I got this email a couple of days ago. Since these are common questions – in fact, we had most of them – I’m answering on the blog.
“I have enjoyed reading your info on the net. We are thinking of buying a small condo and living in Costa Rica in the winter. If we rented the condo out the other months, how do you get your monies back to your country of origin (home)?“
You wire it. Complicated, lots of paperwork, but do-able.
“Is this legal?”
Making money here? Or transferring money to and fro? It’s legal to rent out your property for money. The work question is fairly complicated. You can’t work for a salary unless you are a permanent resident which takes at least three years. But if you have rental income, I guess you aren’t really working, you are investing. In fact, you will need someone locally to manage your property (or you are insane) so you are providing work for locals. That’s a good thing!
And it must be legal to wire money from Costa Rica internationally… Costa Rican banks do it all the time.
“Do you pay tax?”
If you deposit money into a bank in a country with a government, somebody in that government is going to tax that money sometime. If you have two governments involved, brace yourself. Money you put in a bank will probably be assumed guilty as taxable income until proven otherwise. Get your ducks in a row.
“They tell us taxes on homes there are so cheap, but it sounds like this is all changing.”
Yes, things are changing here very fast. I don’t know that Costa Rica’s property tax rate has gone up – I don’t own any Costa Rica real estate so I only know what I read… It’s more that authorities are assessing properties on real values, rather than on the amount the buyer reported. Said reported amount being historically and ridiculously less than the actual sale price.
“We’re nervous to make the move, then find out its more expensive than we thought.”
It will be. Last night, a friend told me they did the math on staying in Boulder or moving to San José. All things considered, it was cheaper to stay in Boulder. I concur. Once you are here, the cost of living is not appreciably less. Obviously, they did move here. But not because their money goes further. For us, quality of life is so much better, it’s worth the effort.
One caveat: if you moved here several years ago and thought to buy Costa Rica property when it was really cheap, your cost of living would be much more appealing than for those of us who moved here in the last two years. But inflation still takes its toll. Chicken breasts (boneless, skinless), one of our markers, was 2,000 colones a kilo (about $2/lb) when we arrived. It’s now 3,250/kilo ($3.25/lb). That’s quite a jump. Other food has gone up proportionately. The price of eggs has doubled. I understand prices are taking similar leaps everywhere.
“If we rented out our place for awhile, that offsets costs. But we don’t know if that’s a no-no to have this money coming back home and don’t know who to contact about the proper way of doing it. Do you?”
You can have your money go home or stay here, whatever you want. To find out exactly how, where, when, how much tax liability you may incur, you need to ask your attorney/accountant in your home country as well as your attorney/accountant in Costa Rica.
If you want a referral for an attorney, join the Costa Rica Living group (free) and search for attorney recommendations on there. HINT: make sure the person whose recommendation you are taking has been a CRL member for awhile and has LOTS of posts.
Don’t rely solely on a Costa Rica real estate salesperson’s advice. Or any salesperson’s advice. Please. Don’t just take my word for it, either. I’m a singer in a geezer band and an unpaid blogger. Who has been known to exaggerate from time to time.
The money title caught my eye. We are coming to Costa Rica in April and I know that USD are widely accepted but we want to go to the local sodas and other out of the way places. The rate now is around 500 colones to 1 USD but when I go online the best exchange I can get is 430 colones to 1 USD. Maybe I will just wait until we get there and exchange money.
I really like your site, and we are bringing supplies down for Costa Rican school children,, but are flying into Liberia and donating to the schools in Brasilito and Potrero.
its unbelievable how much harder it is to open a bank account these days, in essence the paperwork is ALMOST THE SAME as opening an offshore account in say Isle of Man
for Carlita, that exchange rate is terrible, everytime I travel I simply use my debit cards to get cash out of the local ATM machines, this works GREAT except that I have read that many banks in the US are ‘trigger happy’ and will freeze your card the minute they see international transactions and this is of course terribly inconvenient (Citibank and Bank of America are pretty ‘good’ at this), this is one of the things that (unbelievably to me) work better here than in the US (I supose CR banks are used to international transactions as travelling further than 130 miles in any direction is ‘international’, it probably helps too that their liability for fraud transactions is much much smaller although I have gotten calls /emails asking me to verify charges that they consider suspicious)
Simply bring your dollars and your passport (you will need it to exchange USDs) to any bank (preferably private as lines are shorter as opposed to the goverment banks) and do the exchange there
These are common questions! I’ve heard a lot of them too. Don’t underestimate how much work it is to rent and manage your place while you’re gone. You must have someone you completely trust to look after the place and you will have to pay them fairly for their time. As a rough estimate, if you’re looking around and similar places rent for $500 a week then expect to spend at least 50% on management fees and expenses and with 50% occupancy (based on decent marketing) you’ll make no more than $500 a month less marketing expenses etc.
Sara is right to stress the point — don’t move to Costa Rica because it’s cheap — move to Costa Rica because you love it.
One thing she didn’t say regarding your question of moving money back from Costa Rica to USA/Canada is that you don’t actually need to collect it here at all. Collect the rents in advance on your website using Paypal or other credit card processing and the money never ends up in Costa Rica. Then you’ll have the opposite (slightly easier) problem of getting money into Costa Rica to pay expenses. I do websites like this for all my clients — it’s not about avoiding getting money into Costa Rica but using simpler/cheaper credit card processing, etc that’s available in the US.
There is still that by now totally outdated idea that cost of living in Costa Rica is low. Sure it is lower than in Puerto Rico, or a lot of Caribbean, but if someone wants to move to the tropics for both its beauty and lower cost of living, I would suggest investigating other countries and looking also at incentives for retirees/investors, like no tax/duty on goods brought to the country (cars, personal property, investment property), tax abatements on income from investments (if you think they might be somewhat substantial) etc. etc. Then to look at the level of corruption and cumbersomeness of dealing with local bureaucracy. I would not dare to fall in love with a place before doing that kind of due diligence first. Like I would never fell in love with a guy without doing a thorough due diligence on him 😉
Hi Carlita – thank you for bringing stuff for the school children, that is so needed. And I would exchange your money here at a bank as Wolfie suggested. Or you can use your ATM and withdraw your money as colones here. To avoid having your card frozen, make sure you tell your bank you are coming here first…
Keep it simple, it’s about 500 colones to the dollar. If you carry colones here, you will be able to spend everywhere without any hassle. Some places don’t want dollars, especially now that dollars are devalued.
Thanks, Doug, that is a very good suggestion! You definitely want the money first… And I didn’t have a handle on the rates either. In Key West, property management is about the same: 25%-35% for the company and another 10% to 15% for expenses. After a few years and some repeat business, you can get up to 85% bookings (unless tourism has fallen off significantly).
A lot of Key West’s newer second home owners have debated short or long term (when they would not be using the home themselves for a few years). All things considered, you average better money and MUCH less hassle renting long term. Vacation rental money is much bigger numbers, but the net is less.
The reality of how expensive it is to live here still is quite a blow to us. At first we thought we must be imagining it, but it’s true. There are plenty of places in the world that are less expensive. Like Miami for example… you can buy a really nice oceanfront condo there for under $250K and have everything at your fingertips you could ever want… plus the opportunity to speak plenty of Spanish!!!
Unless the US gov turns around, heads back toward the Constitution and away from policing the world, living there again is out for us. Too unpleasant. Do you know 1 out of every 100 adults in the US is in prison? Wow.
Costa Rica is our home now, but I must say I’m curious about the rest of the world… once our income is solid, I’m opening that door and taking a real good look.
I totally agree with the points given, except with the issue of healthcare. In the US, one major accident can bankrupt you.