I have a good friend by the name of Eddie. He has lived in Costa Rica and survived despite being about eight years away from retirement age. How does he do it? By investing intelligently in the stock market. He is on line reading at least six to eight hours per day studying the market. He doesn’t make millions but enough to have a good lifestyle abroad. On the other hand, lazy investors just turn their money over to their brokers and have them do the investing. Most of these lazy thinks are too busy or just don’t have the energy to study the stock market trends. They end up being the ones who lose money in the market. The same thing happens to the same type of errors when they make real estate investments without doing their homework.

It turns out that many people who decide to retire abroad make poor choices because they choose the easy road instead of really investigating. Here is how it works. Instead of doing extensive research the lazy thinkers get on the Internet and come across one of the high profile sites where they are offered every imaginable service. There is one organization in particular that on the surface looks great to these lazy thinkers. Said company offers daily newsletters with scores of real estate bargains in paradisical destinations. They also conduct large retirement seminars where they guide the attendees to their bargain real estate projects in select countries. Furthermore, they publish magazines with slanted statistics ranking the places where they have vested interests with high ratings. In addition, they bill some of their Central and South American retirement destinations as the ‘new” Costa Rica. The latter together with some parts of Mexico have always been the leaders in retirement south of the border. Costa Rica’s success as a retirement haven can be imitated but never equaled.

Organizations like the one above seem really enticing on the surface to the naïve and lazy thinking retirees who find it easier to be led like blind sheep rather than taking the time to do the proper research. The result is usually a bad choice.

To avoid falling into this trap:

(1) Do your research
(2) Read between lines when being bombarded with propaganda
(3) Be careful of the large conventions and the manipulative techniques that are used to separate you from your money.
(4) Be careful if only a couple of real estate projects are being promoted in the countries theses organizations are hyping. You can be sure they are receiving a juicy commission from the real estate companies with whom they work.
(5) Don’t be naïve. It can end up costing you a lot of money and valuable retirement time trying to rectify your mistake as the result of moving to the wrong country. Your retirement dreams may even be spoiled as a result.

Baby Boomer retirees and other foreigners should be aware that there are two loopholes often exploited in property transactions to avoid different taxes in Costa Rica. One is legal but might someday be risky. The other is pretty much illegal. The legal one is a method of property transfer in which you are not actually buying a property, but rather the shares of a corporation that owns a property. By transferring the shares rather than the property itself, you avoid the 1.5% property transfer tax, since that tax does not apply to the transfer of shares.

This loophole is legitimate, though risky on a due diligence level, since buying a sociedad anónima (or S.A., as corporations are known in Spanish) means you’re buying not only the company’s assets but also its debts. We’ll get into this more in the chapter on due diligence. The other problem is that since the loophole is legitimate, developers have gone too far in taking advantage of it. Imagine a 160-unit condominium project in which each condo is registered under a different S.A. and you can see it’s gotten a little absurd. Still, if developers don’t do it, they’re at a price disadvantage to their competitors, to the tune of thousands of dollars. Inevitably, the situation is drawing the government’s attention, and there are signs that regulators might start going after such abuse under a legal principle known as the “principle of economic reality.” So while for a variety of reasons it’s a good idea to own your property through an S.A., acquiring it through an S.A. with the end of dodging taxes might become legally risky in the coming years.

The second loophole that Baby Boomer retirees should know about has been exploited in years past could really get someone in trouble – it’s less like a loophole and more like fraud. It involves you and the seller colluding to register the property with a value lower than its sale price. The annual 0.25% property tax is levied based on this record, so a $1 million property reported by you and the seller to be worth $100,000 would provide you with a significant savings over the years.

This is a bad idea for three reasons. First of all, it’s tax fraud, and while it’s true that the wheels of justice turn very slowly in Costa Rica, they do turn, and would put you in a very awkward position should they come upon you skirting the law. The second reason is that compensation paid for the expropriation of property is, in theory, based on the value in the National Registry. So, for example, if you under-registered a piece of property you bought next to a national park, and one day the government decided it wanted to expand the park by expropriating your property, it would pay you the $50,000 you reported the property’s value to be, not the $500,000 you paid for it. It’s a remote possibility, but something to keep in mind. Third, should there be a dispute between you and the seller after the transaction is complete, the figure in the National Registry is the amount you legally paid and the only number you have claim too, regardless of what went on under the table.

Finally, and on a slightly more prosaic note, remember that without taxes, you don’t get services. While tax dodging can save you a lot of money, in the long run it contributes a whole slew of problems, from bad roads to higher crime to poor administration. You as a foreigner are bringing investment to this country, but you’re also bringing rapid change that causes growing pains. More tax revenue isn’t the only solution to these problems, but it’s a good start.

The general definition of street smart is someone who is intelligent, has good common sense, knows how to handle bad situations, possesses shrewd awareness of how to survive or succeed in any situation, and has the skills necessary to function where they live especially as a result of living or working in a difficult environment.

On my monthly relocation/retirement tours my clients often ask me, “Chris, what is you forte? I respond by saying that I am not a lawyer, economist nor do I have an MBA in business, but what I bring to the table can help anyone who wants to move to Costa Rica. First, I have lived Latin America for more that half of my life. I have advanced degrees in Latin American Studies and the Spanish language and have authored over ten books on living in Latin America including three bestsellers about Costa Rica. However, what I feel that I really have to offer is my understanding of the inner workings of the country, my common sense and general street smarts.

Experience is everything and I have plenty of it. I really know the country and its people. I have been confronted every imaginable situation during the time I have lived here and been a survivor. As I tell my clients, “Costa Rica isn’t for everyone. There are challenges everyday. However, if you feel at home here, you’ll never want to leave.”

Over the years I have met Costa Ricans from all walks of life and have a valuable network of connections all the way up to former presidents of the country. The people I know can get almost any thing done and resolve most problems.

As a result of my contacts I have thrived here and become very successful. In my books and on my award-winning tours (Latin America-Asia Travel Award for the most outstanding tour) I share my survival tips and secrets and network of contacts with those seeking to move here. In fact, I am often hired as a consultant by foreigners who already live here who are seeking expert advice.

On my retirement tours and at seminars people always ask about bugs in Costa Rica.Costa Rica is a tropical country in which bugs do thrive. Fortunately most bugs are found in the lowlands. I live in the Central Valley at a higher elevation and have never really had a problem with insects. In fact, my home doesn’t have screens. I get an occasional fly or a small invasion of ants but the situation is easily controllable. Cockroaches or cucarachas, or just cucas, can become a problem if you don’t keep your house clean and take the proper measures to control them. If your home does become infested by these annoying guys there are some steps you can take to get rid of them.

About four months ago I called the fumigator (fumigadora) because I started to see more cockroaches around my home. I found a company called Fumigadora Ecólogico. What they do is use insecticides which are odorless, biodegradable, that don’t stain and above al lare safe for humans and pets. Their products can be used to combat cockroaches, fleas, termites, scorpions, rats, ants and more. The cost of their service is around $40 which is a lot cheaper than in the States. In addition, you don’t have to leave your home while they are working. Anyway they sprayed my whole house and since then I have only seen a couple of roaches. They say the process should be done every couple of months but their products continue to do the job so I haven’t schedules an appointment. You can be sure if these critters reappear in large numbers I will call the exterminator.

I just read that there is an exciting new development which may make the extermination of cockroaches more effective and safer. Scientists have discovered that by using an anti-afrodisiac produced by young cockroaches who aren’t yet ready for sex, they can virtually keep cockroaches from reproducing. What a breakthrough that would be!

Most of my clients are of retirement age and have pensions. However, some retirees don’t want to vegetate and wish to start their own businesses. According to the Caja Costarricense del Seguro Social (the local Social Security System) during the last five years the number self-employed people has doubled in Costa Rica. Ninety-nine percent of these business are owned by Costa Ricans but this shows that small entrepreneurs can start a business here. It is interesting to note that the country came in first in Latin America and ninth in the world with respect to nations offering the greatest commercial freedom and protection for private business, according to Freedom and Development, a Chilean research institute. There are some opportunities for foreigners who want to start a business.

As a foreigner you are allowed to start your own business with only a few restrictions. If you plan to go into business here, it is very important to be aware of the local consumer market in order to succeed. Most of the country’s purchasing power is located in the Central Valley. A total of 75 percent of the country’s population resides in the central provinces of San José, Alajuela, Heredia and Cartago. About 60 percent of the population is under 30 years old. Intelligent business people will try to meet the needs of this group.

You may have to adapt your idea due to the vagaries of the local market and different purchasing power. Don’t get any grandiose ideas since the country only has about 4.5 million people and a quarter the people are below the poverty line with little or no purchasing power. You cannot expect to market products on a large scale as in North America. Also keep in mind that only two out of three expats who go into business here succeed.

Despite the above, there are opportunities in a few areas. Costa Rica is ripe for innovative foreigners willing to take a risk and start businesses that have not previously existed. Start up costs for small businesses are less than in the United States or Canada. Many of the same types of businesses that have been successful in North America will work if researched correctly. There is definitely a need for these types of businesses. You just have to do your homework and explore the market. Be aware that not everything that works in the United States will work here.

Starting an internet-based business which depends of the U.S. will greatly increase your chances of success here. For example, I know a couple of Americans who started Spanish schools which bring groups of students here. I know a Canadian who founded an on-line newspaper. Another friend started a cell phone rental service for tourists. Whatever you do don’t expect to strike it rich. With luck you can make a good living here.

¡Buena suerte! Good luck!