Thanks to its uncrowded beaches, abundant nature, and friendly locals, Costa Rica has quickly become a hot vacation destination. Investors in vacation properties are reaping the benefits, but what does this mean for the local economy and should you invest?
Pros and Cons of Owning a Vacation Property in Costa Rica
Short term vacation rentals in Costa Rica have a strong return on investment. Well maintained and properly marketed rental properties generally gross 18 to 25 percent on average. However, short term rentals can have a negative impact on people living in the country long term, especially the locals, or ticos. Like many cities across the world, Costa Rica is experiencing what’s known as the AirBnB effect. As more and more properties are being used as short term rentals, it drives up prices and displaces locals seeking long term and affordable housing. This is an important insight for expats and investors to consider. And it’s not just the locals affected. More and more families are moving to Costa Rica for a year or longer, but with only AirBnB properties to rent in the most desirable locations, they are having trouble finding long term rentals.
While this has hurt some, the rental property boom has also helped in some ways. The increased short term rental market can help boost the tourism sector in the country, along with home improvement stores, and has increased the value of land and homes. The best thing a vacation rental property owner can do for the local economy is ensure they shop at local stores and use local artisans to furnish and dress their homes, and employ local workers to maintain their properties.
To help alleviate rental shortages, property owners may also decide to offer long term rentals, which is less labor intensive than offering short term rentals. Also, long term renters offering year-long leases don’t have to worry about the seasonal low occupancy rates experienced by short term renters. September typically signifies the end of the short term rental season, with the rainy season in full swing, and summer vacation in North America come to an end. This is why many property owners utilize the rainy season for private use and also for repairs and upgrades.
November will slowly show rise again in occupancy with the return of the North American snow birds, however. And high season for vacation rentals will be in full swing again by Christmas and New Year’s, with an average of 60 to 85 percent occupancy level during these celebrations. Easter week, or Semana Santa in Costa Rica, is even busier, with occupancy levels up to 100 percent, due to high levels of local tourism within the country. After Semana Santa, rental levels will usually go down to 25 to 45 percent occupancy levels until the beginning of summer vacation in North America, when occupancy levels will rise to a 40 to 65 percent occupancy rate.
Despite the ups and downs, vacation rentals in Costa Rica are a good investment. Most vacation rental properties will net profit between 8 to 12 percent on investment, annually. That is, of course, after deducting all expenses including taxes, maintenance, utilities, repairs, management, and marketing fees. While the Costa Rican government has implemented a 13 percent sales tax on short term rentals, property taxes in the country remain low, at only 0.025 percent of property value to be paid annually to the local municipality.
How to Maintain a Successful Vacation Rental in Costa Rica
With high competition, marketing and guest service is crucial for success in the vacation rental market in Costa Rica. This is why it is vital to understand that to make a profit, a vacation rental must be managed as a business, either by you, or by a second party. That’s where we come in.
Here’s how Costa Consultants can help you market your Costa Rica vacation rental:
-Build a small landing page/website for minimal cost ($1,500 and up, additional monthly cost to have automatic and live time syncing with all reservation platforms so you don’t double book)
-Build out the AirBnB profile for a flat fee and even manage the inquiries
-Build out a Facebook page or Instagram page for a flat fee
-Provide professional photos and videos for content for the AirBnB page, landing page (which is a one-page scroll-through website), and social media
-Social media marketing on Facebook and Instagram for an affordable monthly rate
-Optimized content for your site such as a blog, complete with backlinks
-SEO, Google ads, AirBnB ads, or Facebook/Instagram ads
-Manage the home in regular maintenance, check-in and check-out
Additionally, if you have several homes to showcase, we can build you a booking website where clients can book your rentals and you can earn money directly via an e-commerce property management/villa rental website. This service starts at $2,500 but with the right marketing platform, this has the potential to earn investors more over time, since you will not have to pay fees to other booking platforms.
There are pros and cons to every investment and running a vacation rental in Costa Rica is no different. But with proper management and marketing, this investment has the potential for high earnings and creating stress free vacations for not only your clients, but yourself.