If you’re thinking of building a home in Costa Rica, the process is not very different from building anywhere in the world. Of course, every country has its specific guidelines and regulations, so help from a local expert goes a long way.
The Senderos Construction Management team has decades of collective experience building in Costa Rica. For this article, we sat down with Senderos Managing Partner Curtis Peart to talk about the ins and outs of building in Costa Rica, what folks can expect from the process, and why Senderos Construction Management Services is different.
The Homebuilding Process in Costa Rica
Walk us through the process of getting into a home in Costa Rica. Are there homes already built that people can buy? Do people work with architects to build homes?
Curtis Peart: There are really two options out there. You can find a resale, a house that someone is selling after having enjoyed it, or rented it out for a period of time. Or, you can go ahead and build a brand-new house, working with the local builders and architects.
If you are going to go ahead and build your own house do you have to do permitting and inspections?
CP: Yes, the permitting process is very similar to the US or Canada or Europe, but of course it is in Spanish. You also have to know your way around the local permitting offices, so most people choose to have a local architect, engineer, builder, or a third party project manager to handle this stuff, just like in the US.
Buying An Existing Home vs Building a New Home
Walk us through the difference between choosing to buy an existing home vs. building a new home.
CP: Most of the differences are pretty self-explanatory. If you are looking to get into a home quickly, or really want to avoid all the decisions involved in building a home, then an existing home is maybe the right way to go. Of course, you have to find an existing home that fits the lifestyle and investment you are searching for.
What do you give up? What’s the downside of an existing home?
CP: It’s hard to know exactly how an existing home was built, as well as the level of wear and tear on the home. We have a relatively tough environment here in Guanacaste, so older homes do need to be maintained to avoid running into costly problems.
Also, buying a home that’s already built means either you have to live with the decisions of the previous owner or spend money on renovations.
And what about building a new home?
CP: The best part of building new is that your home is just that — brand new. You get a certain amount of warranty if things break. You know exactly how the house was built.
You also get to make decisions on the design of the house. So you can enjoy a finished product that fits exactly how you want to live or, if this is an investment property, you can design it to how you think renters will want to rent.
Typically a newer home will have lower ongoing costs too since materials and design innovations improve every year.
So, what are the downsides to building a new home?
CP: Of course, no matter where you are in the world, anybody who has built a home will tell you that it is a process which can have 1000 decisions and quite a few ups and downs.
And that’s no different here in Costa Rica. The most important thing to look for is a level of ethics from your team—you have to be able to trust the people you are working with implicitly.
The Specifics of Building in Costa Rica
What is different here in Costa Rica when you decide to build a new home?
CP: Typically, because we have a lot of long-distance buyers, so the process is done in stages.
First, folks come down and look for a homesite in the areas they like with a broker. Then once they find a lot, they go through a due-diligence process of figuring out if there are any problems with the title, finding out whether it has water and utilities.
Then once they buy a lot, they look for an architect they want to work with (if they don’t already have one). Then, they design a house, the architect helps them get estimates from builders, and then they kind of cross their fingers that the build goes as smoothly as planned.
How is that different from anywhere else?
CP: Well sure, that process is how it used to be a long time ago everywhere else, but there are some definite problems with going through those steps (which have kind of been resolved in other places these days).
When you have that many steps and new people coming on board throughout the process, communication becomes a very big challenge. Every time a client gets to a new stage with new team members they have to communicate (or ask someone else to communicate), their vision for the home, their needs, and their budget. There are multiple times where information can get lost or misinterpreted.
One could also see it being hard to choose a lot, knowing if it will work for the kind of home clients are looking for.
CP: Absolutely. The way it frequently works down here is someone will say “I like this lot, I like the view, I like the neighborhood, and I think I can build the home that I want here.” Instead, the right way to do it is to really think about what you want in a home, and then find a homesite that will allow you to build what you want.
Sure, an ocean view is sometimes the most important thing to people, but sometimes in the pursuit of a lot, view, or a neighborhood, people buy an odd-shaped lot or one with challenging access points. And in the end, that means compromising on their ultimate dream.
So the best way to choose a lot is to understand what you want to build and who you want to build it with first?
CP: Definitely. If you have an architect who you enjoy working with, and you can trust them to listen to what you want and what you want to spend, you are going to be in much better shape.
And what about selecting the builder, how does that work?
CP: The way it is done down here is that the architect bids out the project to several builders. Ideally, they then ask for references, and then the client reviews the different bids.
What Challenges to Expect
That seems pretty normal, are there problems with this step?
CP: This is probably where the biggest problems in the process begin. Typically, people expect home construction to be cheaper in Costa Rica than it is. Yes, we have more affordable labor here, and that makes up a big part of a home build budget.
But the flipside is materials and finishes are more expensive here. At the entry-level luxury and luxury level, clients are expecting the finishes, the fixtures, and the appliances at a premium level. Those items are more expensive in Costa Rica. So, at the end of the day, construction costs are really not that much different here.
Are there any other problems that happen at this point?
CP: What we see happening pretty much every single time is that clients focus on the cheapest price.
It is very normal for clients to ask for more house than their budget allows. Maybe it’s bigger than they can afford, maybe there are more special features, maybe the design of the house does not fit the lot and there are expensive additions to make the lot work. But they’ve fallen in love with the house they have designed.
This naturally forces clients to choose builders based on the lowest price, and builders know this. Depending on how their business has been going, builders will very often low-ball or underestimate in order to get the job.
As a result, clients are set up for a pretty rocky ride before they have even broken ground. Corners will get cut, they will get hit with change orders, and the process will become incredibly stressful. Normally, these homes are 10-15 month builds and that’s a very long period of stress to go through.
Often builders will offer to do what’s called “cost-plus.” They will give you a budget that “allows” a dollar amount for every item but offers no guarantee on the price. This gives a sense of transparency by saying they will show you what every single thing costs and then their overhead and profit will be in the form of an agreed-upon mark-up. That’s “cost plus”.
What this really means is that they can’t get the design to fit within the budget or they have been told the design is likely to change significantly. They are passing the risk of running over on costs to the client.
The Senderos Difference
So what’s the solution to this problem?
CP: Well, as I said earlier, be clear as you can be with what you want to build and what you want to spend. Find a homesite that can easily accommodate your needs, choose an architect who listens as well as he or she designs.
If you do these things, you should not be focusing on the price. Variations on labor and materials around the world do not vary all that much. But whenever we see multiple bids on home builds down here, you often see large variations on budgets from builder to builder.
A good rule of thumb is that unless a builder says that their estimate is low because they are cutting out their own profit, you should see estimates with 10% of each other.
The best advice I tend to give is that you should not look for multiple bids. Forcing a competition between builders in Costa Rica always ends the same way [a low bid that ends up getting overrun anyway.
Instead, you should focus on a builders’ reputation and their commitment to quality and ethics.
How is it different building in Senderos?
CP: In Senderos, we have chosen to break the cycle of stressful, over-budget builds. What we have said is “sure, clients are welcome to choose outside builders to build their home in Senderos, no problem. But we will not engage in a bidding process against those builders for those homes.” We will politely decline.
Our point, which I think is a good one, is that the bidding process — a process that is supposed to keep builders honest and prevent them from over-inflating prices — actually does the opposite. Builders engaged in a bidding competition tend to deflate prices and then try to make the difference up once the client is stuck in the middle of a build. You only have a few options to slow a runaway train.
An unfortunate truth is that many builders in Costa Rica have proven almost uniformly to take advantage of clients who have no way to reverse the process other than compromise on their own expectations. This sets projects up for failure every single time.
Because Senderos is in the business of helping people realize their dreams, in a place where we honestly believe that dreams come true, a neighborhood where people come to find happiness, we chose to stand on reputation and loyalty. Once an owner in Senderos builds with us, the idea is that they will never look for a building partner anywhere else.
Explore The Possibilities of Homes in Senderos
Thanks to Curtis for sitting down with us to talk about building in Costa Rica, especially his thoughts on building in Senderos.