5 insider tips to real estate investing in Central Ameria

1. Determine what market is right for you and focus there

Good investments can be found in every market but whether a particular market is right for you will depend on your investment goals – do you have a speculator’s stomach? Do you want immediate access to amenities and a sense of community or can you wait?  
 
As a general rule, regions at earlier stages of a property development curve will have a higher potential for rapid capital appreciation than more mature areas but will also have a higher inherent market risk.  In more mature markets, the infrastructure will be better quality and the tourism industry and associated amenities more developed providing more potential for rental income.    Choose the risk/reward profile you are comfortable with and set your investment goals early.  As Garry Keller notes in The Millionaire Real Estate Investor, when researching investment opportunities: 'Think powered by a big why'.

2. Don’t assume you can finance your purchase

In many Central American countries getting a loan from a local bank as a foreigner is cumbersome and it’s easy to get lost in the bureaucracy.  If you stick with the process and succeed, the interest rates are often not as competitive as what you would find in the US, Europe or Canada.

Panama stands out in this regard as competitive financing is relatively easy to obtain.   In Costa Rica we seeing more developers structure standard mortgage arrangements with local banks to short cut the process for their clients.  You’ll also find an ever increasing number of developers offering seller financing although normally for shorter terms than you can negotiate with a bank.

3. Top 10 questions for the developer – before you buy:

1. Find out what kind of title the developer has to the land and ask to see the master title insurance policy.


2. Ask whether the development masterplan has been approved by all relevant authorities.


3. Check to see if environmental impact statements have been submitted, and approved.


4. Investigate whether the developer has the capital to move the development forward or if they are relying on sales revenues.


5. Find out about the water source and whether the developer has ensured that there is enough even when the development is fully built-out.


6. Ask how sewage is being handled and does the process comply with local regulations.


7. Check to see if power lines will be underground or overground.


8. Find out who is responsible for the maintenance of power lines (the developer or the government?).


9. Do some research into the past experience of the developer and and ask to be put in touch with past buyers.


10. Find out how much time of the year the developer spends in-country.

4. Buy only what you see

A solid piece of advice is to buy only what you see. Make up your mind on the inherent value of the property you are considering.  Don’t factor in the 'new coastal road' the 'new airport' the 'new hotel flag' into the price.  Certainly not if you are investing for the short term.  

Don’t buy sight-unseen however good the sales presentation and virtual imagery may be.   Remember you’re not just buying a property, you’re buying into an area and a country and it’s important to experience this first hand.  By all means put down a refundable deposit to reserve your chosen property, but fly in before the closing.

5. Give something back

Investing responsibly makes a great deal of sense both for the country as a whole and for your individual investment.  Central America is a warmhearted region welcoming to international visitors.   In order for this sense of welcome to endure into the future, local communities need to benefit from the real estate and tourism activity that is going on in the country.  As the community grows and develops so the foundation for real estate becomes more solid and sustainable.  

Don’t lock yourself away from the community - be a part of it. Support charities, work with local business, provide employment and take part in everything that you can.   Your life will be richer for it.

Want more tips? Read our combined list of insider tips.