Webinar August 2024

[Richard Bexon]

Yep. Oh, everybody, welcome to the August webinar here, where we're going to talk about how to invest in a vacation rental in Costa Rica. So we do these every month.

I think we're going to be releasing what we're going to be doing in September after this, but just to give you a sneak preview, we're going to be talking about value engineering and construction. So basically when you get your bid back, kind of number one, how do you go out for bids? And then number two is how you actually reduce that price.

And to give you an idea, we've been able to reduce prices anywhere from 10 to 20%. Once we start value engineering things, we actually had a client up an hour now. His bid came back at, I think it was like 670.

And we ended up getting it down to 530 in the end with quite a few changes and not that many structural changes. It was just a lot of changes to finishes and doors. And again, there's always a lot of errors in bids as well.

So we actually spend quite a bit of time on that, but you're here to talk to, well, listen to us today. Talk about how to invest in a vacation rental in Costa Rica. So your speakers today will be of course me, Richard Bexson, Managing Director for Costa Rica Investments.

And also Jake and I, we work together. Jake is an investment specialist and works with a lot of clients looking to invest in a vacation rental in Costa Rica. So welcome Jake.

Thank you. Thanks for having me. It's not your first rodeo I'm sure.

So, so yeah. I mean, I just want to quickly run through the agenda today, guys. We're talking about factors here, factors that drive vacation rentals and their returns here in Costa Rica.

We're going to go a little bit over the country data as well. Every single time that we do one, I think the last time we did this was in back in May. So kind of just updating what's happening in the country with regards to arrivals and also airports as well.

Then Jake's actually going to cover vacation rental data, kind of more the locations, looking at occupancy, average daily rates, kind of a number of listings and area what's going up, what's going down, seeing any trending. He's going to also talk a little bit about some modeling and examples there. We've got three examples there of just investments that you could make in Costa Rica, just so that you have an idea of how we go about doing the modeling when any of our clients or us personally look to invest in Costa Rica.

I've also thrown property management in there as well, guys, a lot of people that are looking to get an investment here in Costa Rica and a vacation rental require a property management company. So I just wanted to cover that a little bit as it's not actually kind of widely covered and there's kind of a wide gamut of property management companies, but just wanted to go through kind of some of the things and questions that you should be asking them. And then also just our advice when investing in a vacation rental in Costa Rica.

So it's kind of just the general agenda. We should probably be around about 20, 25 minutes, I think. And again, you know, if at any point through this, you have a question, feel free to, you know, just pose the question there in the Q and A and we'll do our best to answer it as soon as we can.

Okay. So first of all, what's more of the factors that, you know, when we, that we look at, you know, when making an investment in Costa Rica, I think it's important to just share kind of, you know, the, I suppose our investment philosophy that we look at when, when looking to invest in Costa Rica. So we're looking at tourism trends here, guys, and we're going to get into that kind of a little bit with country data.

We're not going to go as deep in this one as we did in a webinar in May where we started to look at search data and kind of like intent data online as well. You know, we, it's, that's maybe a little too deep for today, but we look at tourism trends. This is something that we personally spend a lot of time in looking at the search data, basically online, looking at the search data that we have from various sources.

And then also the search data from the tourism sector, because we have access to some pretty unique private tourism data there from some of the, you know, the largest tourism companies here in Costa Rica. It really just helps us get an idea of kind of what's happening in locations. And that's where we go to locations here.

You know, so location has a huge impact on the actual investment as well. And Jake covers quite a bit of that. When we look at occupancy, it's average daily rates, listing growths, you know, and there's also a bit of gut in there as well from me, not that I'm shooting from the hip, but I usually use the data as kind of just to give me a general direction.

And then from there, basically we'll kind of use a little bit of gut when I'm actually in the area and just chatting with people. And as I mentioned there, you know, average daily rate, occupancy, and also number of listings. And also some analysis that we have our guys do here in the office on rental returns, you know, cost to run a property.

Electricity is more expensive in other parts of the country. You need more air conditioning in other areas of the country, et cetera. So we always do that analysis.

And then also just looking at property management as well, because property managers can take anywhere from 20 to 40% of your revenue there. So that's a huge impact. They're actually on your rental returns there.

So just to summarize here, guys, and apologies if this is very simple, this is kind of the formula for generating revenue in Costa Rica, 365 days a year multiplied by your occupancy percent multiplied by your average daily rate basically equals your revenue may sound pretty simple to a lot of you. Maybe for some of you, you've never kind of seen it tight, tight, tight doubt like that, but these are kind of the variables here. The 365 is not a variable.

That's how many days there are in a year, but the occupancy percent, and also the ADR does. And again, that's dependent on location. And also product as well, because sometimes there are locations that don't have high ADR, but have high occupancy because they don't have luxury product there.

You know, and then that's where you need to take a look at all their luxury hotels. Do you think it could work? And that's where kind of the gut comes in a little bit.

And then of course you have to take your revenue, that's your expenses. And I think sometimes it can be very difficult to get those expenses. If like, this is your first time doing it, or you're not too sure, you know, and then you divide that by your investment to basically get the return on investment.

So we do a lot of analysis on properties. You can actually go to the website, investing in Costa Rica.com. There's a curated investment section there.

You can just scroll down the homepage and find it, sign up for it and you can get in and you can actually get access to some of that data there as well. We're also happy we've actually done for quite a few people, just a bit of quick analysis there when they've asked us to. So if you have a property that you'd like us to analyze, feel free to email us, you know, the details will be at the end of this, but it's just info at investing.

Costa Rica.com. We'll have one of the analysts here, take a look at it in the office and then basically kind of send it back to you. Okay.

So that's just the formula there guys. You know, it's plain and simple. I'm sure for some of you, it's like, but for other ones, you may not have seen it out like that.

And again, there's a lot of rev. There's a lot of variables at play there as you guys can see, you know, and we'll get into some of those variables a little bit later on. Now getting into, I think Costa Rica's country tourism data.

And I always like to look at this as it gives us kind of a bit of a macro view of kind of what's happening here. We're going to look at tourism data over the past couple of years. I'm focusing on really arrivals and also airports as well, guys, meaning San Jose, Liberia.

And we also touch a little bit on the private charters as well, which is starting to see a bit of movement here in Costa Rica. So. The first thing I want to take a look at here, guys, is actually January to July, 2019, 20, 23, and 2024.

Why January to July? Because that's the only data that we have so far for 2024. So in order to compare apples to apples, we need to compare those periods exactly for all of those, those periods, 2019, as I like to say, as the pre steroid era, you know, of what it was before the pandemic, 20, 23, you know, is, you know, it's kind of what, as I like to see the steroid era.

And I think 2024 is really going to set the bar for the new norm here, guys. So. I mean, here's the data.

I'll just give you a couple of seconds to just take a quick look at that and kind of consume it. But you've got 2019, 2023 and 2024 there, guys. Okay.

So that's the data there for Jan for July for total international arrivals for tourism in Costa Rica. Okay. So as you can see there, you know, there has been quite a bit of growth in 2024, 14% over 2019.

So people are always asking me, Hey, Rich, what's tourism going to look like in 2024 and 2025, 2024. I think you're going to look at a number, you know, around, you know, anywhere from 15 to 20% increase over 2023. And then going into 2025, I think you're going to start to see a, like, you know, a 10% increase year and year after that.

You know, I don't see that stopping more airlines are coming here. We have larger brands where it's Carlton, Wardorf et cetera coming in here and just the airline. So these are just helping to kind of put Costa Rica a little bit more on the map.

Okay. One thing I wanted to look at here was seasonality. This is basically a graph of monthly arrivals by year from 2019.

I removed 2020 just because again, it was the pandemic year. It made the graph not look so nice. I wouldn't say nice, but like anyway, you know, it was just a very weird year because of all the borders were closed majority for the majority of the year.

But again, I think what you're seeing is 2024, you know, returning to seasonality as we can see here, 2023 barely broke pre pandemic numbers of 2019, but 2024 is showing growth there. As I mentioned, the 14% growth. And again, 2024.

Outstrip will be the best year for tourism in Costa Rica. When talking to a lot of the hoteliers here in Costa Rica, you know, they're saying that, you know, there's a return to seasonality. They're seeing the high and the low season.

You know, I was actually expecting this when I looked at the data for 2023 and 2022 to see it a little bit flat line that it wasn't expecting to see the dip in September and October. I was expecting to see it a little bit flatter. But it was, there was seasonality in the arrivals, but the hoteliers didn't see seasonality.

And I don't know why that wasn't, why that was, you know, whether the locals, you know, Costa Ricans were traveling a little bit more in the off season because the borders still kind of weren't open for some countries and restrictions. So it was kind of pulled up by that. But I was expecting to see a bit of a flatter line there for 2022 and 2023 and not so seasonal, but 2024, as you can see there, guys, it's just going to follow the same pattern.

It's just going to be a line above. And I'm thinking we're going to see that for 2025. And again, if, if everything stays as it should, you know, you'll continue, continue to see that as it goes into the future.

Now we're going to take a look at here guys is, you know, we've done the country we've done seasonality. We actually took a look, take a look at arrival data by airport. Okay.

When I started in tourism in Costa Rica, which was in 05, Liberia San Jose was an 80 20 split. As you guys can see there in 2019, it was a 73 26 split. And in 2023 moved to a 68 31 split.

And now it's a 65, basically 34 split. So, you know, Liberia continues to grow and outstrip San Jose. I, you know, it sounds like can't grow more really much guys.

Whereas Liberia has a lot of space to do it, but all of the larger properties and hotels are going into the Northern parts of Costa Rica. So I think by, you know, 2030, which is a long way off, you're going to start to see like a 45, 50 split, maybe even getting close to 50, 50 as a lot of the new airlines coming into Costa Rica are just going into Liberia. And, you know, it's, it's, you can just see there, it's just the trend, you know, it's, it's just moving more and more business there basically to Liberia.

So I think when looking at investment, you have to consider that as well. I personally, you know, people might be saying, Hey, Rich, why are you investing in areas like mountain Antonio then? And, you know, it's just the data draws me there and I'm able to get in at a decent price in mountain Antonio.

It has great occupancy, as you'll see by Jake's numbers there, it's average daily rates. It's not as good as the other part of the country, but I think that's because it's an older destination that needs kind of a bit of a facelift, but I wouldn't discount San Jose. I just think if you're going to make a safe investment outside of your home country, just bear in mind that the majority of the traffic is starting to move towards Liberia guys.

Okay. And then once you just start to see, you know, as percentage changes year over year, you know, as we say there 2019 to 2023, you know, a 0.77% change, 13.46. And then 14.33, this is just the average. This is the kind of the overall airport arrival changes guys that we're seeing there.

Okay. And that's January to June. I think the July data just came out, but I don't think you're going to see much of a swing there guys really in that data there.

It's not going to change that much. So, you know, as I mentioned that Costa Rica arrivals continues to increase, you know, Liberia arrivals, I said there could be 40 to 50% over the next five years. Costa Rica had stated that by 2030, it's going to have 5 million travelers.

I don't think that's going to be correct guys. I think you're probably going to be looking, you know, probably I would say around the three and a half million dollar that three and a half million, maybe up to $4 million to 4 million travelers. You know, 2023, we saw 2.47. What would we see about, you know, probably about 2.8, 2.9 this year. And I think that again, by, you know, for the next five years, you'll probably start to see it get to about maybe three and a half, maybe even touching 4 million travelers there guys. And I think again, you're going to start to see that trend push towards Liberia as well. So again, as I said, you just need to bear that in mind when making an investment in Costa Rica.

So you have all these travelers arriving into Costa Rica, pushing more towards Liberia hotels aren't being quick enough, aren't being built quick enough. If anybody has ever tried or knows the industry here, you know, it can take three plus years just to break ground. And that's like a fishing.

And sometimes it can take five, six, seven years. The cost of operations in Costa Rica continue to increase. There are other areas of the world when doing an analysis against Costa Rica, people go, Oh, okay.

For hotels, it's just much easier. I can break ground quicker. The government gives me tax breaks.

The cost of operations are lower, you know, so I'm going to go somewhere else. That being said, we're starting to see high-end hotels move in here. Ritz Carlton, Wardorf Astoria guys, you know, moving in here.

They were talking about that. There's a Hyatt moving in as well. I'm again, I it's that's the, I would say the cheese may or the.

What do we say? She's made English that would be the rumors on the streets, but I don't believe anything until, you know, anything starts to move ground here, but. I think vacation rentals are going to start to become the new hotels.

And we're definitely seeing that. And probably managers are starting to offer basic services like breakfast chefs, daily maid service concierge that hotels offer as well. So we're definitely seeing it.

I think we're part of that trend as well. So, you know, it's a lot more affordable to do a lot easier to do than getting all of your permitting basically for a hotel. Okay.

So what I'm going to do now is hand it over to Jake and Jake basically will talk about the location mental data here. So over to you, Jake.

[Jake Alexander]

Thanks Rich. Yeah, let's move on to the next slide here. We're going to look about, look at notable occupancy changes and some of the most popular locations.

And look immediately looking at this. I think the first thing your eyes drawn to is 15, almost 16% in Papagayo, which looks great, but you know, bear in mind, 42, 43% occupancy depending on your ADR might just be your breakeven point. The, the other thing that really jumps out here is what we had been talking about with Playa Grande, as it becoming a stronger destination.

I know we have a bunch of houses we've built out there for people and you see that occupancy increase 9%, you know, over 50%, almost 54% really pushing Grande up into a stronger destination. And on the other end of the spectrum, when you look at places like Jaco, Manuel Antonio, Cobono, Santa Teresa, there's still growth, it is a little bit slower, but for a place like Manuel Antonio, it's an established, like you said, an older destination. Maybe those areas are seeing some saturation or that the new supply maybe isn't attracting new occupancy proportional to demand. So if you are looking to invest in one of those areas, it's important that you do really set yourself apart from what else is already out there.

[Richard Bexon]

Yeah, I mean, I agree, Jake, just because, you know, I mean, I think Hakko is about to get flooded with one, two, three bedroom condos. You know, it's doubling its inventory and I don't know what's going to happen to that. But I mean, when you compare Hakko being one of the top tourist destinations in the country, a 45% is not exactly great, if that makes sense, when you've got other ones in the 55, 56%.

But I think what was interesting there that you mentioned is Playa Grande. I mean, Playa Grande is coming on to be, you know, to compete with some of those top destinations. But yeah, I mean, we've been harping on about Playa Grande for three or four years.

So, you know, we're probably 0.1% of that may have been us in that increase, so yeah.

[Jake Alexander]

And to your point of the high end, you know, if you drive around Playa Grande, the majority of what's down near the beach is all high end luxury villas, not saturated with condo towers.

[Richard Bexon]

Yep, yeah, I agree, I agree. It's very, I think once there's one condo tower, it's very easy to build other ones. And then, you know, you could see, I don't know, 100, 150 properties just come on the market in two seconds.

And that has a huge impact in your occupancy and average daily rates, because there's more competition.

[Jake Alexander]

Yeah, and it's much harder to be unique. You know, if there's 80 other two bedroom condos, what are you doing to make yourself really separate and apart and better?

[Richard Bexon]

Yeah, and I think that that comes back to a point which we'll discuss later is property management. You need great property management because they're really part of your success.

[Jake Alexander]

Yeah, and we can, yeah, let's move on to the next one here. So this slide, we're looking at the total number of listing changes from 2019 to 2024. And, you know, also while looking at this, just keep in mind the occupancy data from the previous slide.

You know, you look at Flamingo, Potrero, this area has the highest increase in listings, but a moderate occupancy increase is 6.7%. Suggesting that the area is becoming more popular. And, you know, I think it's also important to keep in mind what's happening and what's happened in these areas between the times that we're looking at. You know, that marina up in Flamingo is, was constructed and finished, still working on it, but for the most part done in that timeframe, which I think helped increase the amount of listings going in there as well.

When we look at Playa Grande, you know, 61% increase in listings with a high occupancy of 9%. Like we said, we're seeing Grande experiencing both supply and demand growth and a healthy market where that increased supply is also being absorbed by the growing demand. And, you know, inversely, if you look at Santa Teresa, they've had a really high increase in listings, but only a 3% increase in demand.

[Richard Bexon]

Yeah, I've never, I have to admit, I've never been a huge fan of investing in Santa Teresa, you know, just because of the data, but also as I kind of look at it as a bit fashionable, again, this is just my opinion as well. It's like, it's fashion, it's very young people there and fashion kind of comes and goes. I prefer to, you know, have established areas where families go, because then again, that fashion doesn't come and go.

It's just, you know, it's interesting looking at just some of these points here of like, this buhuco has started to come on the scene here, Jake, which is basically Punta Islita and Playa Coyote, you know, which is, Coyote is becoming the new, I would say, you know, when I first came here 20 years ago, Santa Teresa was kind of where all the locals kind of went, you know, Santa Teresa and also Grande. Now they've started actually to move to Coyote.

So I'm always like people like, look, if you want to know which the next beach to kind of pop is over the next like 10 to 15 years, just figure out where the locals, like the cool kids go in the surface and stuff. And then that's going to tell you where you should be like potentially looking at for a long-term, you know, investment. And it's just interesting there that they had 68 and moved to 103, but it's still beyond Papagayo, which I think is an anomaly.

It's still one of the lowest, you know, basically number of listings, if that makes any, you know, increase. As a percentage, yes, it's a lot, but as a number, it's just not huge.

[Jake Alexander]

Yeah, well, and it's a, look, it's an area that's not super easy to get to. True. But I think we'll also see on the next slide how that number of listings does drive the average daily rate there.

So looking at the average daily rate, it's had the highest increase by a significant number. So why? Well, growing demand, limited supply, driving, you know, driving up the prices.

And it'd be curious to see what a lot of the new listings there are like. Yeah. Is it luxury?

Is it not? The interesting thing about that area in particular too is how close you can actually get to the beach and have a beachfront property.

[Richard Bexon]

Yep.

[Jake Alexander]

Which, I mean, you know here is very difficult and hard to find.

[Richard Bexon]

Yeah, I mean, look, in that, Punta Islita, you know, Punta Islita is part of the Autograph, the Marriott Collection, the Coyote just down the road has great water infrastructure. It has, you know, active concession beachfront. Like it was, I have a lot of friends who have properties there and that were building large properties there as well.

So, and I say, it's all Costa Ricans. It's not, you know, foreigners coming in. It's all Costa Ricans.

So they just kind of, Costa Ricans kind of go to like Santa Teresa, then they sell their properties, you know, make a bunch of money and then go and find the next beach. They all kind of seem to move together. And it appears that the next beach at the moment is that, you know, that Coyote area.

[Jake Alexander]

Yeah, it'll be interesting to see what the like town, how the town infrastructure changes over the next five, 10 years, because there's really like one corner supermarket next to the football field and like a little bar and their big thing that happens there every year is the off-road rally in October.

[Richard Bexon]

Well, I mean, look, Grande was like that 10 years ago. You know, actually, it was like that in 2000 and 20, like 2020, if you went there, it looked exactly like that. I was there in 2020 and like there was, well, there was the ripjacket in, there was a little pulparia and then that was about it.

[Jake Alexander]

Yeah, and I look at it. It's crazy.

[Richard Bexon]

Yeah.

[Jake Alexander]

So also looking at the data here, you know, when you look at a place like Mammal Antonio, you had mentioned that the ADR certainly isn't the highest, but, you know, it's a mature market, it's established, there's a good balance of supply and demand. However, you know, so what do you do to get a higher ADR? Well, it emphasizes the importance of having a unique property that really separates you from what else is out there to drive up your occupancy, but also how much you can charge.

[Richard Bexon]

Yeah. Well, I mean, look at Papagayo. I mean, you had mentioned there in Papagayo it was like 45% occupancy, I think, but look at that average daily rate of $2,000.

And that's actually, you know, I mean, I think that there's some condos up there in Papagayo, when we say Papagayo, when you're talking the peninsula where the Andaz and the Four Seasons are and all those homes, I mean, there are homes up there that are 20, $30,000 a night, you know, and they rent at 40% occupancy. And at that rate, that balance, when I go back to that formula, it was 365 times your occupancy times your average daily rate of your revenue, you see. So it's sometimes your average daily rate can be so high, but then your occupancy a little lower.

And sometimes it can be even, and sometimes it can be completely the other way.

[Jake Alexander]

Yeah. And then, you know, looking at that, I think it's also a similar thing that we see in Santa Teresa where you have to spend so much upfront to be able to get that return that you're looking for.

[Richard Bexon]

Yeah, yeah.

[Jake Alexander]

All right. So, and here, locations with the highest occupancy rates. The interesting thing I see about this is, you know, you look at the top one, two, three, four areas, and it's all San Jose.

Now, you know, how many nights are people staying there? My guess would be one or two. I don't, look, it's not like people are going to stay in San Jose for a week.

But, you know, it's been interesting to see how, you know, you look at that change there, especially with the amount of listings. So year over year, you know, there's only 11 more listings, but a much higher increase in occupancy.

[Richard Bexon]

Yeah.

[Jake Alexander]

So, you know, San Jose, as a whole, occupancy is increasing to the point where demand is really outpacing the new supply.

[Richard Bexon]

It's funny, Jake, because, you know, I was driving with my wife the other day and we saw the San Jose skyline, and I was like, wow, 20 years ago, that did not look like that. It was very flat. You had the Banco Nacional building, which is the tallest building, and that was it.

And now you've got towers going up everywhere, like everywhere. You know, I think the occupancy numbers could be high, I think we need to dig into that data a little bit more and see if they are available all year, or it's just people that are renting it out. You know, there's a lot of, the data sometimes can be very dirty that we also look at, but it's also your average daily rates, like 50, 75 bucks a night.

So it's that balance again between like, okay, in Tamarindo, I get 56, but my average daily rate was up like 400, was like 400. Whereas in San Jose, you know, probably my average daily rate is about 80 or 100, but I get, you know, 61% occupancy. So once you multiply those numbers out, your revenue number is completely different.

[Jake Alexander]

Yeah. And also the way they're building those towers is a lot of them are built for Airbnbs and for short-term rentals, kind of built into the equation. And you can get a one, two bedroom place starting, I mean, depending on the building, 150 to 200.

[Richard Bexon]

Yep. Yeah, I mean, I think when we analyzed it a while back, cause I was looking at, I think it was a Babylon tower I was looking at, cause they were advertising 12% returns, but it was 12% on revenue, not on, they didn't mention that. But then once I started looking at the data and met with them and then went over it, you know, they quickly put the phone down on me, but yeah, I was like, look, it's like a three, 4% return, actually, which is not terrible.

You know, if someone's just looking to park money and, you know, potentially get, when they sell it, make money on the sale, but I don't like to do that. I prefer to make money on the actual cashflow and the sale is just a bonus.

[Jake Alexander]

Yeah. And I think the other interesting thing when looking at this data here is the slight decrease in Monteverde with the occupancy, which, you know, maybe it just means that the new properties coming on the market aren't as appealing, but it's still, like, it's 1%. Is that seasonality?

Is it new properties? I think it's really hard to pin down exactly what it is. And it's not a really significant number.

Yeah. I think the other part is, when you look at the number of new listings in areas where the occupancy is staying pretty steady, it's showing that it's growing, growing together with the supply and the demand there as well.

[Richard Bexon]

Yeah. I mean, I think that, again, you know, going back to my previous point about, you know, the next five years, you know, every single year, I think you'll start to see, you know, an increase in the number of travelers. This number, as long as the number of listings doesn't outstrip demand, you know, like, it's not like HACO.

I think HACO is going to be a bloodbath over the next coming years. Apologies to anyone that owns a property in HACO, unless it's like a beachfront home, like luxury home, because, like, you can't beat them. But like, if it's a one or two bedroom condo, I think it's, yeah, I think it's going to be very interesting to see what happened there.

I was chatting with David Carr, one of the brokers over there, and we were talking about that. But yeah, it's, I think you're just going to see steady, you know, a steady eddy in some of these, in these destinations, you know, going forwards, as long as there aren't huge amounts of listing increases. And usually, as you know, Jake, water infrastructure here is very limited, and that's what's going to limit some of these, this listing growth.

[Jake Alexander]

Yeah.

[Richard Bexon]

Okay. Back to me. So I just wanted to go over here, kind of like, I say, when the investment magic kind of happens here.

You know, we did a webinar that was back in May, and I talked about high and growing demand areas, you know, so there is data out there. It's not great data. I mean, that's the thing with Costa Rica.

Somebody was asking me, hey, where do I get data on five-star luxury hotels in Costa Rica? And I was like, well, number one, there aren't that many of them. And number two, I have no idea where you get that data.

Like, I think there is a report out there that does take data from some of the hotels here, but you have to pay for it. I know a couple of my friends have access to it, but I think you just need to take a look at high and growing demand areas. You know, you can, again, you can use AirDNA.

I think the ICT has some data as well out there. You know, I mean, we take a look at data with regards to listing growth, also hotel occupancy as well, which we have, which is not readily available there, and just see those high and growing demand areas. And in those areas, look for like kind of those mid hotels where stuff's starting to be upgraded.

And Monteverde is a great one there, Jake, because if you roll back the clock four years ago, there really wasn't that many luxury hotels there. Now, you know, there's appearing to be more and more luxury hotels in those markets. With Sendo, I know Monteverde Lodge just got refurbished, and I think there are a couple of other ones up there as well.

So, you know, I think Monteverde, from a luxury vacation rental point of view, there's definitely opportunity there as well. And that's just one that comes to the top of mind. And also find places where real estate is affordable, which you said there, Jake, you know, occupancy ADR numbers in Santa Teresa look great, but real estate, once you start putting the cost of, what it costs to buy there, you know, the numbers just don't work.

So, you know, we're always looking for, you know, those high or growing demand areas, but it just depends what your investment thesis is or your investment appetite. Like if you want to take a risk, you can do that on maybe an area, you know, I don't know, I'm going to pull one out, Avianas here. You know, Avianas is starting to grow a little bit.

It didn't come up on any of this, but this is where you have to kind of look at the data, but also use your gut. And very difficult, I think, you know, and that's why we do what we do, is we spend a lot of time on the ground. You know, I mean, today I just got back from Guanacaste, Monday I was in Arenal, Jake, you were down in Manuel Antonio.

You know, we're all over the place. So we're kind of seeing what's going on because sometimes the data is more lagging than leading. So we're always kind of looking at some leading indicators, whether that may be developments in the area, talking to people, et cetera.

And then we just go back and kind of run the numbers and take a look and say, hey, would an investment here make sense? So, but I mean, the, you know, the saying here is the money is made on the way in. So you just need to make sure is that you've got something that's affordable, that gives you the returns basically that you're looking for.

So in summary here, I'm just going to kind of give you some locations here that are just very interesting. You know, I think strong locations, you know, La Fortuna. I don't think it really came up here, but I still think La Fortuna is a strong one just because of the hotel occupancy and lack of luxury product.

And we're actually about to start a five room hotel there over fractional ownership. Also Flamingo as well is very, very strong. The data just continues to be very strong there.

And Tamarindo, Manuel Antonio, Playa Grande. You know, I mean, I think if I was to grade these, I'd probably say your Manuel Antonio, Tamarindo, you know, your A destinations, Flamingo is probably an A minus. I think your Playa Grande is probably a B plus and your La Fortuna is probably a B to B plus as well on that one.

And of course, Nosada that we have here as well. You know, but again, it's the cost to get into some of these destinations, especially like Flamingo, Tamarindo, Nosada. Manuel Antonio actually has some actually pretty good deals.

And I know that you'll cover that in a minute, Jake. And Playa Grande is starting to get more and more expensive to get into as well. You know, as I sit there, depending on your risk appetite and your investment, you know, I suppose, length that you want to be invested in something.

You know, this Bajuco Puntes Litre is a brand new one for me. You know, when we were looking at this data here, I was like, wow. You know, I'm like, Jake, we've got to go and, you know, I don't have a big four by four, but I know that you do.

So we're going to have to get in a rally this year and see what's going on there. Monteverde there, I think is an up and coming destination. I also think San Jose are the right locations.

I don't know much, you know, I have had some investors who were like, hey Rich, I'm thinking about investing in the Central Valley. I'm like, it's easier money at the beach than it is in the city, if that makes sense. Because yes, the occupancy might be high, but the average daily rate.

And I think as you said there, Jake, there could be a lot of people kind of coming for one night, two nights, et cetera, but it could also be business travel. It could be Monday and Friday and nothing weekends. Yeah, and then you've also got to take a look at like, a lot of major cities like Panama have banned vacation rentals in their cities.

San Jose has not done it, but I know that there is a push from the tourism community here to start taxing like EVA, the sales tax here on Airbnb's, which if you're here in Costa Rica with a Costa Rican credit card and you pay for Airbnb, you pay the EVA, the 13% tax. But if you're foreign and use a foreign credit card, you don't pay the 13%, which doesn't make sense. But anyway, so they're just trying to push that one through there.

But this is just kind of an area of just a summary here of like strong destinations and kind of up and coming. And when I say up and coming, that could be up to a five-year play. I think Baja, Copacabana are probably about five to 10-year play.

Monteverde is probably a shorter period. You could probably actually do pretty well there over the next coming years. And San Jose, I think it's up and coming from the point of view of the occupancy looks good.

I'm just not sold on this central valley with regards to its actual returns based on how much it costs to get into the market and the returns that it's done. I'm yet to see something that's better than like 4%. Anyway, Jake, over to you for some example properties.

[Jake Alexander]

Yeah, so we're gonna dive into three different properties here that we've identified as good options. We can go to the next slide here. So this first one is a condo in Manuel Antonio.

And here's the big difference when you're looking at a condo in Manuel Antonio versus a condo in Jaco. For those people who aren't familiar with the area, there are not giant condo towers in Manuel Antonio. And where this particular condo is located, it's right in the heart of Manuel Antonio.

There's only three levels of condo here and about 20 units in total. You're getting in arguably one of the most popular areas that people come to visit for less than $400,000 for Ocean View. And this particular condo is actually two separate units in one.

So you have the option to rent it as a two bedroom or separately as two one bedrooms. So with this, you're looking at an investment of 382, 460, after the listing price and closing costs, $15,000 for renovation, really to cover furniture and some small details in there.

[Richard Bexon]

And looking at an annual return of about 8.7%. Yeah, I saw a comment the other day, Jake, actually from one of the brokers that owns one of the large brokerages here. And he was saying, look, I mean, anyone that's promising you 10% returns here in Costa Rica, you know, it's kind of unicornish. You know, I've got someone in, he's like, you've mentioned that, you know, someone that's had this property for years.

And I think it was in Mazocon Chavez making 4%. But again, I think it all goes down to that formula and demand, you know, and there are places in Costa Rica you can do very well if you know what it is that you're doing. I mean, you can get, you know, six to 8%, you know, returns.

And look, this one's 8.7. And I think when we looked at those numbers, we were pretty conservative with those numbers as well. I mean, it's just, there just aren't that many units in Manuel Antonio, you know, like this. So, yeah.

[Jake Alexander]

Yeah, you know, Ocean View, right in the middle of Manuel Antonio, walking distance to a bunch of restaurants, even down to the Paitis Beach if you wanted to. So, you know, it's definitely a unique property.

[Richard Bexon]

And on the next- I'm just gonna say, Jake, none of these are our listings, by the way. We don't list properties. This is just stuff that we've analyzed and we've been through with clients.

So, you know, if someone's like, why are you doing this stuff? It's like, well, we saw, you know, when we've done the analysis, we saw it as a great opportunity here.

[Jake Alexander]

Yeah. And so on the next slide here, this is the analysis on this property. And this is something that we do for our clients.

So after we go out and look at properties with them, we go through an analysis, looking at historical data, if we have it on the actual property, or looking at comps in the area. So this is just an example of what that analysis looks like.

[Richard Bexon]

This is their real data though, right, Jake?

[Jake Alexander]

Yeah, yeah. So this one, we actually were able to pull the real data off of it. And that's why you see there's actually two separate daily rates there.

Yeah. And this was the actual data from this particular unit tied in to exactly how the property management was structured, as well as the HOA. Utilities was guessed, but.

[Richard Bexon]

Insane at 90% in January, February, March, but I mean, just the demand is just, you know, I mean, it's there in that one, I'm telling you.

[Jake Alexander]

Yeah, and look at the price point. The other, if you wanna stay at a hotel for that price point, you're not. I mean, the Falls is about as close as you're gonna get, and it's still more expensive and arguably in a worse location.

[Richard Bexon]

Yeah, yeah.

[Jake Alexander]

So this is a condo in Villa Verde II in Tamarindo. So you're getting into, again, extremely popular area with 6% increase in occupancy from 2019 to 2024 for $300,000.

[Richard Bexon]

I mean, I can say, Jake, we did one of these. We bought one of these, we actually remodeled it as well, and then actually ended up selling it on, you know, but yeah, it's the remodeled cost, I think it was actually about 40, $45,000 as well.

[Jake Alexander]

Yeah, and so this one, you'd be looking at an annual return of 7%. And, you know, why do we like this one? Well, the area, Tamarindo, it's popular.

And, you know, we talk about differentiating and being different, better. Well, the remodel is how you do that. And then also from, you mentioned you flipped one of these, same kind of deal, you help yourself in the long run there as well.

So not only on your annual returns, but when you ultimately go to sell.

[Richard Bexon]

Yeah, yeah. Yeah, I mean, I think the interesting thing about this is we've actually done one of these. And Villa Verde II is not the most amazing condo development, but it's just that there's demand for it.

Like if you were to make an investment, I don't think that many people, or maybe some people would actually be happy to go and stay at it, but a lot of people aren't, you know, that happy to go and to stay at these. But if you're just looking to park money and get some return on it, I think that you could, you know, very easily do that on something like this.

[Jake Alexander]

And, you know, again, on the next slide here, you see our analysis and projection on exactly how this property would do. And so you'd be looking at, you know, 7% return there. And the last one would be, it's actually our R&L fractional investment property.

[Richard Bexon]

Which is fully funded, we're just sharing it as an example.

[Jake Alexander]

Yeah, yeah, so it is fully funded. So, you know, we're doing an investment of 1.1 million. So we did $100,000 at 11 shares with a projected annual return of 13%.

And why R&L? Well, this ultimately goes back to what you were talking about where the magic happens. So the top destination for luxury hotels, extremely high occupancy on those hotels, 70%.

Lots of luxury hotels with an average daily rate of $1,000 plus. When you look at the rentals that are already there, they're not that nice. And they're already exceeding 80% occupancy.

So looking at all those different factors, we saw the opportunity to put a high-end luxury rental in there. I think if you want something that's even remotely comparable to what we're doing, if you were gonna take a villa at the Springs that could sleep just as many people, you're looking at thousands upon thousands of dollars a night.

[Richard Bexon]

I looked the other day, it was $5,300 a night in low season.

[Jake Alexander]

Yeah, so, yeah. And ultimately the affordability of being able to buy real estate up there. Or the price per square meter in La Fortuna, R&L, compared to Manuel Antonio, it's not even comparable.

[Richard Bexon]

Yeah, yeah. Well, thanks, Jake. I'm gonna now jump back in.

I know we have some questions here from, I can see from Josh, Sandra, and we have an anonymous attendee here, but we'll get to that one in a minute. I just wanna quickly talk about property management, because as I said here, not all property managers here are the same. Typically when people buy a vacation rental here, they're also having a property manager kind of run that.

So I think when analyzing property managers, you need to look at their occupancy of their current rentals. I think you need to ask them a bunch of questions. You need to ask them for a similar property that they have, comps in those areas, and take a look at their occupancy.

Again, we're able to actually see in and actually see property managers and see who actually works best, how many listings they have, what their occupancy and their average daily rates are, what their views are of basically all of their properties. So we're actually with our clients, we actually provide that data for them and recommend like, look, these guys have the best occupancy and also it looks like they got the best reviews. But it's also, there's a bunch of different factors here as well, we're also using their tech, that they're also using as well. Some are kind of a little bit more old school and aren't using up-to-date property management systems with channel managers, with maybe integrated locks into those property management systems.

A lot of people, personally, I hate to pick up a key. I stayed in a vacation rental last night of a property management company and I had a key and I was like, dude, I'm leaving at six in the morning. Who am I giving this key to?

They were like, ah, just throw it over the wall. And I'm like, okay, well, what if that, they can't find it, am I now responsible? I just prefer a code.

And there was actually a great one that we've started to see which is the code is the last four digits on your mobile. Like the property management system sets the lock because it's a wifi lock and interconnected to the property management system for the last four digits on your cell phone which I thought was pretty cool because you're always gonna remember those last four digits. So I think asking about the use of tech that they're using, their property management system, the channel managers, what channels that they're using.

I think anyone that's just using Airbnb and VRBO, like, come on guys, like anyone can do that. You need to find other channels out there. Whether that's the Marriott network that they're using there, whether they're integrated with any agency systems, whether they're using any other age or travel industry, I would say, online travel agents or even specialized travel companies as well.

But also I say to people like, trust your gut. Interview three, it's a long-term relationship that you're gonna have with them. So you're gonna better like them.

Like nobody wants to work with someone that they don't like and this is a relationship. So just, I would say, trust your gut as well. Ask these questions, look at their rates, ask for a model, ask them a little bit more questions about the tech that they're using.

And then also trust kind of your gut there on that one as well. So that's kind of my advice on property management, guys. There are a lot of companies out there.

Sometimes people are always like, do I go with one that's got a bunch of, a lot of them or do I go with someone that doesn't have many? And I'm always looking for the up and coming hungry person. So I would ask them like over the past year, how many rentals do you have in the past year?

How many have you added? Because you're probably looking for that probably management company that maybe has 10 to 20 and that's added, that started to grow a little bit because they're going to be hungry to kind of add more rather than the guy that's got 150, because you're just one of 150 there. But sometimes, people, that's what they want.

They just want to kind of just stick it with those larger people. They don't want to take the risk with those property management companies and just basically just kind of leave it with them. And there's nothing wrong with that.

It just, again, depends on your goals. So my advice guys, when investing in a vacation rental in Costa Rica, I think the investment's only as good as the team that you have on it. And that consider investment consultants, whoever's your buyer's rep, whoever your lawyer is, if you're doing any analysis on it.

And it's just only as good as the team on it, guys. And I think you just need to understand if like you need someone in your corner when making investments in Costa Rica. I would suggest sticking to strong tourism areas.

They always say that the quickest way to make a million dollars in Costa Rica is come with two, because you'll leave with one. So I suggest sticking to strong tourism areas because it's a market that you don't really know. So I wouldn't jump into the deep end unless you really, really know it and start speculating.

I just wouldn't speculate, guys. As I mentioned here, don't speculate. I just wouldn't do it.

If you don't do it back home, don't do it here. This market just is so different. It moves so slow.

And sometimes people are like, all that beach is going to take off. But when you start looking at the infrastructure in place, you're like, well, it's not going to explode. Like I look at Avianas, it's not going to become the next Tamarindo over the next 10 years.

And it's not going to become the next Langoster over the next 10 years because of the infrastructure there. It will do well, don't get me wrong, but it's not going to look like anything like those just because the water infrastructure from the aqueduct from Paris or going in there is not big enough yet. And then also just make sure you've got a clear exit, guys.

Buying something in the middle of nowhere where there's not that much demand, that exit doesn't appear to be very, very clean. So I would suggest that get a good property management company because the cashflow that you're going to get from your vacation rental is going to help you on that exit. So just stick to main areas with good ADR, good occupancy, and you'll find that your exit from something is very easy.

It makes a listing agent's job easy when he can say, hey guys, there's also, I don't know, $100,000 of future revenue on the books as well. That's a very easy sell. So yeah.

So that's kind of our advice on advising on investing in Costa Rica on a vacation rental. I hope that's been helpful, guys. I mentioned questions here.

I do actually have some questions here that we have here that had been asked earlier. Josh had asked, hey Rich, do you have any data on average international arrivals compared to new short-term rentals on the market? I mean, we have the data.

I would say that vacation rentals, short-term rentals are outstripping the arrivals as a percentage. I think when you start looking at numbers and looking at those ratios, I think that might be an interesting thing to look at, Joshua, on that one. So Jake, maybe we'll make a note there and see if we can actually take a look at that data of international arrivals.

It's like solid numbers compared to short-term vacation rentals. And it would be great to kind of split that as well. Maybe not.

We'd have to think about how, maybe we can speak to James in our office, who's our analyst, and figure out how we'd both, you know, we'd go through that one. Sandra asked, do you have any data on Atenas or the Central Valley? I mean, we covered, I think, Sandra, some of the stuff there in the Central Valley with Corte de Edad, San Jose, which is more like Savannah.

We have data on that there. The occupancy appears to be good. The ADR is a little bit lower.

But if you want to reach out to us after, Sandra, you can just email us, info at investing costa rica.com. We'll be happy to kind of just guide you and see what we've got there. I think Atenas, from what we saw, Jake, if I'm correct, the occupancy with growth was pretty strong, but it wasn't that high.

I think it was like 45, 46% or somewhere around there. Do you remember that data point?

[Jake Alexander]

Yeah, I think it's around there. Yeah. And I think it also kind of boils down to the rest of San Jose, where what are the stays really?

And, you know, are you looking there for yourself or as a like short-term rental investment?

[Richard Bexon]

Yeah, I think if I was to do something, especially in Atenas, you know, a lot of people, because it has that famed area as having the best climate in the world, that's like, you know, is its slogan. I'd probably be looking for something there that has kind of more midterm rentals. There's not like one month plus rentals where you can rent from December all the way through March.

I mean, you can do it, but I would be building more affordable stuff in Atenas based on the data that I know in the area, which I actually know pretty well. There just isn't huge demand. There isn't, I'd say there is demand for that, or I believe it to be.

I just don't think that it exists today. You know, but again, that's me going with my gut. So yeah, for what it's kind of worth on that one.

We have here, are most investors paying cash for properties or are there options for financing? I would say that probably, wow, what 90% of people are probably paying for cash here. There is financing becoming available.

We've had quite a few clients do it. Jake, you just went through it with a client as well. I think that they just need to understand that like it's a minimum of 8% interest rate, which is usually, I think, does it become variable, Jake, at some point?

[Jake Alexander]

I think it can be. It all depends on who you're working with, whether it's private, the banks, owner. You know, I think we talk about in terms of paying for things here, easiest is cash.

If you need financing, it's gonna be owner financing. After that, you'd be looking at private lending, but for that, they definitely wanna see some sort of cashflow and then looking at traditional like bank lending, which is the most, it's doable, but definitely the most difficult.

[Richard Bexon]

And I think when you talk about interest rates on that, of course, you know, I mean, owner financing interest rates are probably gonna be, you know, I mean, depends on how desperate the seller is, but you know, we've done stuff at 5% before. We've done stuff at 8.5, 9% before. You know, I think on private lenders, you're gonna be looking anywhere from 10% plus, depending on what it is, maybe like a three year plus with a max of probably up to eight, 10 years max on that one, you know, and they're probably gonna give you 50% loan to value, maybe 60% loan to value on that.

And then the banks here, again, they're gonna give you 50, 60% of loan to value. Their interest rate's gonna be lower, I think probably around eight to 10%. And I think their loans are 10 or 15 years, Jake, if I'm correct.

[Jake Alexander]

Yeah, I think it'll give you, you know, the option.

[Richard Bexon]

Yeah, okay, okay. So I think that that answers that question there. Does anyone else have any questions at this moment in time, guys?

I'll just wait here for two seconds. Well, if there's nothing else coming through here on the question and answers, guys, we very much appreciate your time and joining us on here. Again, you know, these are our contact details if anyone wants to reach out to us.

I always say to people, I'm pretty useless, but you've probably worked that out by now. Jake is kind of more the specialist and investment specialist on a lot of this stuff, spends a lot of time with clients. I just say, I just write the checks most of the time.

So, but very much appreciate everyone's time. And yeah, I hope, actually, we've got one more question. What do you think of Uvita?

Well, that's a good question, Akash, because, you know, we've actually seen it on previous reports that have been there. And I think on the most recent one, it started to kind of die down a little bit on that area. But I think Uvita is, it has good stats.

I think it has good occupancy. I think its average daily rate is a little all over the place, just because of, you know, different, I would say, different types of vacation rentals that they have there. But I think it's a great area.

It's an area that's been growing with huge amounts of demand. It's just that I think at the moment, you just need to be, you need to find the right property there with regards to getting in at the right price. I mean, as I said there, you know, you make your money on the way in.

So I think you just need to make sure that you're really smart, Akash, on what it is. We had a client in Dominicalito buy a house a while back, you know, which was, I think probably, I think it was about, was it 300,000, Jake? The one in Dominicalito?

[Jake Alexander]

Yeah, I think it ended up being, I think, closer to 350.

[Richard Bexon]

Yeah, yeah, it ran about there, about 350. It was owner-financed as well. The numbers look pretty good at it, but that was just north of Uvita.

You know, if you were to buy that in Uvita, it's probably gonna be around about 550. So it just depends on, you know, if you can find, if you can get in at the right price and the numbers work. And also, Akash there, you said that, you're supposed to be an airport there soon.

I would, yeah, I've been hearing that for 20 years. Don't expect it. Like, until the runway's being dug up, and even then, I think it's gonna be very difficult.

So I always say to people, like, invest with everything as it is today. Do not speculate in Costa Rica, because, you know, we've been also hearing that they're gonna move the international airport to Oratina. That's not ever happening.

You know, I mean, I think the one thing that you can expect is Liberia to expand, but don't expect there to be another international airport in that southern zone anytime soon, guys. We had here Las Catalinas. Is it getting overdeveloped?

I think probably so. I think when we look at Las Catalinas' data, you know, I know that they've had a few issues recently with property management. I think it's getting a little overdeveloped, but again, I think Las Catalinas is more of a, you know, a lifestyle investment out there.

You'll just cover your costs. There's just a lot of property that's there. You know, they've built condos, they've built homes.

There's just a lot, a lot of stuff going on up there at the moment. And I think until it settles down, you're not gonna have a good idea. You know, occupancy rates are okay.

Average daily rates are okay as well. It just depends on, you know, what you've got up there. I personally wouldn't make an investment in Las Catalinas.

Would I go and visit and stay? Yes. If I liked it, you know, and I want a place to go and have fun there and just cover its costs, yes, I think it would be a good play.

But if I'm looking, hunting for returns, it's not a place that I personally would look at.

[Jake Alexander]

I think like when you look at Las Catalinas, the places that do really well there, there's that strip of large bedroom count beachfront that does well there. And I think it's similar. Like when you look at Los Sueños, there's a bajillion one, two and three bedroom condos.

So what really does the best there, it's the private homes because they're unique.

[Richard Bexon]

Jake, do you know when we pull the data, we've got a question here from David. We consider Las Catalinas the same as Portrero Flamingo. I don't know whether it reaches that far over.

Do you know?

[Jake Alexander]

I don't know, but I know we can get Las Catalinas specific data. Okay. And David, if you shoot us an email, I can send you over what I've had in the past.

[Richard Bexon]

Fantastic. Well, I think that's all the questions that we've got coming in there. I hope that's helped everyone.

And again, if you want anything else, feel free to reach out to us. Jake will do a follow-up with everyone that joined this as well, and kind of to give you a copy of this presentation as well. But thanks very much for taking the time to join us on the webinar guys.