Sell America before Buying Costa Rica August 10, 2007
Posted by admin in : Real Estate, Investing , add a commentOn the “About” page of this blog, I started the page by writing:
Are You the Owner?
Every week, without fail, a guest will walk into the lobby and ask “Are you the owner?” “We’re thinking of buying property in Costa Rica. Maybe investing in a business. Retiring in Costa Rica. What do you think about….”
What I didn’t write was my reply, and it has been the same for the past two years, “Do you own property in the United States?” I would ask. The person or couple almost always would answer “yes”, and then I would say “Sell it!”.
Before I would warn them about crooked real estate agents and lawyers, advise them to be careful about purchasing Costa Rica beach property, or suggest where I thought they could find good real estate values, I told them to sell their homes and properties in the U.S.
The reaction of the guests was typically a nervous chuckle followed by a bemused smile. I’m not sure if they listened to anything I had to say after that, nor to be honest did I really care, I could understand why they thought they were dealing with a fool. Sitting barefoot and half-naked, in a cute but otherwise un-impressive hotel in Costa Rica, I did not appear to be someone who could give decent advice on Costa Rica real estate - let alone suggest that they sell their quickly appreciating asset back home. An asset, that they were planning to leverage, to buy their investment or retirement home in Costa Rica.
I wrote the following in a blog post on this site dated March 18, 2007
The Second Scary Reason
The second and scariest reason not to buy Costa Rica beach property - the U.S. economy is about to tank. A painful plunge into recession in the United States is about to occur. Starting with the over inflated values in real estate, and an over valued stock market, the United States may be facing a prolonged recession.
Is this the time to be investing or buying Costa Rica Real Estate?
If the economy in the United States of America is going down, what makes you think, Costa Rica’s is going up? The United States is Costa Rica’s largest trading partner. When the U.S. and World economy tumbles, Costa Rica’s exports will decline. A severe slow down in tourism due to high airline tickets (jet fuel, Iraq war, job anxiety) , which has already begun, will worsen. And finally, if the run-up in real estate values in the United States have to correct, what will happen to real estate values in Costa Rica, where there has been tremendous appreciation in real estate values in the last two years?
In light of the massive foreclosure crisis in the U.S., and the recent stock market corrections, was the post accurate and prophetic? Yes. But I am not writing this post to say “I told you so!”, I don’t know you, nor do I have anything to prove to you. I’m writing this post to say “I’m telling you so!”. The economic situation is much worse than anyone realizes, it goes way past sub-prime mortgages, and strikes at the core of the U.S. economy.
If you are interested in the U.S. economy, what is happening, and where it is going. I suggest that you follow two writers, Paul Craig Roberts and Mark Whitney, their articles appear regularly on counterpunch.com - one of the few websites that produces honest opinion and journalism. Even though the fundamental factors, affecting the economy of the United States are greater than even they realize, these two writers come the closest to understanding the the current problems facing the U.S. economy.
Why am I focusing on the U.S. economy when this is a blog about Costa Rica real estate, retirement and investing? Because it was in Costa Rica where I realized that “No man is an island”. I came to Costa Rica to get away from the United States, to not have to worry about war, politics, and sub-prime mortgages. Many of you may be thinking the same.
Costa Rica is a beautiful country, but it is not an island, protected against the misfortunes of others. What happens in the United States has a direct impact on Costa Rica. The investment into Costa Rica, these last few years, came from the United States. Many people bought homes and land in Costa Rica from the appreciation they had made in U.S. real estate. That is over, finished, kaput. Now, Americans have to worry about holding on to their houses, in the U.S., not about buying property in Costa Rica.
Everyone’s situation is different, for those of you who wish to buy real estate, invest, or live in Costa Rica, it still may be a viable idea. Just be aware of a couple of things, what happens in the U.S. affects you in Costa Rica, and do not expect any substantial appreciation in Costa Rica property values.
More importantly, before you consider buying Costa Rica real estate, SELL your American real estate first. Do it - you don’t have another two years.
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