Good morning, group,
Hal and I are heading to the Dominical area today for several days. We are going to investigate developments for a buyer in the states.
I wanted to ask for two things, please. First, anyone alive down there? I would love to meet you. We will be in Matapalo the first night… then working our way south from there.
Second, if you have lots for sale down there, I'd love to hear about them. The buyer is looking for a lot to hold for a time, then build. I've made contact with several smaller private developers, as well as a few of the big ones. We'll see all we can see.
Ok, three things. I'm open for information, good and bad. I am a real estate broker from Key West, 12 years running my own successful brokerage (of course, if you had a pulse and worked in Key West real estate during 2002-2004, you were successful…) I know that market. I need an education in this one. Rants and raves welcome.
Thank you. Looking forward to seeing this part of the country – we've not been south of Manuel Antonio yet. Pura vida!
What I left out is that I'm a jaded real estate broker and will be going down there with radar crackling, red flags waving. Anyone who reads the message on the board will read all this – I left my blog address.
If you are a Costa Rica real estate salesperson or developer, read on at your own risk. Criticia Voluptua Right-Right (my alter ego who looks something like Cruella) speaking here. I know there are experienced, competent, honest, hard-working agents out there; I've already met and worked with good ones here, as well as in the states. But my overwhelming experience is that we are wildy outnumbered.
I distrust real estate salespeople and developers. Guilty until proven innocent, as far as I'm concerned. ESPECIALLY newly rich developer/real estate agent types spawned in a hot market. These guys (and the really crooked ones are mostly guys)(so sue me) are generally short-sighted, void of all compassion for their earth and their species, and just not that smart. Prove me wrong. Please.
The real estate business is incredibly easy to get into. In Florida, all you need is to be able to read (I would have said "literate" but you just have to be able to read), spend eight days in a mind-numbing excruciatingly boring class, take two tests that anyone with a fairly decent short-term memory can pass, the wherewithal to drum up about $5,000 (for class, books, tests, a computer and business cards) and, voilà, you are in business.
It's even easier in Costa Rica. Here, there are no tiresome licensing laws, no tests, no clubs to join, no literacy requirements. Nada. You just say, "I'm a real estate salesperson." And poof you are one.
No wonder the real estate business attracts the lower element. Name one other profession you can get into so quick and easy and make so much money so fast. Ok, so maybe the oldest profession. But you'd also have to be young to be successful in that one. Fairly young. At least not old. I wonder if I'm too old. Never mind, as I've pointed out before, Hal is so old-fashioned, he won't even let me date.
So what's a nice girl like me doing in a job like this? What can I say, I'm good at it. I'm a people person, a problem-solver, I pay attention. Real estate sales can be very dramatic. That's certainly up my alley. When the pieces fall into place and the agent across the table is not a total ass, it's all very satisfying. Plus, I get paid.
For all of you who got into the business after 2003 in the states, sorry. Tough luck. For all of you who are getting into the business in Costa Rica now, hold onto your day job. This market has some room to grow, but I don't hold any hope for the heat to continue much longer.
First of all, if the U.S. sneezes, the world gets a cold. One day this may not be true, but it is still true today. Most of the investment money in Costa Rica still comes from the U.S. As potential CR buyers can't sell their US property and can't get those lovely 100% loans, you will see an effect here. The markets are related, and trickle down is not just a theory.
Second, there are 40,000 new condos being built in Jaco alone. Everywhere I look, including in Escazú, there are massive condo projects being built. If you can't do that math and extrapolate a tiny bit into the future, I hope you aren't snatching up Costa Rica real estate looking for the home-run.
Third, tourism is down here. Everyone is talking about it except the government which swears we are doing better than ever.
Fourth, sales are down. Other agents tell me so. I get emails from Costa Rican sellers and agents offering discounts and price reductions. Even the developers are saying "Prices are negotiable." In a hot market, prices are not negotiable. In a hot market, sellers don't use the word "motivated" in their sales sheets. In fact, in a really hot market, sellers are not even nice. Costa Rica's gringo sellers today are bending over backwards to accommodate.
Fifth, the market is flooded with properties. EVERYTHING is for sale. The first words you learn in Costa Rica are se vende [say VHEN-day, for sale]. You learn it because you see these words on signs EVERYWHERE: in the city, in the villages, on the coast, in the jungle. Everywhere. And over the next three or four years, there will be many, many, many more properties for sale. I hope all those baby boomers are indeed moving to Costa Rica. Otherwise, we are bulldozing the jungle for nothing.
Sixth, and this is the most dangerous aspect of all, Costa Rica real estate is now being driven by speculators: someone who buys a property looking to make a relatively quick buck in the property's short-term appreciation, the middle-man between the developer and the end-user. End-users, those who will keep the property and enjoy it, are not really in the market yet. They need to retire first.
And investors, someone who buys and holds a property that already produces positive cash-flow, are gone. There are no investors in this market: prices are too high for them. Positive cash-flow is history. Most newbie agents don't even know what positive cash-flow is or how to figure out there isn't any. [See point Seven.]
Most of today's sales are to speculators who intend to sell to the end-user (one of the 77 million baby boomers every market in the world is banking on. Don't get me started.)(Ooops. Too late.) A low number of professional speculators in a market is good, the sign of a healthy market. Like 10%. As that percentage climbs, a market is less and less stable. I'd say this market is well over 50%. That's a wild guess but I'll bet you a dollar it's a conservative one. Make that $2. I'd also be willing to bet experienced speculators are out of this market. They've made their money, this market is too close to the peak and they've moved on. You've heard the old saw Buy Low, Sell High? You can't Buy Low any more.
Point Seven: this market is also flooded with newbie agents/developers/speculators who were trained by Carleton Sheets and Robert Kiyosaki who, along with the Donald, just wants you to be rich. Forgive me. I'm chuckling. These trainers are smart and savvy, I've read their books, played their games. All good info, some of it brilliant. But, like Rich Jerk, they make their millions selling you their secrets, which mostly consists of Buy Low, Sell High using Other People's Money. They are not buying and selling real estate. Not lately, anyway. They know better.
The scariest thing about these newbies with their websites and their cell phones is that they don't know they don't know anything. They don't know markets are cyclical. If they are reading this, they are now googling cyclical. They have said these words: "Costa Rica real estate values will never go down." They never heard of Fibonacci. Don't understand central banking. Can't pronounce Bernanke. Have never seen Predatory Lending in action and have no idea why the death of the sub-prime lending market is cause for alarm. Don't know the difference between a speculator and an investor (they will think they are one and the same.) Never give a thought to who the end-user will be past what they've been told ("77 million baby boomers") and wonder why I would mention it. The whole baby boomer thing is common knowledge. Accepted wisdom. You can take that to the bank. Right?
You might be wondering if I'm so down on the market, why am I jumping in? Because it's fun. I need a job and I'm good at this one. As long as my customer is an informed customer, eyes wide open, I can work with that. He's buying because he wants a property here, not for a flip. He can afford it and he wants it. He will have it for many many years and can ride out a market correction.
And I get five days away from two teens (poor mommy), in a new part of the country with monkeys and macaws, at the beach. Two of the nights in a developer's fabulous guest house overlooking the ocean, all food and drink included. Heck. Who wouldn't want this job?