Why are we looking at properties near San Jose?

We're making the move to San Jose for several reasons. In summary, we're transitioning from a vacation-oriented market to one tailored for permanent housing, catering to both Costa Ricans and foreigners.

We are currently facing a housing crisis that won't be easily resolved. This crisis is a central reason why we've chosen to predominantly invest in the residential market since 2018.

The Central Valley market presents an opportunity to produce a final product at a significantly lower price point. Affordable housing remains a pressing, long-term issue due to a systemic undersupply of homes. We believe that constructing housing that meets an affordable price point while offering quality living standards will constitute a secure investment over the next 10 years.

Many of the issues afflicting US housing markets are reversed in Costa Rica. Costa Rica experiences significant immigration from Nicaragua and has a robust pool of young laborers eager to engage in construction work.

The local government has been cooperative, and the zoning laws operate effectively. If our assumptions are accurate, this could potentially reduce the timeline of a typical development by a year.

The big issue Costa Rica faces is a need for more credit for both the customer and the builders. This places a premium on investments requiring extended liquidity, providing us with a distinct advantage.

We are reviewing new properties daily from Grecia down to San Mateo. 

San Jose is a great city that provides a lot of great amenities. 

We have decided to target this specific area because it will have a large influx of new Costa Rica workers. At the same time, it is currently a favorite landing spot for foreigners to permanently move. 

It is located in an area where you can access fantastic beaches within a 30-60 minute drive. Moreover, it sits within a 30-60 minute distance from the San Jose International Airport. The climate remains perfect year-round, unlike Guanacaste, which tends to get hotter and drier during the dry season.

San Jose also offers top-notch amenities that foreigners have grown accustomed to, including top-quality hospitals. We recently experienced this firsthand when Kincaid's newborn had to be transported by ambulance to a hospital, confirming the excellent quality of care available.

The city of Grecia has also implemented a new 'free zone' advantageous to foreign companies and has already had much success signing on new companies. 

Companies that have taken advantage of Costa Rican free zones include Amazon, Johnson & Johnson, Walmart, and the United States, which plans to establish a new semiconductor factory. These upcoming job opportunities will benefit Costa Ricans, but the area presently requires additional housing to accommodate this influx of employment.

Construction costs in the Central Valley are 30% lower than on the coast, enabling us to reach a significantly lower price point. With the more temperate year-round weather, indoor-outdoor living becomes more feasible, thus reducing the necessity for larger home sizes.

While the margins are smaller, the liquidity on the product is much higher and the price floor is more solid. There is also a lack of US-quality homes in the area.

Given that affordability is the highest priority for Costa Ricans, home builders will cut $25,000-$50,000 off of a build, making the home less attractive to foreigners looking to relocate. 

We frequently witness this reflected in the final pricing of products, where developments that invest in superior infrastructure and construct a better product command higher prices for their end product.

We hope to build that quality product in the area where we will have a solid floor as we compete with inferior products but have the potential upside to foreign customers. 

We see a few examples of this being done successfully in the area and believe there is strong demand for that product. 

This week we sent an LOI on a property in Grecia. This represents the typical style of development being built for Costa Ricans in that area.

We can achieve an outsized margin on an increased purchase or rental price by slightly increasing our construction costs and expanding the lot size.

Ultimately, we are still running a lot of different scenarios right now and hope to have a lightbulb go off on our next trip in two weeks as we tour properties and meet with owners.

I hope everyone has a great Thanksgiving. Please feel free to reach out with any questions.