Harsh reality hits Costa Rican property seller

Despite prime location, high-tech improvements and tax setup, buyers afraid to commit

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Nov. 11, 2011

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Despite prime location, high-tech improvements and tax setup, buyers afraid to commit

Steve Bergsman
Inman News™

Toward the end of 2006 I began writing a book called "Passport to Exotic Real Estate: Buying U.S. and Foreign Property in Breathtaking, Beautiful, Faraway Lands." The book was published in September 2008, just in time for the country's financial markets to collapse.

"Passport to Exotic Real Estate" was dead on arrival; maybe 1,000 copies were sold. I put the failure behind me and didn't think about it again until this past summer when I got an e-mail from a man in Costa Rica looking to sell his property. I'm not sure why the property owner, Tor Prestgard, contacted me, unless he had come across my book, which had a chapter about buying homes in Costa Rica.

Nevertheless, I was intrigued and contacted the Costa Rican homeowner. I could see in his story the yin and yang of owning property in a beautiful foreign country like Costa Rica, and the difficulties, especially in today's shaky global economy, of trying to sell that property today.

Prestgard is somewhat of an internationalist. A native Norwegian, he lived in the United States for 13 years before returning to Europe, eventually settling in France. However, he and his wife dreamed of owning a home that could be self-sufficient and remote, but with access to a decent educational system because his triplets were of school age. They decided on Costa Rica.

The property they found was an existing coffee plantation on 30 acres of land about one hour from the capital city of San Jose.

"We visited Costa Rica several times and looked at close to 30 different properties before buying," Prestgard told me. "We had a list of what we wanted, and this was the one that matched our criteria and spoke to the heart. We wanted a place that was secluded yet close to a town. We wanted a place that had a lot of development potential, and this one had more than 900 meters of public frontage road, which is a requirement for subdividing and building in Costa Rica."

The property not only has a river running through it but includes both sides of the river valley. The views are unobstructed. In addition, the property sits about 3,600 feet above sea level so temperatures are a wondrous 64 to 70 degrees on average year-round.

The Prestgards bought the property two years ago and invested a lot of capital into infrastructure, including a main building and visitor cabins. Most important, he was permitted for a well and he constructed a pumping system using the newest and best technology.

For investors, the most interesting aspect of the property is that he subdivided the land in accordance with Costa Rican regulations.

"Prestgard divided the property into different segments where someone can literally go in there, sell off the other portions and still have a big chunk of farmland for free," said Fred Hayden, a native Canadian who has lived in Costa Rica for the past 10 years and is now a real estate agent in the country.

Hayden is handling the sale of Prestgard's property, which has been on the market about a year.

The reason for the sale: Prestgard's children had a difficult time adjusting to Costa Rica and now need to be back in France to re-enter the school system there.

"My wife and I would be happy living here for the rest of our lives," Prestgard said. "But, my most important duty is to make sure my children are comfortable, and they are at the age where they go onto to the next stage of schooling. We don't want to screw up their schooling in any way."

When I wrote my book, there was a lot of new development on Costa Rica's west coast, which was attracting North Americans and Europeans by the thousands.

Here's what happened, said Hayden. "A lot of people were coming down here, seeing lots for $50,000 and scooping them up. Suddenly, the same piece of land was worth $150,000."

Even though the market literally stopped cold when the global recession hit three years ago, Costa Rican land and home prices haven't come down very much. The Prestgard property was appraised for $1.3 million and is on the market for just over $1 million. A lot of people have come through to see it, yet no one has made a commitment.

In the old days, Hayden said, "anyone could leverage their house in Canada, (the) United States or Europe, get an equity line and buy a house in Costa Rica. The banks have clamped down, so that type of buyer would now have to sell his or her home before moving to Costa Rica."

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