ImmigrationReal Estate

Real Estate Investment for Residency

There is the option of obtaining residency in Costa Rica through the purchase of real estate. Generally, this is called residency through investment as it requires making an “investment” of $200,000 USD in real estate.

Many countries offer the option for foreigners to obtain residency or even in some instances to obtain citizenship based on the purchase of real estate among other investment options.

I say “investment” because investment generally includes the expectation of a return and considering the market conditions in Costa Rica it is questionable the amount of return that you can obtain through only purchasing and selling a property. While there are numerous options for investing in real estate, today this article will not focus on that subject but rather on the “investment” to obtain residency.

Section 79 of the Immigration Law in conjunction with sections 87 and 88 of the Immigration Regulations, sets forth the requirements to obtain residency through the purchase of real estate. The minimum investment amount is $200,000 USD. So, lets walk through this.

The Investment Amount of $200,000 USD
The regulations require an actual investment amount of at least $200,000 USD. This means that the buyer must actually pay that sum of money for the property. I overemphasize this as we receive numerous inquiries from people stating that their property is worth more than that and therefore they want to apply for residency based on the value of their property rather than on the amount of money paid.

To qualify for this category, the intention of the government is to confirm that the applicant spent the required amount of money, and thus, the requirement is not about the market value of the property. So, the question you must be asking yourself is not how much the property is worth, but how much did you pay for it. If you spent $200,000 USD or more, then you may qualify.

How to Acquire the Property
The Corporate Option
As a rule of thumb, we advise people to acquire properties in their own names if the purpose of the property is for personal use whether it is the primary place of residence or a second home. If you are planning on acquiring an income property or to develop some sort of business in that property, then the appropriate thing to do is to acquire it through a corporation, since the nation of corporations is to do business.

Distribution of Shares of the Corporation.
If you are single person, then naturally you will create a corporation where you will be the owner of the 100% of the shares of the corporation, unless you have some additional partners or investors. Otherwise, you will be the only owner of the shares.

On the other hand, if you are married or if you will bring additional investors to the scenario, it is important for you to retain as much ownership to represent the minimum investment amount to qualify for the residency. Let me explain, if you purchase a property worth $200,000 USD, then you should be the owner of 100% of the shares. If you purchase a property worth $400,000 USD with your partners or spouse, then you must at least own 50% of the shares of the corporation as it will represent a value of $200,000 USD. If you purchase a property at a value of $1,000,000 USD then you must own at least 20% of the shares, so on and so forth.

Value of the Corporation
When creating the corporation, you must report a capital equal of the purchase price. There are several factors to consider when creating a corporation such as the name, address, appointment of directors, number of shares and value of the shares (among other things).

Most of the time, corporations in Costa Rica are created with little value such as $10,000 USD or less. If you already know that you will acquire a property worth around $200,000 USD or any other value for that matter, then when creating the corporation, you should report the capital of the corporation to be $200,000 USD or the corresponding value according to the purchase price of the property. If you do not create the corporation with that amount of capital, then  you should increase the capital of the corporation prior to acquiring the property as you need to justify from an accounting perspective the origin of  the funds to acquire an asset of such value.

Acquiring the Property in Your Own Name
Naturally, if you are single and acquire a property in your name for $200,000 USD then the title should state that you are the sole owner and that you paid that amount. But that is not always the case.  If you are married and are considering acquiring the property jointly for the purposes of protecting your interest on the marital property, then you will need to take additional steps or considerations. Let’s see.

If the purchase price of the property is $200,000 USD, then you should be the sole owner of the property. The way to protect the interest of each spouse is by drafting and signing an agreement (similar to a prenuptial agreement) whereby each spouse is to get 50% of the property upon divorce or the totality of the property upon death of the other spouse. This was just an example, but you can make whatever arrangements are applicable to your circumstances upon careful consideration with your spouse.

If you acquire the property for $400,000 USD, then you can register the title jointly where each of you is owner of 50% of the property, and naturally would have made the minimum investment of $200,000 USD to qualify for the residency under the investor category.

Final Considerations
Depending on the purchase price, you may be required to get the property registered with Hacienda for the purposes to pay the Solidarity Tax on Luxury Properties, which is applied to constructions valued over $213,000 USD in today’s colones. This particular topic of the luxury tax requires special attention due to its level of complexity. In addition, you need to update the value of the property with the municipality so it can reflect the purchase value and match the value reported in the deed.

Obtaining this category of residency should not be difficult, but in our experience, most of real estate transactions are not completed correctly or in a manner compatible with the immigration regulations. If you are able (or your attorney) to pay attention to these details, you should not encounter trouble when processing this type of residency.

If you have any comments or questions, do not hesitate to leave a note in the comment section of this post or to contact us directly through our page.

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The Author

Irene Brenes

Irene Brenes

Attorney with more than 10 years of experience in customer service, team management and team building at an international level. Has worked immigration cases in various countries, including Costa Rica, Colombia and Panama.

5 Comments

  1. Avatar
    Nataliya Schulman
    September 14, 2019 at 2:12 am — Reply

    What about being in process of building a property worth more than $200,000? At what point can you submit paperwork for residency?

    • irenebrenes
      September 15, 2019 at 2:02 pm — Reply

      Hello, as soon as the property is constructed and all mandatory paperwork including documents form the Muncipality showing the new value of the property are gathered, one can apply for Residency via the Investor Program. A series of documents need to be filed to proof that the $200,000 were invested, meaning paid, therefore, when the Residency will be based on a construction, we would also recommend keeping copies of the construction contracts as well as all payment receipts, bills, etc. for expenses and purchases made.

    • rafavalverde
      September 15, 2019 at 2:50 pm — Reply

      Hello Nataliya,

      Thank you for your comment. Once you have made the investment of the $200,000 you can submit the documents to apply for the investor category.

  2. Avatar
    John Kolthoff
    December 14, 2019 at 10:04 am — Reply

    Can you buy a house for $165,000 and put a pool and some upgrades for $35,000 and still be at the $200k threshold?

    • Irene Brenes
      December 16, 2019 at 4:55 pm — Reply

      Hello, no, that is not possible.

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