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HomeBuying property8 questions to ask before buying a vacation home in Costa Rica

8 questions to ask before buying a vacation home in Costa Rica

If you’re considering buying your dream vacation home in Costa Rica, hopefully you’ve already considered other countries and ruled them out. And hopefully you’ve scouted multiple locations within Costa Rica to be sure you’re buying in the right place.

Do you want Costa Rica to be your vacation destination for the next 10 or 20 years? If you’re sure that’s what you want, you need to figure out if you want your vacation home to be on the beach, in the mountains, in the jungle or perhaps in a city.

If you’re looking for adventure, national parks and other attractions like bird-watching, you may want to choose the Central Valley, where you would have central access to national parks, Caribbean and Pacific beaches and natural attractions like Arenal and Monteverde. But ultimately only you can determine what will work for your tastes, including your desire for isolation and your tolerance for heat and bugs.


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Whether you are a tourist, a foreign resident or a citizen, here are eight questions to ask before buying a vacation home in Costa Rica.

1. Can you afford it?

Are you a cash buyer? You might think that puts you in a strong position to negotiate a deal on a vacation home in Costa Rica. It might, depending on the location and whether you find a motivated seller. Property taxes are low and if the property does well as a vacation rental, the seller might not be so motivated to accept a low-ball offer. Ask your real estate agent for orientation.

Find out all about the annual maintenance cost, HOA fees, property tax, corporation tax, luxury home tax (if applicable), closing cost, home insurance, property management fees and any additional costs that might come up when you make the purchase.

2. Do you need financing?

If you don’t have the cash to buy a vacation home in Costa Rica, and you will need a mortgage, it is important you know that you have to be a legal resident of Costa Rica to be able to get any bank financing. Banks in Costa Rica typically charge between 6.5 and 8 percent annual interest in U.S. dollars, 1.5 percent for formalization, and other costs. Private financing is available but usually runs around 12 to 18 percent in annual interest.

Your real estate agent might know of vacation homes for sale that are offered with some owner financing, and in some cases buyers can use an equity loan on their property back home. If you are buying the vacation home strictly as a rental unit, you can use your retirement funds, such as a 401(k) or self-directed IRA.

3. What about home security?

If you’re not going to be on the property most of the time, the property needs to be secure enough that you don’t have to worry about theft. Maybe you want a caretaker on the property all the time, so you will need a caretaker’s home or room at least. Or do you prefer a condo, so you just pay your HOA fees and don’t have to worry about anything? Otherwise, you will want to know what the cost is for a caretaker’s salary, social security, insurance, etc.

4. Are there restrictive rules?

Are there any restrictive rules or bylaws that can stop you from doing certain things that are important to you? Maybe you want to bring your pet with you during your vacation, have a barbecue on your balcony, rent your vacation home out to third parties or bring your grandkids, but the rules don’t allow it. Get a copy of the CC&Rs (covenants, conditions and restrictions) or bylaws before you sign any purchase agreement so that you’re aware of any restrictive rules that might make you think twice.

5. Do you want to rent it out?

In case you plan to use your home as a vacation rental, it is very important to make sure you purchase in a popular vacation rental site, unless the income is not important to you. Try to find a few property management companies; ask your real estate agent for recommendations.

Before you make a final decision on your purchase, show the property to a few property managers and ask for their advice. Do they think the unit would do well as a vacation rental? How much would it rent for? What additional investment might be necessary to turn it into a hot vacation rental investment?

6. Do you need a property manager?

If you plan to use this home in Costa Rica as a vacation rental, you will want a local expert on the ground who can act as a professional property manager. A good property manager can tell you how much your vacation home can be rented for, how and where to market it, how to pay your bills, what powers of attorney are needed, etc.

The property manager can also inform you about the costs of home maintenance, gardening, insurance, painting, repairs or HOA fees.

7. What are the tax implications?

Your real estate agent or property manager can assist you in finding out how much the property tax is and whether you need to pay corporation tax and/or luxury home tax. You will need to ask your CPA all about the burden of having foreign income and how that would affect your tax payments at home.

8. What kind of legal advisor do you need?

If you are a cash buyer, you have the right to choose the legal advisor who will transfer the title for you. If you will get a mortgage, usually the mortgage holder will insist on using his/her lawyer for the closing.

You will need a lawyer who is also a notary public to close on the purchase of your vacation home in Costa Rica. Pick one who is fully bilingual, specializes in real estate and has a registered escrow account, or uses a registered trust company with an escrow account.

Ivo Henfling founded the American-European Real Estate Group, the first functioning MLS in Costa Rica with affiliate agents from coast to coast, which has been in operation since 1999. Read his blog at or contact Ivo at (506) 2289-5125 / 8834-4515 or at


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