I'm certainly no Rhodes Scholar. In fact, I had to google "Rhodes Scholar" to see exactly what it is. That doesn't keep me from talking like I know something. Like I'd even heard of Murray Rothbard. The fact is I'm a skimmer, a looker, a listener. In 10K B.C., I'd have been a gatherer. I soak up stuff, come home, wring out, sift through and post.
And as James so aptly pointed out, "I think it is more likely that your own political and philosophical bent is causing a biased interpretation of events." Truer words were never spake: if you have pink Volkswagons on your mind, that's all you see.
I still think the sky is falling. Even so, there are two conditions under which I'd buy a (Costa Rica) property in today's market:
1. Because I'm so poor right now, I'd have to follow the rental rule. That is: if I can buy the house for 5-7x annual rent, I'd buy it. So if my landlord would take $60,000 to $80,000 for this mansion, I'd buy it. Otherwise, it only makes sense for us to rent. IF we want to continue to eat. I mean, we do have a choice. Or,
2. If I found a house I loved, that I could afford, that I was going to enjoy for many years, I would buy it planning to be there for the long term, regardless of the rental rule. Not looking to throw my money away, but security, putting down roots, puttering about MY house… all that is important to me.
Today's lousiest idea is speculation which is buying a property banking on the price going up. A lot of people a lot smarter than me are still speculating. But I wouldn't. You have to ask yourself, "What does she know?" Let's face it, if my advice was so brilliant, WHY AREN'T WE RICH? I've always believed, "The proof is in the pudding." I'm looking around. It seems we are low on pudding.
Being a Rhodes Scholar might help, might not. Happily, we are wicked lucky in love, kids, dogs, moms and location. Who needs pudding?
I have enjoyed reading your blogs. Jan.5 about buying a house…I’d buy so that I can plant and watch a tree grow or maybe pick a fruit that has ripened on a tree that I watched grow. One can do that in a rented place but the roots aren’t the same.
I am so tired of renting. I too want my own home so that I can make it mine. I look at all the repairs our rental needs which will never be done, and it makes me want my own spot very much. I feel rootless not having my own home. Hoping it will be done this year!
(And who wants to be a Rhodes Scholar when we are Lindenwood Ladies?)
This is the draw of home ownership. Back when buying a home was to live in and not to make your riches with. I want to plant a tree, too!!!
Jen – I forgot we were both Lindenwood Ladies. Yeah – that bachelor’s in drama sure came in handy during the real estate broker years!
Sara it sounds like my story a bit, I think we were both to focused on other things in life…not just hoarding our commissions. I love that we may believe different things but can still come together as humans on much more important issues, share a laugh over a cup of coffee etc..Considering this hot topic it was refreshing to see it not descend into a Bill O’Reilly style mudslinging fest! I think the biggest falsehood(bigger than the federal reserve..lol!) is the idea that our character, our personal net worth is somehow defined by our material success’s. Home is where the heart is, go ahead and plant that tree. If your not paying cash for your home the bank then becomes your landlord anyway.
Hey Sally! There is an award for you at Living Dominica!
Funny, I still have no inkling toward purchasing: I am a Peter Pan at heart and have always been: “do not fence me in” is my motto, and have most often perceived any long term committment (like marriage, child rearing, owning a house) like a prison of sort, a cage, even if at times a gilden one. Yes, I have been married (happily), have a (great, thankfully fully grown up) child, and have owned houses: villas, townhouses, dachas, cottages and cabins – but only when I have been otherwise imprisoned (marriage, child). To do it to myself, when it is only myself I am responsible for (and a few cats, but they don’t care one way or the other, always happy) – no, I haven’t matured enough, yet.
Still, yesterday I accidentally discovered one of the mountains road over Rincon and at some points – at the highest elevations – there is a view soooo breathtaking (mountains all around, an Atlantic ocean to the right and the Caribbean to the left, all shimmering both gold and silver)… I am inclined to talk my daughter (and/or my ex son in law) to buy a lot there, where I can build a house to my – and their specifications, pay them rent and they can visit any time they want. ;-))
That is: if I can buy the house for 5-7x annual rent, I’d buy it.
I think these are just quick calculations to somewhat estimate if a house is “reasonably” priced, but it can’t be your only guide. I’ll use your example to show how its highly improbable to get the price you want (but of course nothing is impossible, if other factors change).
Let’s look at your target price for rent $2440 for a $176k condo. I’ll put expenses at the high end: let’s subtract maintenance ($150), assoc. fee ($150), insurance ($100), and tax($100) (even if this is tax deductible). This totals $500/month, which makes your monthly income $1940. So, theoretically if you buy this condo in CASH for $176k (meaning no mortgage whatsoever all income is yours, its gravy so to speak), you are earning $23,280/year for that money. That comes to an interest yield of 13.2%. In todays market environment of 4% CD yields, you hope to gain 13.2%? You essentially want 3 times more for your money. That’s what makes it highly unlikely. This indeed can happen but interest yields needs to push up too.
But you know what will happen then, how this would affect investing psychology? Most people would be saying, “Hey, now I’m getting 12% on my CDs risk free, why would I invest it anywhere else”. That’s basically the dynamics on how one can get trapped.
You are right: a purchase price of 5-7x rent is not available today. But it used to be up until this boom started. All real estate was priced right around that. They use it on appraisals. But it’s not available now and that’s why we aren’t buying. It makes more sense to rent.
I think we’ve had a disconnect somewhere… My rental figure was based on the purchase price. Which – and I think we agree here – a landlord would never get. I doubt you could do much better than the $1300-$1500 over the long haul. Which makes this a poor investment in my opinion. If it works for you, great.
When people were truly investing in real estate (as opposed to speculating) they wouldn’t buy real estate for less than a 15% return every year. Real estate is biodegradable and can be very illiquid, a pain in the ass (the house and the people renting it), prone to natural disasters.
I didn’t make up the 5-7x rent formula. I sold real estate to people for years based on that formula before the boom started. If you can buy a condo cash for $176,000 and keep it rented at $2500 a month, have at it. I don’t think that is likely in today’s market. You can buy tons of condos for $176K cash… you just can’t keep them rented for a price that would justify that cost.
Keith, coffee anytime! Heck, with a 3 year lease, I could have a nice new coconut palm here…
Jen – thank you! I love presents.
Minerva – isn’t that nice to find THE spot? Good luck with it. That’s what I like about not owning at this moment: there are so many fabulous places in the world, still in Costa Rica… I’d like to have a house for the boys, but if it were just Hal and I, we’d probably be wandering even more. A little gypsy blood…
I feel fortunate to have purchased my home when I did. The house was in bad shape and it took a couple of years renovating. I never completely finished but I’ve gotten to a point where I can really enjoy it. Looking back now, I wouldn’t have undertook the problems had I know what they were but here, there is no disclosure and I really didn’t have a clue what I was getting into. I had water and electric when I bought the house but I was unaware it was not “permanent”. I’ve since bought a transformer and connected to “the real” water source. The pipes for electrical are too small for 220 wires, the sewage tank had to be redone, stuff like that. It wears you down discovering new problems, one after another. I’ve about put all the fires out and now I just ENJOY having the house of my dreams near the ocean.
I’m putting out feelers in an attempt to get as many opinions on this as possible. Please help…if it isn’t inconvenient for you (and others).
My wife and I are brainstorming about moving to Costa Rica, and doing as much research as possible from afar. We plan to come for a vacation/recce visit first. If we like it, we will then come back to rent for a while, eventually buying something. We now live in a beautiful historic home in Savannah, Georgia (that we love), but medical insurance and medical care is extremely expensive. I have an artificial heart valve and a pacemaker. We are under the impression that CAJA will cover that as a pre-existing condition. If we are wrong about that, please let us know, as that would be a show-stopper.
We’ve seen many nice places in our price range (up to about $250K). But we haven’t seen our ideal home in any of the real estate ads. Of course, we don’t know anything about anything yet, so we’d appreciate it if we could get some opinions about how much, if any, of this is possible:
We are thinking of eventually buying an older house (even a historic house) with character in the San Jose barrios of Amon, Otoya, or a similar barrio in that area. Interior and exterior should be historic and architecturally interesting, but restored (unless the price is low…we could restore it ourselves, but don’t really want to do that again). Two bedrooms and 1-1/2 baths would work. We would like an interior courtyard (if possible), and lots of sunlight coming into the house. We don’t want to buy a car, unless we really need to, but we’d like parking for one car (garage preferable). Also, a small workshop, or something that can be used as such would be great. If we really stretch it, a pool would be a bonus. It would ideally be within walking distance of shopping, etc.
The reason we are looking at San Jose is the proximity to heart care facilities. If the above criteria exist in another part of Costa Rica that we should consider, please let us know.
Does a place like this exist, or should we forget about it and spend our energy on a “Plan B”? Thank you for your help.
Michael and Donna
I think before you do anything you need to come down to Costa Rica and “hang out” for a few months or weeks. You should also check out http://www.welovecostarica.com it also has a lot of information on the nuts and bolts of a move etc..
Tica Macha, your house is so perfect and comfortable. Worth the fuss, it seems to me!
Michael and Donna, Like Keith said, the http://www.welovecostarica.com is a great website for info, as is http://www.therealcostarica.com and http://www.crexpertise.com. But here’s what I’ve found: reading reading reading all this information can’t be absorbed until you are here. You have no frame of reference…
On the CAJA question, I would contact one of the residential experts. ARCR would be able to answer that (www.arcr.net) or http://www.residencyincostarica.com. That info might be on http://www.therealcostarica.com site, not sure, but he has a good search engine on there.
Your plan to come here and rent is exactly what you should do for at least six months. I’m not sure about the historic home in those exact neighborhoods, but I know you could get a new home in that price range with all those amenities in the central valley.
It sounds like your medical issues will require you to be in the Central Valley. We have found the medical care here to be extra-ordinarily good and inexpensive. You have three excellent hospitals here: CIMA, Clinica Biblica and Hospital Catolica.
Renting will give you an idea of whether or not you can live here, where exactly you want to be, give you plenty of time to investigate those areas, see what services you can and can’t live without, all that. It’s a big change. If you don’t have the patience to rent first, you probably don’t have the patience to live in Costa Rica. (Not speaking to you exactly here, you already said you would rent first…)
Medical insurance is available here as well. Our 4-person family can get good coverage for $3,200 a year from INS. You can get a quote here: http://www.segurosgarrett.com/english/homepage.asp
That is David Garrett & Associates.
If you are seriously thinking about a move to Costa Rica, come here and rent for six months. You will get your answer, I think!
Thanks for the advice…that is our plan.
Thank you for all of the info. We must be good researchers, because we have some of the links bookmarked. There are a lot that we don’t have, and your links on the left are going to keep us reading for some time.
It seems that ARCR has everything covered, and we will definitely join.
We hope to meet you when we visit. You and my wife have at least a few things in common. She lived for a while in Islamorada, and she backs Ron Paul (who is getting a lot of support here in Savannah).
It’s funny, because we’ve been saying to each other that there is nothing left except for us to just go there and check it out. She hates to leave home (wherever home is at that time), and she also hates to leave the cats (don’t tell her, but I miss them too when we are away). For that reason, I don’t know how long I can convince her to remain there the first visit. Maybe she’ll go back and forth, but I want to get my feet well wet before I make a life-changing judgement…then again, she might fool me…she’s done it before…lol
I’m just waiting for my green card to arrive (should be any day now). I’m Canadian…Donna is American…we met on eHarmony…we could do the commercials, except that we dance better…lol
Again, thank you for the info.
Pura Vida (I like that),
GO, Ron Paul!!! I’m so excited about him. OK, I have to meet you all when you get here. Let me know… You are the second couple I’ve met who met online and are very happy. There must be millions more because it’s still going strong.
Yes, at some point you just have to come here because all the reading just makes you numb. She could go back and forth if she had to for awhile, worth it to make a longer stay and get your feet really wet! See you sometime…
Hi Sally! Hey on the topic of real estate; is it possible for a regular person (read: non realtor-type) to find out the selling price of a particular home? Like if it sold a year or two ago… without just asking the current owner.
You can find out from the tax records. Our tax records in Monroe County are online and you can search by owner’s name or the address. Call your tax assessor’s office for your county – you might just be able to ask them for the info. If not, ask for the website. If they don’t have a website, ask where the records are. Before ours were online, we had to go to the county office, give the address and pay $1 for the printing out of the tax records. That will have at least the last sale price recorded and usually a ton more information – this is the info the tax assessor uses to determine taxable value. Our records have the last 3-4 sales, sf of the property (although that is usually not accurate), sometimes a footprint, sometimes a floor plan. Good luck!
Before buying and overpaying in this fluid market now in Costa Rica my advice is ask someone who has been doing certified real estate appraisals for the banks in Costa Rica.
I have 23 years experience and since I am licensed my valuations called avulos in spanish must be accurate since the bank holds me responsible if there is a problem of collateral not being enough to cover the loan.
You can read my latest opinions on orbitcostarica.com
Hi Angela, The problem with appraisals is that, in the real estate world, we say, “Appraisals are what we use to fool the banks.” The banks know this, they want the deal as much as anyone.
The other thing is that, usually (you may be different), appraisers – like bankers, real estate salespeople and sellers – are the last to admit we are in a falling market. It takes a lot of courage to be honest about that in your shoes.
I have a friend who is trying to sell his property. It’s listed for $3,000,000. It’s a house. A big nice house in A Desirable Area but still just a house. It will never bring $3,000,000 in this market. Why won’t he consider lowering the price even though I have produced tons of evidence that we are in a falling market? That properties aren’t selling for that anymore? Because he has an appraisal.
Apparently his appraisal was done by God because, in my friend’s eyes, it is indisputable fact that his property is worth $3,000,000. They have sold their livestock, have sold some of their furniture, have put stuff in storage, have a contract on a property in another country, ready to move, just waiting for the house to sell. Everyone else knows it ain’t gonna happen. But they know it will because they have an appraisal. That is sad.