Costa Rica’s tenancy laws are still very much pro-tenant. Rents can initially be freely negotiated between landlord and tenant and the minimum lease term is three years but the tenant can cancel it by serving a three month notice period.
If the rent has been agreed in any foreign currency, no yearly increases are allowed. Increases are only permitted if transactions are agreed and paid in the Costa Rican currency (the colones), while unpaid rent can be very difficult to collect.
Heating up in Honduras
To find the best real estate investment opportunities in Honduras, one must look beyond the tropical climate and attractions. Investor Randy Jorgensen did that, and is now profiting from the experience.
Successful real estate portfolios are not built overnight. It took Randy Jorgensen 16 years before he found the answers he had been looking for. A frequent visitor to Honduras, particularly the city of Trujillo, he realized there was money to be made there.
“After 16 years of vacationing and visiting, becoming familiar with the local regulations, and developing relationships, the opportunity presented itself, as Honduras began to encourage foreign investment with a focus on tourism,” the CEO of Life Vision Properties recounts.
“I felt if Honduras met all the criteria and Trujillo specifically met the ambience and location expectations I had; it would for others as well.”
In addition to being a great area for investing, the country’s economy is relatively strong. According to the IMF, the GDP is forecast to expand by 3.3 per cent in 2013 and 3 per cent the following year.
The first purchase
Originally from Moosomin, Sask., Jorgensen took the first step and built a vacation home in 1992. “My initial purchase was 42 acres with 1,000 feet of beachfront,” he says. “The property was covered with extremely thick jungle that could only be walked across by blazing a trail with a machete.”
Jorgensen knew that he faced an uphill battle with the undeveloped land. “The property was raw land with no services or infrastructure with a large swampy, low area,” he says. “The purchase price was $50,000 USD, and the original documentation stated 50 acres.”
He also faced issues with the actual size of the land. “It is common in Honduras for land size to be significantly different from documents to actual survey,” he continues. “The final size should only be accepted if a recent survey by a qualified surveyor and reviewed by a qualified civil engineer.”
Once the land survey process was complete, Jorgensen performed an extensive cleanup of the area. “After purchasing the land, plans were made to clear the property so topography could be conducted and further plans for road access, power, water, drainage where required, and choosing a site for the home,” says Jorgensen.
Jorgensen generally prefers to focus on areas that have had some development, as it makes the process easier for both investors and developers. “Clearing and infrastructure costs initially cost about $60,000,” Jorgensen says. “The low cost was mainly due to the ability to perform most of the work myself without paying outside contractors, and the luxury of taking four years to complete.”
Hot spot: Trujillo
Since entering the market 21 years ago, Jorgensen has always focused his attention on Trujillo. “I personally have begun developing property producing serviced acreages to enable ease of acquisition for foreign property owners, specifically Canadians,” Jorgensen says. “Currently, 1,500 acres are under development with 500 lots sold to date.”
Two key factors are responsible for Trujillo’s growth. The first is affordable average prices. Many properties in Trujillo can be purchased for between $200,000 and $250,000, according to the Global Property Guide.
The second reason is an expected influx of retirees and vacationers over the next 15 years. “The time to purchase at an affordable cost grows shorter each year, so anyone considering a tropical property should take action sooner than later to enjoy the lower pricing still available.”
Developing a strategy
As Jorgensen began to add to his portfolio, he developed an investment strategy that would best fit his personal needs. “When purchasing property as an investment, I first decide if it’s a short-term (3 to 5 years), or long-term (10 to 20 years) project,” he says.
He prefers the long-term approach when it comes to his holdings. He says he finds this method more financially stable and less susceptible to changes that may occur in the market.
Before entering a foreign market, Jorgensen advises investors to perform a detailed analysis of the area they’ll be targeting. “In both short– and long-term investments, use of the property needs to be clear, exit strategy developed, target market identified, and improvements to add value begin immediately,” he says. “Carrying costs need to be included in the projections and personal use needs a value assigned.”