Considerations
In many cases, buying a pre-existing home might be more cost effective than purchasing land and building yourself. The single most important factor is the steady increase of construction costs in recent years. Homeowners who built 10-15 years ago were able to take advantage of cheaper manual labor and materials. For example, a home that cost ~$400,000 to build in 2005 might now cost $600-700,000. One home available for sale in Tierra Pacifica is a good example: it measures 4,500 square feet and has 4 bedrooms, 4 baths, a separate guest house, pool and third story terrace. The owners have listed for $429,000, a price that will leave them with about as much as they invested in the home almost a decade ago.
Today, the home’s cost would include:
- $60,000 for the land (a 1.5-acre valley view property)
- $540,000 for construction (using $120 per square foot, a reasonable estimate for current costs in this particular community, where building standards only allow for high quality construction)
- $15,000 for landscaping
- $15,000 for pool
- $10,000 for furnishings
Total current cost to build: $640,000 – some $210,000 more than the current asking price.
#2 Time and Rental Income Lost
You will likely spend one year building your home in Costa Rica, as a minimum. That’s one more year you could spend living comfortably in your beachside home, enjoying amazing surf instead of emailing with your builder and stressing about shipping down your furniture.
If you’re planning on renting your property for part of the year, you will transition from spending money to cover maintenance costs to generating income that much faster. An established rental history can be a huge asset for a home, accelerating your rental business. Return clients make up a large part of annual business for rental properties; new homes must be rented for years to build up the return clientele that will make up the bulk of your rental income.
#3 Headaches and Heartaches
No matter where you build in Costa Rica, the construction process can be complicated, with possible delays and cost overruns that turn your tropical dream into a painstaking effort. (We highly recommend working with an extremely reputable contractor, such as Noswell Construction, to ensure success in the building process.) There are many unfortunate foreigners (and Costa Rican nationals alike) who have had terrible experiences with dodgy contractors, permit issues or any variety of other challenges, and many of their construction stories end with no home and a huge investment wasted.
Buying an existing home obviously eliminates this risk, but the home’s existing problems and potential repair needs shouldn’t be ignored. Luckily, many homes that are for sale can also be rented, so the option for a “trial run” stay can help buyers get a good feel for the home and its quirks before making a serious investment. In any case, professional builders and other contractors can and should be brought in to check a home and all its components prior to closing the sale.
All in all, for expats who may be nervous about navigating the construction process in Costa Rica, finding an existing home can be a great option to have a much smoother, more predictable transition to life in the tropics. They might also be able to create equity by finding a good deal, so it’s definitely an approach worth considering.