By Dr. James T. Sears
US News and World Report identified the ten top retirement spots last year; seven of those were in Central and South America: “Central and South America offer the unbeatable combination of warm weather and inexpensive real estate.” In an International Living analysis of the “world’s top retirement havens in 2012,” six of the top ten locations were also in this region of the world.
What in the world is going on and why would anyone wish to live outside the United States—even part time? I have spent the past 18 months researching and traveling to seek answers, which I hope to share with readers here from time-to-time.
Many persons at or nearing retirement age are experiencing a deterioration of their investment funds, an increase in health care premiums (along with taxes), and the certainty of increases in taxes and commodity prices. Some are thinking “outside the box” and beyond our national borders.
When people learn I invest and work with clients in Central America, the most often spoken questions are those concerning property prices, health care, safety and security, and the process of acquiring overseas property.
Generally, this retirement and investment sector is focused on resorts, condominiums, and gated communities along the coasts, in select mountain areas, and upscale or gentrifying urban neighborhoods. From the white sand beach of Roatan, Honduras to the unparalleled breaking surfs near San Juan del Sur, Nicaragua, to the Aspen-like village of Boquette, Panama, to the laid back beachfront of Costa Rica’s Manuel Antonio, to the Charlestonesque-charm of the colonial enclave Casco Antiguo in Panama City or a high-rise unit in the newly built Trump Tower overlooking Panama Bay—all of these are just a 3 or 4 hour flight from Atlanta.
Along with uncertainties in the global economy, the real estate downturn has resulted in lower prices and increased inventory in many regions within emerging international property markets. The prospect of acquiring residential real estate at an affordable price within an emerging real estate market with favorable conditions (e.g., cheap cost of labor, government retirement/investment incentives for foreigners), and then selling property for maximum profit (assuming a 10 year outlook) is good.
There are terrific opportunities (as well as a myriad of potential landmines) for the intrepid buyer. Beachfront homes near Leon, Nicaragua can be bought for under $150,000, a hundred acres with 200 meters of beachfront and all ocean views are in the $750,000 range, and a fifty-five acre piece of close ocean goes for around $250,000. Similarly, mountain land with stunning views (even of the Pacific on a clear day) can be found in Boquete for about $25 per square meter, and the list goes on.
In today’s market, constructing a high-end home in Central America should run between $60 and $80 square foot. And, for those who simply want the convenience of walking into their new home, there are a wide range of excellent gated communities under development, such as Monte Cristo overlooking on Nicaragua’s Pacific coastline with its golf course, or Bahia Lomas Estates with its Marina at Bocas del Toro on Panama’s Carribean side.
Some countries, like Nicaragua and Panama, also provide significant incentives for individuals retiring. Perks may include purchase of a vehicle tax-free every other year, $50,000 tax-free purchase of building materials, a 20-year property tax holiday, along with discounts for travel, utilities, etc. These incentives are open to persons with only modest verifiable income (e.g., Panama’s “pensiado” program is $1400 a month) and do not require home ownership.
Personal safety in any country is dependent on various factors, ranging from where you are (or should not be), to just plain luck. However, despite the violence associated with drug cartels in Mexico and those countries bordering it, personal and property safety in Panama, Costa Rica and Nicaragua is less of an issue. In fact, a recent article in the Economist (Jan 2012) reported: “Nicaragua, the poorest country in mainland Latin America, is remarkably safe…. It is now less violent than booming Panama, and may soon be safer than Costa Rica, a tourist haven.” And, last year’s Crime and Safety Report, issued by the US Department of State, observed: “Panama remains relatively safe when compared to other Central American countries.” A similar report on Costa Rica noted that crime is on the uptake in the capitol city of San Jose and that “violent home invasions and express kidnapping are also prevalent in certain areas of Costa Rica but not rampant.”
Thus, owning or even leasing property in Central America requires a different approach to home safety than in the Charleston area. For instance, unless one lives within a gated-community, it is advisable in any of these countries to have someone residing or guarding your home if you are gone for an extended period of time. Many homes have live-in maid quarters and the cost for this service (or for a night guard) is negligible—$35 week for the former and $25 for the latter.
Health care in countries where I currently work with clients—Panama, Costa Rica, and Nicaragua—is excellent. All three countries do a brisk business in medical tourism with outstanding hospitals (with US/European trained, English-speaking doctors) such as Vivian Pellas in Managua and Hospital Punta Pacifica, in Panama City, which is affiliated with the Johns Hopkins Medicine International and maintains the same high-end standards in facilities, services and staff. Health insurance can be easily purchased for a fraction of the cost in the US. For example, using Costa Rica’s national health care system, El Caja, members pay just $40 a month or nearly full coverage is offered through the Club de Salud at Vivian Pellas for less than $700 annually. And, the actual prices for procedures (including dentistry) can be a third of that in the United States.
Cost of living is also low. For example, in the picturesque colonial city of Granada, Nicaragua (where I own a home) even with its large expat community and a thriving tourist business, I can go to one of the best restaurants for dinner and (with wine and tip) pay less than $20. The cost of rum, coffee, and beer (which are thriving exports) is also embarrassingly cheap. Nearby Panama has earned the title as the “Dubai” of the Americas due to its significantly lower cost of living with food and commodities only slightly more expensive than in Nicaragua.
The process of acquiring property (and foreigners can own property without being residents of the country) is different than what buyers experience in the United States. For example, licensing laws in these countries are generally loose, not enforced, or non-existent (e.g., Nicaragua has no licensing requirement to sell another person’s property or represent a buyer). The concept of “fiduciary duty” requiring confidentiality, due diligence, loyalty, and accounting—among other duties—is generally absent in any meaningful manner. Further, an important element of a competitive market—transparency—is absent as there are no centralized market system such as the Multiple Listing Service. Many countries also have different processes for a real estate transaction (e.g., countries which observe Civil Law rather than Common Law). And, while title insurance is generally available through reputable international companies, the past history in some countries of agrarian reform and bureaucratic inefficiency requires extreme diligence on the part of buyers (and their agents).
Although there are recognized real estate franchises operating in these countries, their agents are bound by their country’s laws, or lack thereof, and cultural expectations. In the United States, fewer than 8% of all Realtors work in the international markets. Even fewer are certified as international specialists, which is in part, due to the enormous learning curves and the absence of professional overseas relationships with competent and honest attorneys, real estate agents, and others commonly needed for a successful real estate transaction.
Despite these drawbacks, whether it is for a change in lifestyle, to enjoy an excellent standard of living for less money, or for investment purposes, when someone asks, “What in the world is going on,” you may now have a better response.
James T. Sears (firstname.lastname@example.org), a Realtor and Real Estate Investment Analyst, and Broker Associate with AgentOwned Realty, lives in Seabrook Island, South Carolina and Granada, Nicaragua. As an Accredited Buyer Representative and a Certified International Property Specialist, he works clients interested in second homes and real estate investment (including real estate tours) in the Charleston area and Central America. More information can be found at www.searspartners.com