165 Generating 20 percent returns with a vacation rental in Costa Rica

[Richard Bexon]
Good afternoon Xenia, how are you doing?

[Xenia]
Good, thank you. How are you?

[Richard Bexon]
Very, very good, thank you. I'm here now in Los Sueños, which is by Hakó. I was down in Manuel Antonio working on a project now up here with the family because we have this week vacation period here for the kids.

So I thought it was always good to kind of get out of Chepe or San Jose as they say and down to the beach.

[Xenia]
You should go to Arenal.

[Richard Bexon]
I will be in Arenal next week. I own a piece of land in Arenal as well Xenia, so I'll be there next week actually and we have a project going on up there.

[Xenia]
I will wait for you.

[Richard Bexon]
Fantastic, thank you, thank you. Well Xenia, again thanks very much for taking the time to join us on the podcast. The question that I always like to get because I think that you have a very clear picture of probably what's happening in the market at the moment, you know, I mean with worldwide, you know, economies kind of slowing.

I mean how are you seeing this hitting specifically your Airbnb bookings? Is the like the past couple of months been different than last year? How does your high season look?

I mean just give us an idea of kind of what you're seeing from your point of view.

[Xenia]
Okay, since pandemic everything is a normal. The tourists at La Fortuna, that is my zone, it moves very different than years before. Yeah, years before.

Before pandemic. After pandemic it was very move when we get out, it was very move, very good tourists at Costa Rica for a year and a half steady, steady. It was good.

Right now it came slower, slower than any other years. September and October was, no one was prepared for this very slow season. The rafting companies, they usually move 300 guests per day and they are right now in five, eight, it's very slow right now, right now.

December, I already had my lodging very high, like 70% rent already. It will be a good season but this year, September and October, I don't know why this year was different but it is very slow, more than usual.

[Richard Bexon]
Well, I mean, I think that what you're saying there is exactly what the hoteliers are seeing as well and just the general pattern in Costa Rica. I mean, I think we're returning to seasonality, which we had pre-pandemic. Just that the past couple of years, of course, because we had that kind of real big swing back from pandemic, I think everyone's accustomed to that being normal, whereas that's not normal.

I think that the new normal we're about to see, especially in 2024, is we're going to see that cycle of December, January, February, March up to April being very high, May, June a bit quieter, July, August peak, September and October being very, very quiet and then kind of the ramp up again from November, December.

[Xenia]
Yeah, yeah, of course. But well, we are waiting for our guests. We are prepared, dealing with offers and everything to get up this again.

[Richard Bexon]
Yeah, yeah. Well, I mean, if you don't mind me asking, Xenia, how did you end up owning a vacation rental in Aranau? It seems very like you're from Puerto Rico.

Like how did you end up with something in Aranau of all places?

[Xenia]
Okay. 2016, I get divorced and it was my first solo trip in my life. And I asked for friends, where can I travel being a beautiful lady and alone and being safe?

I want to be safe, but have my solo trip. And I was thinking on Dominican Republic. They told me no.

And a friend told me Costa Rica is a sure place that you can go alone. People will help you. It will be safe.

So, okay, no problem. I booked for Costa Rica on June 2016. My first solo trip, I took my places of interest, explore San Jose a little bit.

Then Rio Celeste, Monte Verde, La Fortuna. I love La Fortuna. Everyone loves La Fortuna.

Ticos love La Fortuna because it's very move place, like happy, a lot of tourists. And I like it. I met people, I met tour guides and they talk to you a lot of his country.

The electricity, the water system, everything. And it was very interesting. Here where I live in Puerto Rico, the electricity is awful.

So, I can have this kind of business in Puerto Rico, because the bill in Puerto Rico from electricity is very high, very high. And even you need some power generator at your home or solar panels at your home. So, Costa Rica, it was like a good idea for investment.

So, I only had 11,000 on that moment for my future. I don't know. I need to think very well, what can I do?

So, I started searching for lots at La Fortuna because I already had friends that I met there. People at Costa Rica are very friendly. They want to help you.

They would like you to visit more his country and very friendly. So, they helped me on distance to search for lots. And we're going to make business because I will make an Airbnb and they are tour guides.

So, they will have work from me. I will have guests from them and they will have guests from me. So, everything starts like that.

Then I travel again in September. I signed with a company that they had no, you don't have to make a prima. They finance everything, 99%, 95% the construction.

It was, wow, that would be nice because with my money, I can buy the beds and everything inside, the appliances. And I do it like that. It wasn't the best option because the best is you can do it by your own, right?

But if you're on distance, it was perfect. They had everything there, the lawyers, all the permissology for the water, electricity, everything. So, for someone that is outside Costa Rica, it was a very good option and would not change anything that I'd already made.

[Richard Bexon]
You wouldn't change anything. I mean, if you could go back and tell yourself something, you would never change anything. Not even in the design of the home or a bigger pool or anything like that.

[Xenia]
No, I designed that home. They send you a prototype and I made the changes and I designed it by myself like I wanted. I like the place that it is.

I bought, that is the best, I think it's the best thing that you should know that sometimes Americans don't think on that. Costa Rica still had a lot of streets on road, not with asphalt. Americans don't like that.

But if you're smart, you need to buy on that moment because it is on a lower price. And then in some years, they will go with asphalt. You will take advantage of that because your property will have an income.

And it is the best way to buy when it's still on road, I think.

[Richard Bexon]
Well, I mean, you definitely take a risk though, Xenia, because again, Hacienda Pena waited like 25 years for an asphalt road. So, it just depends on where it is. And I mean, they have a multi-million dollar project there.

But I think when there's a lot of tourism development and not so much real estate development, but tourism development like Laportura had, we definitely see a lot more infrastructure going in place. And again, Aranau is one of the hubs for tourism in the country and producing tax revenue. So, I mean, what has been the best platform for revenue for you on your Airbnbs, Xenia?

[Xenia]
Well, right now, I still think the best is Airbnb because they had this platform very safe for everyone. The insurance, yes, it is very tricky because a lot of people like to take advantage of the platform and use like bad reviews or something to ask for money. And it goes against the policy from Airbnb and all that.

The problem is not the platform, it's the guests that would like to take advantage. But still being the best, the one to five stars review, I don't like it because it gets you very low and maybe sometimes gets out of the platform like suspended. I don't like that.

It's the only thing. For the other, it's still being the same. I don't like booking too many cancellations.

They don't have a platform that they can ask for the money for the guest. I need to ask for, yeah, and ask for with the guest, ask for the payment and all that.

[Richard Bexon]
The guest has to pay you and then you have to pay booking.

[Xenia]
Personal, yeah.

[Richard Bexon]
Okay. Whereas Airbnb will charge the client and just give you what's left over.

[Xenia]
Yeah.

[Richard Bexon]
Which I think is smarter, to be honest with you.

[Xenia]
Of course. It's still the same. It's still the best right now.

Airbnb is still being the best. Of course, if you are thinking on Costa Rica for an investment, an investment is something that you need to move your money. You need to take a tourist place.

I would not go to a mountain without tourists because you will not have too much income. You need a place that can move with a lot of tourists. For that reason, I choose La Fortuna.

Some people choose Guanacaste. I don't think I'm going to Guanacaste because it's expensive already and over-populated.

[Richard Bexon]
But the demand is still there. I mean, the great thing about La Fortuna, again, is that there is not much luxury Airbnb there. Everything is very basic.

It's being very organic, but the hotels there are very luxurious, like Tavacon and Morena and Nayara. There are some very high-end hotels in the springs. What advice would you give to people looking to invest in Costa Rica?

[Xenia]
What they should look for La Fortuna?

[Richard Bexon]
Well, I mean, what advice would you give? If a friend came to you and said, look, I'm looking to invest in Costa Rica. I want to do something similar to what you would do.

What advice would you give them? What would you tell them? Be careful of this.

Do this. Don't do this.

[Xenia]
I would choose La Fortuna every single time because I like the people there. They still have values. I can't talk bad about any employee that I had.

Everyone are very good people and honest. They like to work. You can buy them with money.

They like to work. They like to serve. You can treat them like, oh, I will bring you money.

You will serve me. They don't like that. They help you because they have a compromise with you.

I took La Fortuna for that. It's a place that I really know from Costa Rica. I can tell you, I know La Fortuna like 100%.

The employees are the machine on your work. More like me, that I don't live in Costa Rica. I live in Puerto Rico.

They are my machine. They don't steal. They take care of your business like his own.

I'm very happy with the people at Costa Rica. That's something that I recommend anywhere. I can say that from Colombia.

I can say that from Dominican Republic. For that reason, I like Costa Rica. I recommend it because of the energy too.

Wi-Fi is very steady too. This is very good. If I compare to Puerto Rico, I prefer Costa Rica.

Puerto Rico has more beautiful beaches and I love this. For business, like I do, I choose Costa Rica.

[Richard Bexon]
We had an office in Panama for many years and it was very difficult to do business in Panama just because of the people. Whereas I think that's what makes Costa Rica very unique is the people. Its greatest asset is its people.

[Xenia]
I think that's one of the best things. The other, I have restaurants. I have someone who made the tramitology for the permissology and all that.

Everything is very fast. The permissions for everything is very fast. I had permissions for everything on the restaurant.

At Puerto Rico, I'm still waiting for that and a lot of money. Costa Rica likes that the country moves. They bring you easy because they take taxes.

We move the money, the market, not make you difficult.

[Richard Bexon]
Well, Xenia, how have you found banking in Costa Rica? Because a lot of people find it very difficult to open a bank account in Costa Rica and then just manage that account. What was your experience with that?

[Xenia]
It is very difficult. I opened in 2016 because the people, when I made the business for the house, they helped me to open the account because they need that I can make the payments to them. They help you to open the account.

It was a personal account, a little bit limited, but it's no problem because when you start to move the money, they will increase the money you can move. Right now, I have first just a dream house. It was the log cabin at La Fortuna Center, three minutes from the center.

That is country style. Then on 2021, I opened Arenal Village. That is luxury, like you said, that it wasn't my style, but it's a luxury place at Costa Rica and that had the Cedula Juridica.

They had a company ID. You still had Tico on your society where they can open the account because I made a society and I tried to make it by myself. They don't know.

Even for commercial use with a PO and all that, no, I need to put someone from Costa Rica with Costa Rica Cedula so they can open the account.

[Richard Bexon]
Okay. That's good to know. Cynthia, for someone looking to make, let's say, Arenal, say that someone's looking to do a vacation rental in Arenal, what percent return do you think that they're going to get on their investment, do you think?

Do you know the answer to that? What return do you think that they would get? Meaning if they invested $100,000 a year, are they going to be making 10%?

Would they be making 15%, 20% return a year? Do you have any idea of how much they'd be making on that?

[Xenia]
Okay. Well, you need to move your business. At the beginning, it's not be a lot, but I can tell you that is 100% good revenue on a touristic area.

[Richard Bexon]
All right.

[Xenia]
That's a thing. Like an example for just a dream that I already had from 2016, they had some years, private pool, that's a thing that you should need to rent a private pool. I paid for that loan $1,000 and I get revenue $5,000.

[Richard Bexon]
Wow.

[Xenia]
So is it good?

[Richard Bexon]
You're making probably about $60,000 a year basically revenue on an Airbnb and you're paying $12,000 a year and maybe your expenses are what? $8,000? So you're making like $40,000 a year.

[Xenia]
Yeah. Maybe expenses are lower because you know that the hourly payment for the employees is very low.

[Richard Bexon]
Yeah. Yeah. Wow.

Okay.

[Xenia]
So it's good.

[Richard Bexon]
And how much was your original investment, if you don't mind me asking, just so we can get an idea. I mean, was the original investment with the lot and land, if you'd have paid all in cash, would it have been 100, $150,000?

[Xenia]
I got everything financial. And on that moment, it was very lower price because of the road and all that. It was the beginning.

Just a dream was the second Airbnb at La Fortuna.

[Richard Bexon]
Wow.

[Xenia]
Yeah. It was the second. I stayed on the one and only Airbnb.

There, it was an apartment. And for that reason, I took that idea because everything was hotels. And if you're in a group, I can have two or three rooms rented for my friends.

I want a house that we can be on the same place. And for that reason, I made it on 2017, goes live on Airbnb without pool on that moment. And it was for a group until 14 guests made just a dream.

And what else?

[Richard Bexon]
But Xenia, if you would have paid cash, you'd have paid a hundred percent cash in 2016 for your land and house. If you don't mind me asking, and you can say, I don't want to ask that question.

[Xenia]
No, no problem. It was a total of 100,000 was the total. The land and the construction being expensive because it was on a loan.

Yeah. No, it's not expensive for us. But if you have your money in cash and if you can do it, not with them, with a construction company directly, it goes through half of that.

[Richard Bexon]
But still, I mean, look, you invest a hundred thousand dollars. Your revenue is $50,000 say. Say it's 40.

Say your expenses are eight. That's $32,000 of net profit at the end of every year. Less taxes.

Say you make 25,000. That's still 25% return, which is phenomenal, you know, in the world of investment. So I think any investor would take a 25% return every day.

[Xenia]
It's the best. I think it's one of the best deals you can make.

[Richard Bexon]
Definitely. Definitely. Well, I mean, I personally invested in land in Aranau myself.

So yes, I completely agree. But I mean, my last question for you Xenia is I've kept you long enough. If you inherited $500,000 and you had to invest it into a business or real estate in Costa Rica, and I think I know the answer, but what would you do with it?

[Xenia]
Well, right now I'm selling my two business because I want to do something new and buy something on road and do it again. Something innovative. I have too many ideas.

And I will do it again, of course, at La Fortuna. It will be at Costa Rica. I already know the people.

And if I already have that staff and people, people who made the tramitology and everything, why can't I move from that place?

[Richard Bexon]
True. Stick to what you know. And I mean, it's been proven.

So yeah.

[Xenia]
Yeah. Yeah. And it's a touristic place, always has the movement.

I have deals with all the companies from rafting, zip lines. We are all friends. It's our business.

We live one from each other.

[Richard Bexon]
Awesome. Well, Xenia, I really appreciate you coming on the podcast. And I'll put up your contact details and all of your websites in the description down below.

But thank you very much for taking the time to chat with us.

[Xenia]
OK, thank you. Thank you for the invitation.

[Richard Bexon]
Thank you.