This morning my long term girlfriend, Rox, suffered her first asthama attack in over six months, here in Escazu, a suburb of the capital city of San Jose. We had just come back from vacationing in moist, hot weather in Bocas del Toro, Panama to rainy, chilly weather in San Jose. Where we live, in Guanacaste, the weather is hot but dry, so asthma problems had been history.

Anyway, it´s seven in the morning, Rox can´t breathe, and off we go to a "doc in a box" provided free by the Costa Rica state run health care system. Only problem is, the doctor won´t be in until 10:30, according to the nurse on duty. Wait. And the traffic to San Jose will take at least half an hour, maybe much more. Instead, we drive five minutes to CIMA hospital, an outstanding private hospital in Escazu affiliated with Baylor. They run the credit card, make us wait less than three minutes, and begin treatment with oxygen and an inhaler filled with something that clears up the bronchial tubes. Four treatments of this, and we are out before 9:00 a.m. Total bill for private medical care, provided by going to the emergency room, $46.64. That included an 8% discount by presenting our PriceSmart wholesale club card.

So, we get back to the bed and breakfast where we are staying, I turn on CNBC, and there is Barack Obama with his speech on reforming the U.S. health care system. Hmmmm. Time will tell. Hope so.

In our case, we had a choice between free government run health care (wait 3 1/2 hours, but the price is right), or outstanding private care for under $50.

Do any of you in Canada or the U.S. have similar stories? How does our experience compare?

I am trying to find one person in a 1,000 on ActiveRain who wants to come to Costa Rica, have fun, look around, and make some money with very little effort.

Phases one and two of The Oaks Tamarindo, www.theoakstamarindo.com and www.theoaksrentals.com, are fully finished. We are over 80% sold out, and our owners want rentals. During July, a great season to visit for "little summer", we are offering week long activities: Fitness at the Beach, Yoga Awareness Week and Alternative Therapies Week, plus classes in t´ai chi. Surf classes are offered all three weeks. More on this later.

How do you make money with very little effort? You have to leave a comment to let me know you´re curious. Remember, I said "very little effort", not "no effort"! There are sales and rental commissions to be earned, fun to be had and even low cost dental work if you want to come back with a white smile to contrast with your tan.

Want to smile all the way to the bank? Costa Rica developer looks for a few adventurous agents.

I am a developer in Costa Rica, www.theoakstamarindo.com, www.theoaksrentals.com, and I have a high class problem. My first phase is 80% sold out, and I have 30 owners who want to rent their condos on a weekly or monthly basis. I want to put a smile on your face and on the faces of my owners.

I am looking for one person in a thousand on ActiveRain (that´s 144 of you). One person who is up for the fun and adventure of Costa Rica, and who wants to put a smile on his or her face, and on the faces of your clients. How? Come to Costa Rica and stay at my condos, of course. Costa Rica alone is enough to put a huge smile on.  Ask Mel Gibson.  Or Britney Spears. Or Heidi and Spencer. Or even Iron Maiden.

Or sign up for our first class dental vacation! That´s right! Costa Rica dental work is first class, and a fraction of the cost in the U.S. or Canada. Or come down and look for Blago.  If you find proof that he makes it to Costa Rica for I am a Celebrity ... Get Me Out of Here! we will give you one year free at an Oaks condo! (Photoshop doesn´t count, although the best photo-shopped photo will be good for three free nights at The Oaks.)

What´s in it for you? We will register anyone you send down as your client, and if they buy an Oaks condo from us within two years, you will automatically get a referral fee. If you actively sell them, you will get a commission. And, we promise not to approach them with sales attempts. It´s not our style, and we want them to have a great time. If enough people have a great time, sales will take care of themselves.

Air fares are low, rentals are low, www.theoaksrentals.com, and this is a great time to get away and have fun!

A year ago, I wrote:

• If you decide on short term rentals, you should register as a tourist establishment, publish notice of your registration and collect and pay your 16.39% sales and tourist taxes.

Well, a change in the law, and another year of experience, and it´s time for an update. Woke up Sunday morning to another day of sunshine, opened the daily newspaper, La Nacion, read all about Vuce President Joe Biden´s visit to Costa Rica, Nicaragua President Daniel Ortega´s call for U.S. aid (the more things change...) and, way in the back of the paper, found out that Costa Rica´s legislature had just repealed its 3.39% tourist tax on hotel rentals. That leaves the 13% sales tax on hotel rentals.

But what about condos? While the issue is not clear, after consulting with way too many Costa Rica lawyers and accountants, I have decided it is better to take an aggressive approach. The law imposes a 13% tax on hotel rentals, but it also gives certain breaks to hotels. Regulations attempt to extend this tax to all short term rentals of six months or less. However, condos that do not offer hotel services, such as a restaurant, do not receive the benefits of the hotel tax law, and, I have "concluded", are not required to collect and pay the tax. Since tax policy everywhere is more than a little arbitrary, I may come to regret this decision. Still, it seems to be based on the law, and worth the trouble of taking a good position. Time will tell.

Meanwhile, at The Oaks Tamarindo, we are offering bargain rates now that our 96 condos are completed and some of our owners wish to earn income from their purchases, bargain rates that do not include sales tax.

Nearly six months ago, from Costa Rica, I posted "Bush and Congress Agree on Bailout Blunder?" The more things change, the more they stay the same.

If you read the footnotes to banks´balance sheets, banks are getting decimated by write downs of assets caused by mark-to-market accounting. They then go to TARP to replace some of the "lost" equity, go to Congress to get publicly whipped by folks who should know better, but don´t, and go to the market to raise new capital, when they can, at extraordinary cost to their existing shareholders. And we wonder why banks don´t lend. Or why times are tough. Or why frauds are uncovered when the financial tide goes out.

Meanwhile, down here in Costa Rica, a funny thing is not happening. By and large, real estate prices are not going down. (Big exception: raw land.) Sales activity has slowed dramatically, but the slowdown is not reflected in prices, at least not yet. And life goes on, sunny and hot here at the beaches.

What is happening is that vacation rentals have fallen dramatically. What would have cost you $1,000 a week a year ago, for a one week stay in a quality condominium, now can be had for $600. Plus, air fares are dirt cheap. One charter from Edmonton, Canada could be had last week for $312 (CAN $400), about the same as a flight from Miami.

Costa Rica has always had a reputation as a good place to hide out. Time for you? Try it for a week, stay forever.

Among all the business of real estate comes joy. We finished our resort condominium, The Oaks Tamarindo, just in time for Christmas. And lo and behold, just last week, we got to celebrate our first engagement! One of our new owners, Sherie, from England, arrived in Costa Rica with her boyfriend, and left with her fiance! Yes, the same lucky guy, Lawrence. Check out the rock!

Sherie is a dealer in antique jewelry, and Lawrence runs a business in the neighboring county. So, Sussex and Kent unite in Paradise! Congratulations!

I have been happily minding my own business in Costa Rica, off to Alberta for a bit of marketing, then Spain, where I am now. So I check in to the internet this weekend, no worries, the Dow is unchanged, politics as usual, whooops! A $700 billion bailout?? That´s more condos than I can build and sell for the rest of my life! Unless, that is,our politicos blunder (again), inflation ramps up and that starter unit goes for a cool $billion. Oh man, I hope I am wrong about this.

And what exactly are our leaders proposing? Destroy the remaining banks, best I can tell. And here I was, all smug, in a third world country that has sidestepped problems mostly by having an underdeveloped banking system that wouldn´t know a CDO squared if it found it in a crossword puzzle.

So where is the blunder? Step one. (Those who can analyze do, those who can´t, number.) Make banks mark to market the value of their assets. So, if the market panics for a quarter, your bank is insolvent. Step two. Invent a race to the bottom, a reverse auction ( I promise you, I am not making this up), where the most desperate bank wins the right to sell its riskiest assets to us, the U.S. taxpayers, at the lowest price, in competition with other banks. Step three. By the end of the following quarter, use this  price to mark to market the portfolios of all banks and other financial institutions, making more of them insolvent. Repeat.

The fact is, the AIG loan of last resort solution was the right one. Can´t borrow money? OK, we provide liquidity, but make it a loan, make it secured, and expect to be repaid. If some banks go broke because of their bad assets, so be it, but not because of illiquidity. Meanwhile, the ones that  will survive with time, but suffer from a liquidity problem today, can get their liquidity as loans, yes, from you and me, the lender of last resort. Financial markets unfreeze. Stronger regulation, including forbearance where prudent, gives technically insolvent banks the time to work their way out of trouble, while taking down the hard cases. Kinda like the 80´s.

During the last financial crisis, the Resolution Trust Corporation took over the assets of insolvent S & L´s, auctioned them, and minimized thetaxpayer´s  loss. But the key was, insolvent S & L´s were allowed to go bust without being mindlessly marked to market, laid low by bad assets rather than by bad accounting. This new combination of mindless accounting and a mindless reverse auction gives pause. But, I fear, pause is not in the cards six weeks before a general election. Hopefully, this is Bush´s intelligence test for McCain and Obama, and one of them will pass the test.

Here is what I wrote for Chicago Title´s Latin American magazine in a more innocent time (July). For those not interested in Costa Rica, you can stop here.

Friends who learn that I left for Costa Rica looking for adventure three years ago and never came back eventually get around to asking me if the Costa Rican real estate market is still going up in spite of the subprime mortgage meltdown in the U.S. And, if it is, how can that be possible?

On December 14, the Wall Street Journal reported on a phenomenon that those in the know have found out first hand. “The housing slump has sent many Americans shopping south of the border.” Existing-home prices... are still climbing in much of Latin America and the Caribbean. ... In San Pedro, Belize, the average price of a 2,200-square-foot home was $697,500 in September, up 18.6% from a year ago, according to a study by Coldwell Banker; the price of a similar property in San Jose, Costa Rica, was up 20.7%, to $389,900, the study said.” What? In the face of massive publicity in the U.S. concerning the U.S. subprime mortgage meltdown? House prices falling? Foreclosures rising? Gloom and doom.

Let’s start by stating the obvious (it makes things so much easier). A subprime borrower is not now, and never was, a good candidate for buying a vacation or retirement home overseas. Ouch. We sympathize with the plight of subprime borrowers, but, no, here in Costa Rica we do not feel your pain. If you are successful enough to be planning your vacation or retirement haven overlooking the Pacific Ocean, you are successful enough to have sidestepped the problems caused by overextended finances.

What about financing? In the United States, the mortgage market went from being incredibly permissive to incredibly tight in two short years. From fantastic to terrible. In Costa Rica, the mortgage market has gone from worse to bad. Yes, you read that right. Not bad to worse. Costa Rica is only now starting to develop modern home lending practices. Who knows, in another couple of years, they might even be good (which will lift prices). There is always a bull market somewhere (credit to Jim Cramer). What is happening in North America are government policies that look to favor Costa Rican real estate values.

Costa Rican real estate deals are transacted in U.S. dollars. Inflation traditionally has been high when measured in the local currency, the colon. In 2007, according to official government statistics (http://www.inec.go.cr/) Costa Rica’s general price inflation was 10.81%. Construction cost inflation (for construction of houses) was slightly higher, at 11.48%. The main newspaper, La Nacion, calls for 15% construction price inflation this year. In the face of all this local inflation, U.S. dollar price inflation historically has been low, because the Costa Rican government supported a creeping devaluation of the colon against the dollar.

No more. Since 2007 the colon has remained within a narrow band against the dollar, sometimes up, sometimes down. What does this mean for a North American investor? Just this. In order to purchase the same construction one year from now, it is prudent to count on annual construction cost inflation of 15%, plus or minus. And this does not take into account inflation in land prices, driven by the same inflation forces, plus supply and demand. No wonder, then, that prices were up 20% in 2007,according to the WSJ article.

Does this make sense? We have been there before. When general price inflation is high, like in Costa Rica, real estate is a terrific asset class. In inflationary times, you want to own real estate. And since real estate prices move in five to seven year cycles, you don’t want to bargain hunt by buying too early in a falling market like the U.S., you want to buy in a rising market like Costa Rica. There is always a bull market somewhere.

But what about the Canadians to the north? Cold, dark, long winters. Ehh? A strong economy. Crazy real estate prices. The Canadian dollar is up 50% against the U.S. dollar over the past five years. Whoaa. Cheap U.S. dollars. Bargain time in a rising market, sipping a cold one while watching the hot January sun set into the Pacific Ocean.

At The Oaks Tamarindo, my luxury condominium project cum nature preserve located within 10 minutes of Costa Rica’s best beaches, and only 48 minutes from the international airport, savvy North Americans have snapped up units at prices under $200 per square foot, compared to around $500 per square foot back home. Ecologically planned, built to the highest North American standards, with the best of Costa Rica waiting just outside their door. Phase one? Sold. Phase two? We sold 34 units this year, almost all to U.S. and Canadian citizens, only 14 units remaining. What subprime mortgage crisis? Ask the author about phase three. Or selected opportunities. info@greensealrealty.com.

I have been reviewing our typical unit owner´s electricity costs at The Oaks, noting that a typical bill during July for a fully occupied unit was $67 CAN for the month. When I asked our on-site concierge, Ana Lorena, for an explanation, she sent me our local electric company´s rates.

 
Rates are divided into two seasons, "dry" and "not dry". Because 80% of Costa Rica´s electricity is generated by hydroelectric power, rates are 25% higher during the "dry" season from January through June. For an average user of 625 kWh per month, the July low season rates cost $67.75 CAN. VOILA! During the "dry" season from January through June, rates are 25% higher, which would result in an electric bill of  $84 per month.
 
So how does this compare with where you live? Here is information from ENMAX for July.
 
Calgary's Regulated Default Electricity Rate for July 2008

For Immediate Release
Calgary
26 Jun 2008
The default electricity rate for Calgary will rise to 11.99 cents per kilowatt hour (kWh), effective July 1, 2008. Consumers who have chosen a fixed price energy plan will not be affected by this price change.
As a result, the electricity bill for a typical Calgary household (using 625 kWh per month) will increase by 15.5 per cent compared with the previous month to $112.31.

Hmmmmm.

Where is this maneuver being practiced?

Unless prohibited, a three-point turn may be used to turn around on a narrow, two-way street. You may be required to make one of these turns on your road test.

•1.    Signal with your right directional, then pull over to the right and stop. Signal with your left directional, then check carefully for approaching traffic.

•2.    Turn left, cross the road so you come to a stop while facing the left curb or edge of the road.

•3.    Check again for traffic. Turn your steering wheel as far to the right as possible, then back up to the right curb or edge of the road.

•4.    Stop, check again for other traffic, then pull away from the curb.

We finished construction on our first 30 condominium units at The Oaks Tamarindo before Easter, and some of our owners already have begun renting out their units. Out of 30 units completed, 5 units are being rented out on either a short term or a long term basis. We are using the 3 units that we are not selling as model units, a home for our manager of guest services, Ana Lorena, and as VIP units for local dignitaries. One of our owners even has set up his own web site.

First, let's start by stating the obvious. (It makes blogging so much easier.) Renting is extremely attractive from an economic point of view.  Prices are going up while phase two is under construction, making renting an attractive option to cover one's costs while enjoying the benefits of price appreciation.

We recommend that owners enter into short term rentals whenever possible. Rates are attractive, at $900 per week during the low season, pretty much the same as renting two rooms at the new Best Western Motel one mile down the road. Additionally, an owner can schedule personal and family use during the year, and we can keep a close eye on the unit's use when it is rented out.

Still, some owners have told us that they believe that long term rentals are more attractive to them, because their income is more stable, and because there is less wear and tear on their units. In our opinion, both beliefs are questionable.

From the point of view of stability of income, the law limits a landlord to only one month's rent in advance and one additional month's deposit for damages.  As a nice trap for the unwary landlord or lawyer, a tenant can cancel his lease with three months' advance notice unless the lease explicitly provides otherwise.  Moreover, a long term lease really is long term. Under Costa Rica law, every residential lease has a term of 3 years (even if the lease itself says otherwise). So, if you enter into a lease for any term (other than a short term tourist lease), you have entered into a three year lease. Combined with the discussion in the following paragraph, think of this as a form of rent control.

 If rent payments are stipulated in a foreign currency, such as U.S. or Canadian dollars, the rent cannot be increased for three years (even if the lease says otherwise).  Only if rent payments are stipulated in Costa Rica colones can the rent be increased, once a year, by an amount equal to the annual rate of inflation, up to 15%.

 This actually is a pretty good deal for the landlord, since the colon is going up against the U.S. dollar, and inflation is running around 10% per year. So, your lease payable in colones will have two nice annual increases in rent, while your lease payable in dollars is fixed for three years.

  What can go wrong? You negotiate a three month lease in October, during the rainy season, for a low rent, payable in dollars. You neglect to register yourself or your company as a tourist establishment, thereby attempting to avoid charging your tenant Costa Rica's 16.39% sales and tourist tax. You figure, no worries, I am covering my costs, the lease is only until December,  and I'll raise the rent during the high season. WHAMMO.  An unscrupulous tenant will stick you with the low fixed rent for three full years, during low season and high.  Never mind that the lease says it is for three months. Costa Rican rent control.

What about wear and tear? Isn't it easier on your unit to have a nice, stable, long term tenant? Well, you own a vacation home, within minutes of the best beaches in the country. So, even though your tenant is a professional architect, engineer or lawyer who lives and works in the area full time,with a wife and no children, he has two parents,  six brothers and sisters,  and20 cousins,  and their families, all of whom want to come visit him at the beach. And there is nothing you can do about that. Do you think one month's security deposit will cover three years of wear and tear?