Tamarindo Rental Investment Review

Tamarindo rental investments are very popular among income investors and rightfully so. Renting living space to other individuals is one of the oldest professions in the world, and it’s still a very lucrative business to be in today. We note five main reasons why investors may want to invest in “rentals”:

1- Consistent and high income:

Since having a roof over one’s head is a vital necessity, the cyclicality of the demand for properties is greatly reduced, regardless of economic conditions. In a recession, tenants may receive a rent cut to keep occupancies at high levels, but overall, the income tends to remain relatively resilient and consistent over the full cycle. Additionally, short term holiday rentals are always in high demand, especially with the advent of AirBnB, Booking.com, Home Away etc.

2- Long-term appreciation:

Well-located rentals are a limited commodity with ever growing demand. The result is price appreciation – often well in excess of inflation with growing rents and values. Moreover, there’s a clear trend toward ever lower ownership rates and therefore rentals continue to benefit from an ever-larger demand pool.

3- Benefits from rising interest rates:

Unlike most other property sectors  which may under certain conditions suffer from rising interest rates, rentals tend to always win here because higher interest rates make it harder for people to buy their own home. Therefore, when interest rates rise, the demand for rentals increases – allowing landlords to raise rent.

4- Inflation protection:

Real estate and especially rentals can serve as valuable hedges against the risk of accelerating inflation. Leases are generally no longer than one year long – allowing for regular rent increases when warranted.

5- Leveraged returns:

Leverage may boost returns, but also amplifies risks. That said, since rentals tend to produce relatively consistent and predictable income, investors are commonly able to get away with moderate leverage over the full cycle without sinking the ship. It may result in greater asymmetrical risk-to-reward outcomes over time.

Costa Rica Tax Reform – Effects on Capital Gains

Costa Rica Tax Reform – Effects on Capital Gains. A few short weeks ago the Costa Rican legislative branch enacted the controversial law ”Cleansing of the Public Finances”, and which was quickly signed into law by Costa Rican President Carlos Alvaro the same evening of its passage. While there are many aspects to this law, notably, a value added tax added to all product and services, the containment of the out of control growth of the public sector and its privileges, the bill introduces an increased capital gains tax now applicable on the sale of real estate. Not known to many, there has always been a capital gains tax applicable to real estate gains, but it is only applicable to ”depreciated” properties and or on property’s whose interest payments are deducted from the owner’s income taxes. This is only on the value of the property’s improvements at a rate of 8%. However, the new law shall apply to all capital gains on the sale of all real estate at a rate of 15% of said gain. Notwithstanding are primary residences which will not be affected. Said law shall go into effect in June, 2019. Our take is that this may trigger a sudden decrease in asking prices by those wishing to cash in on their investment prior to the implementation of the new law. In fact, we have already seen it on a couple of large, expensive tracks of land in the area. Our opinion is that we will see further drops as we move into next year 2020. which may translate into perfect buying opportunities for AAA grade assets.

Tamarindo Real Estate Short Term Outlook

-Short-Medium Term Tamarindo Guanacaste Market Outlook- To be sure Costa Rica has a still few aces in its deck with its tourism industry booming and poised to continue further growth. The province of Guanacaste will be the locomotive of said growth given that Costa Rica is on the map internationally. More than 90% of the country’s tourism pass through Tamarindo and its environs, many of whom are purchasing Tamarindo real estate. Additionally, demographics are changing rapidly with many more people putting roots down and settling here. This means a transfer from a traditionally second home market to a primary residence market.  Many are starting small businesses as well, offsetting the overall decline in the country’s macro economic growth forecast.  This is reflected in the area’s private schools which are experiencing explosive growth in demand. The future looks bright in our little nook in paradise, even amongst the country’s uncertain macroeconomic environment as well as that of the world at large. 

-Marco Economic Outlook 2019- The tax increase passed last week will go into effect next June, 2019. Costa Rica’s GDP has been falling for the last few years and negatively affecting tax revenues, so the injection of other people’s money to maintain the central government’s lavish spending and social programs will be welcomed. The measure does not resolve the central governments debt crisis however, but rather simply allows for the country to add another $1,200 per capita of debt to the populace via cheap funds from the eurozone. Until the country reverses government creep, opening up new markets to competition, and lower tax rates there will be no promised ”economic reactivation”.

2 Storey For Sale in La Garita, La Garita

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Fire Sale

•  4188 sqft , 4 bath , 3 bdrm 2 storey FOR SALE  USD498,000 . Insane Value~

This lovely 3 bedroom, 3 bath, 4,000 plus square foot, Hacienda style home sits atop almost 1 full acre, boasts a rancho with its own full bath, a swimming pool. Conveniently located to all stores, beaches, schools, doctors, dentists and other services, all drivable within a 5 minute radius. New on market and will go soon!

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2 Storey For Sale in Playa Penca, Playa Penca

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A Steal for the Money!

•  1600 sqft , 3 bath , 3 bdrm 2 storey FOR SALE  USD499,000 . Reduced!

This condo offers some of the most amazing sunset facing Pacific Ocean views in the entire region. Consisting of 3 bedrooms and 3.5 bathrooms, this unit has a large two-story floor plan with exceptionally high ceilings, covered balconies, great proximity to beautiful beaches, and even comes with a garage! Offered fully furnished and decorated, this condo boasts a nice open layout with a kitchen that has hardwood cabinets, granite counter-tops, and stainless steel appliances. The residence also has a beautiful community swimming pool with incredible views, BBQ area, restrooms, has well maintained landscaping, and full-time 24 hr security. This turn-key unit would also make a great rental income producer! Jeep thrown into the deal.

Price: $499,000 USD

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Tamarindo Real Estate

-Recent Tamarindo Real Estate Sales and Market Conditions

Sales-It looks like this year will be another banner year for sales with plenty of potential  new buyers making inquiries. Interestingly enough this is coinciding with a slew of price reductions across the board. This is not too soon for many a seller whose property has stagnated on the market for longer than normal. Stale listings tend to generate less and less interest as time goes by, so eventually something has to give. It’s almost as if there is a sense of a coming global recession driving sellers to lower their asking prices prior to the market doing it for them. At any rate this event brings more ”real” inventory to the market which should satiate demand, which in turn should equilibriate the market and putting sounder footing below it for long term growth in equity.  

  Short-Medium Term Market Outlook

Looking Forward- To be sure Costa Rica has a still few aces in its deck with its tourism industry booming and poised to continue further growth. The province of Guanacaste will be the locomotive of said growth given that Costa Rica is on the map internationally. More than 90% of the country’s tourism pass through Tamarindo and its environs, many of whom are purchasing real estate. Additionally, demographics are changing rapidly with many more people putting roots down and settling here. This means a transfer from a traditionally second home market to a primary residence market.  Many are starting small businesses as well, offsetting our forecast for a overall decline in Costa Rica’s  macro economic growth in the medium term.   Proof of this  is reflected in the area’s private schools which are currently experiencing explosive growth in demand.

Additionally, Costa Rica’s capacity to generate energy from 100% renewable sources and its target of being carbon neutral on or before 2025 is very positive.

 The future looks bright in our little nook in paradise, even amongst the country’s uncertain macroeconomic environment as well as that of the world at large.