In 2019, I realized that we were heading towards an affordability crisis in the residential sector.

I was conducting research to determine whether I should proceed with the purchase of a property I had under contract. I spent weeks delving into all available housing crisis data.

As I sifted through the information, it became evident that we had underbuilt for a decade. It seemed likely that there would be a surge in homeownership among the millennial generation, who had postponed forming families.

This realization fueled my desire to contribute to resolving this crisis by constructing housing that could accommodate new families.

In 2021, I witnessed the dwindling possibility of constructing homes for middle-class families as costs soared to a point where starting new housing projects was impractical.

This led me to explore properties in Costa Rica, recognizing an opportunity to build with profit margins that once again made sense. I found greater assurance in constructing homes for retiring baby boomers at first, understanding their preferences and sensing an unmet demand in that niche market.

Despite my enthusiasm for our Black Coast project in Playa Negra, I harbor a strong desire to develop homes at price points more accessible to young families.

Consequently, I've shifted our focus to areas near San Jose due to significantly lower land and construction costs, making the region more conducive for families seeking permanent residency.

The following property is the largest that we have placed an offer on. 

Situated in Santa Eulalia, this town lies between Grecia and Atenas. Its strategic location ensures residents can easily access the new freezones in Grecia within a 10-minute drive, while also offering a 10-minute commute to Atenas.

With just an 8-minute drive to reach Route 1, accessibility is fairly optimal.

Spanning nearly 38 hectares (93 acres), this property has rolling hills and slopes that offer great city views toward San Jose and Atenas. Its orientation also provides mountain views to the south and west.

At $4.5 per square meter ($1,650,000), I consider this property competitively priced and am confident in having it under contract.

This location has the potential to attract three different types of customers, which is why I chose it:

Customer #1: Costa Ricans working in Grecia's free zones.

It's close enough for those employed in the Grecia free zones to consider living here. Our advantage lies in offering a more affordable price compared to properties inside Grecia, where land prices are now above $20 per square meter. This enables us to provide customers with more space, avoiding dense construction that might deter the other two customer bases.

Customer #2: Retirees relocating to Atenas.

Atenas is increasingly popular among expats looking for a permanent residence in Costa Rica. We believe there's a lack of affordable housing for this customer segment. 

The Atenas region's mountainous terrain presents challenges in creating homes with convenient access. Our goal is to provide senior citizens with accessible amenities in the products we offer.

Customer #3 A young family working remote

This customer is at the heart of why I’m choosing this property. Our aim is to construct housing that not only accommodates the budget of young American families but also resonates with their preferences.

We believe that the trend of families embracing mobility has just begun rather than peaked. As a group largely composed of young families, we intimately understand the challenges faced by many parents.

While numerous communities solely rely on online advertising to attract their customer base by emphasizing affordability and a distinct lifestyle, we are hesitant about pursuing that approach. Instead, I'm seeking properties with diverse potential buyers from various sources.

The Development

Amenities:

Our vision for this property involves building a community centered around exceptional amenities. These would include a diverse range such as swimming pools, pickleball courts, gyms, soccer fields, and other sports facilities.

Unit Mix:

We plan to build a mix of units ranging from 1 bedroom condos to lots sized at 1000 square meters. We could potentially do 500-1000 units, allowing us to justify great amenities. 

Timing:

Developing this property involves several stages. Initially, we'll need to secure our water supply by drilling wells, a process requiring up to 1 year for permitting.

The subsequent year will revolve around the approval process. Given that this will be a 'condominium project', we'll be responsible for the infrastructure and will engage in a development agreement with the local municipality.

By year 3, infrastructure development would likely commence. I anticipate a sales timeline spanning 3-7 years to sell all units. The timing represents the primary developmental risk.

Here is a very rough idea of what the financials could look like:

While $340,000 is still a large sum of money, it’s notably more attainable then many similar homes in the United States. The value extends deeper then the transactional cost of the home. The development is surrounded by a robust community with many high quality amenities like restaurants, shopping and recreation. Additionally, there are multiple nature hikes and amazing beaches within a reasonable distance. 

We will be doing the 2 categories of due diligence on this property and a few others over the next 90 days like discussed in last weeks news letter. 

Next week I will cover a property that will have a more expensive end product tailored to the Atenas expat market.