Building a Home

Building A Home in Costa Rica

In Costa Rica you can build your retirement dream house since land, labor
and materials are inexpensive. However, think twice about undertaking such
a project because you could be flirting with disaster. Many foreigners who
have built homes complain that it sounds easier than it really is. They would
not do it again because of costly delays, unreliable labor, fussy building
inspectors, different laws and building codes and many other unforeseen
problems. Be sure to talk with foreigners who have built homes to see what
obstacles they encountered. Costs depend on location, materials and the size
of the home you want to build. You generally pay $500 to $1,000 a square
meter or $45 to $90 a square foot.

One common mistake some newcomers make is to hurry to build their
dream home while they are still on their “honeymoon” with the country.
Many have been shocked by substantial cost overruns. Months or years later,
they realize too much of their capital has been spent on their new home.

If you do decide to build a home on your land, there are several steps
required. First, conduct a preliminary study, which should be completed
before you buy the land. Also, be sure to see if your lot has access to water,
drainage, electricity and telephone services.

The law says you have to hire an architect or civil engineer
to file all of your construction permits. A building permit must be obtained
from the municipality where you plan to build. An architect can usually
handle building permits and work jointly with the contractor to supervise
the construction. It may take a couple of months or longer to get all of
the permits in order.A reliable contractor will also have to be hired.
You should get several bids and ask for references. Expect to visit the
construction site almost daily to ensure things are getting done.
If you cannot be there, have a reliable person inspect the construction
site for you on a daily basis.

According to one local realtor, this is how you can lose money while
building a home:
1. Give money to a real nice and friendly contractor and then leave the
country and tell him you will be back in a couple of months.
2. Take the first bid you get because it seems so incredibly cheap, far cheaper
than anyone else’s. Halfway through, when the real price emerges, it is
nearly impossible to get a second contractor to come in and finish what
the first one started. So, you are stuck with him and have to pay the real
price to build, but now you are working with someone you do not trust.
3. Pay no attention to the amount of cinder-blocks delivered to your
construction site.
4. Live in the city while building in the country and only drive out on
weekends.
5. Give the power of attorney to almost anyone. There is a special trick
here for people getting your deed number (escritura), and suddenly you
don’t own the property anymore.
6. Ignore the advice of experienced people because the taxi driver and the
guy on the bar stool are “locals” and must give good advice.

In short, I buy my materials directly through local hardware stores
(ferreterías), get receipts, place orders by phone and live on the land while
building on it. Some people do it by contract. I pay the workers once a week,
pay my building supplier once a month and use a hardware store I know
and trust. The contractor supervising the project gets a bonus of about 10
percent of the total building cost.”

One local resident’s experience building a home in Costa Rica
“Lots of folks seem interested in building a house in Costa Rica. My wife
and I have done this twice and thought that maybe knowing about some of
our experiences might prove useful to others.

“Because we’re focusing on building here, I won’t talk about buying
land. I’ll assume that you’ve already acquired the land you want to use.
“We arrived here with plans we had purchased in the States. We found
them in one of a myriad of home plan books that you can buy at bookstores.
When we made our decision, we sent off with the plans.

“Although we loved the plans, we had to make a lot of necessary changes
to make the construction suitable for Costa Rica. For example, we didn’t
want the house built with wooden studs and sheet rock. We decided to use
concrete block and stucco.

“Clearly we needed an architect to help us with all this. So we asked the
realtors from whom we had bought the land if they could recommend one.
They had someone they had worked with in the past and recommended
highly. After twice meeting with the architect, we asked him for a quote,
found it reasonable, and contracted him to make the modifications.
“Of course we weren’t contracting him to design the house from
scratch by any means. Had we been doing that, the process would have been
different. In any case, if you’re going to build a house, you must have some
relationship with an architect so that the plans you submit for approval are
properly stamped by a professional architect in good standing in Costa Rica.

You also use the architect to obtain the building permits for you.
“Make no mistake about it: you must get your building permits. I can’t tell
you how many times I have heard of people who had their building projects
stopped dead in the water because they had no permits. The interesting thing
is that after you’ve submitted your plans and received your permits, there’s
not a lot of checking that goes on to make sure that what you’re building
agrees with the plans. Personally, however, I would not take the chance of
submitting plans that are not what you’re going to build.

“Also in our agreement we contracted him to be the supervising
architect, that is, he would submit the plans, as mentioned above, would
do all the paper work, keep the on-site log required by law, work closely
with the builder, etc. We paid him $10,000 for all of that. The funds were
paid over the course of the project, according to an agreed-upon schedule.

“We had already found a builder. He lived right in our little town. In fact,
our property was part of a huge farm his father had once owned. He had built
a lot of the houses for our neighbors, and we examined those very closely.
We also looked very closely at houses in the neighborhood built by others.
Our guy’s work was really superior, plus he had an excellent reputation with
our friends and neighbors, almost all North Americans. We never regretted
our decision to go with him.

“When the architect had the plans ready, we gave them to the builder and
two weeks later he came back with a price for all labor and materials. The price
was more than we had expected. We now know that the reason for this was
that he was concerned because the house was more complex than anything
he had ever built before, and he was padding considerably to help ensure that
he didn’t lose money. The fellow did everything on scraps of paper and didn’t
have any kind of estimating system of any sophistication at all; he didn’t even
have a computer. Some houses he made money on, on others he lost money.

“Although the price was higher than we wanted, it was not unreasonable
by any means. We both made some adjustments and soon agreed on a price.
One thing should be stressed here; the price was for all labor and materials,
that is, it was a fixed price. I’ll talk about alternatives later. It was agreed, of
course, that any changes we wanted to make would cost extra. As it turned
out, we did, indeed, make a handful of changes, one of which was significant
and the others rather minor. But for each one we agreed beforehand on the
cost so that we knew all along what the project was costing us.

“Three things we talked about quite a bit before signing our agreement had
to do with allowances, infrastructure improvements, and payment structure.
“The question of allowances is extremely important in a deal such as
this, that is, where there’s a fixed price. Clearly you, the owner are going to
select things such as finishes (tiles, floors, counter tops, for example), paint,
light fixtures, plumbing fixtures, doors, windows, cabinets, shelving and
many other things.

“The builder has already estimated what these are going to cost him,
otherwise he couldn’t give you a fixed price. So you have to know what he
estimated so that when you pick things out you’ll know whether you’re right
on the money or whether you’re going over budget, in which case you’ll
owe the builder if you decide to purchase these things anyway, or whether
you’re under budget, in which case he will owe you money.

“The question of infrastructure is important, too. One must make sure,
for example, that the price includes bringing water to the property. In the
rural areas where we built both times, there’s no such thing as ‘city water.’
What about telephone lines to the property? What about electricity? All
of this has to be planned beforehand, and there are costs the builder isn’t
responsible for.

“For example, both times we built, although there was electricity available,
there was no transformer on the road from which to supply our houses. So we
had to pay the electric company for buying and installing a transformer. We had
no phones where we first built, so there was no problem about installation. At
our second house, telephone service was available, but the nearest pole was a
kilometer away. We were responsible for paying for poles and cable and having
the work done to bring the lines from that last pole to our house.

“These things about electricity and phone might strike you as being
strange or unusual. But if you live out in the country in Costa Rica, that’s
the way it’s done.

“Finally there was the question of payment. We worked out a schedule
of how much we needed to give the builder and at what intervals. That made
it easy for both of us to watch our cash flow.

“Another important consideration while building is where you will be
while the building is going on. The first time we built a large house, we
were living in a small guest house right on the property and were always
right there. Indeed, every day the foreman (who, by the way, was fantastic)
would consult with us numerous times as did the subcontractors. Living on
site is absolutely the best arrangement. It’s even better when, as in this case,
the builder lives right in the neighborhood.

“When we built the second house, we were living in a rental house
that was exactly a 20-minute drive from the building site. In addition, the
architect/builder lived in San José. What a difference that made. We were
obviously not always available to the foreman and subcontractors. We had
to schedule regular meetings at exact times on certain days with the builder
who had to travel about an hour and a half to get to the site. Although it
was doable, it was far from ideal.

“We have friends who continued to live in the States while their houses were
being built. In most cases this resulted in large problems and great frustration.

“All in all, the building of our first house went extremely well. The house
itself was magnificent, we had all the input anyone could ask for and at the
end of the day we still had a fine relationship with the builder.

“I wish I could say that after the first experience, the second was even
better because of all we had learned the first time. But the second time we did
it differently and I must say that even though in the end, we were extremely
pleased with the house, getting to that point was much more difficult than
our first venture.

“In this case, we didn’t start with pre-drawn plans, but we did have a
highly detailed plan that my wife worked out with just a little bit of help
from me. Then she built a model that would have done her proud in any
school of architecture.

“We met the builder by calling him after seeing his full-page ad in an
upscale Costa Rican home and building publication. He was an extremely
bright young man who built only log homes, which is what we wanted.
There are other log home builders in Costa Rica and we investigated them
all. But the type of homes they built were not what we were looking for.
“What we did was to have a series of meetings with the architect at which
we would present our ideas, he would make sketches, we’d come back, look
at what he did, discuss it and then go to the next round. The purpose of this
was to end up with a plan, on paper, with drawings (but not final blueprints)
of what we would go ahead with. He charged us a set price for the series of
meetings that was quite reasonable, less than $1,000.

“Eventually we agreed on a plan about which we were quite excited.
At that point, we contracted, but on an entirely different basis than we did
during the first project. This time there was a fixed cost for plans, labor and
labor supervision. The idea here is that if they don’t meet the deadline for
completion, we don’t pay anything extra regardless of how long they take.

“The architect’s company was also the builder. Materials, however,
were only estimated and we would pay for the materials as we went. In most
cases they would buy the materials and I would pay the invoices directly to
the vendors, unless the architect had already paid for them and gave me a
cancelled invoice, in which case I would reimburse him.

“All the things that are normally considered allowances, that is, the
things the client picks, we ourselves would just pick and buy, since there was
no set price for materials.

“There are two potential dangers in doing this. The first is that the
estimate made by the architect/builder is way off, in which case you could
go way over budget on materials. The second is that the architect/builder
could be in cahoots with the suppliers and we could be overcharged, with
them getting a ‘commission.’

“The latter was not the case. I was convinced at the time that these were
honest people and even after all the difficulties we later had, I still believe
them to be honest men. But … that’s the only thing that went well.

“We had the estimate for materials and a completion date five months
out. They spent a great deal of time explaining to us why we could be
sure that the estimated materials cost was right on the money and the job
was going to be on time. Unlike our first builder, these folks were highly
computerized—which just goes to show that the old saw about garbage in,
garbage out, as far as computers are concerned is absolutely right.

“They were to start working on January 3 or 4 and were to finish on
May 30. I fired all of them about early April because it was clear that at this
point they had no real idea of when the house was going to be done — I
estimated that it was about 90 percent done.

“At that point we were a good 20 percent over budget and I was having a
hard time getting a fix on what was to come. As you can imagine, there was a
lot of other stuff going on that contributed to my reaching the point of firing
them. One significant problem was, as I mentioned, that they were from San
José and weren’t here nearly as often as they needed to be, and the foreman
here was as bad as our first foreman was great. Additionally, they were always
late on their estimates about when we, the clients, had to make certain material
choices. This, in turn, resulted in either falling further and further behind
schedule or our settling for something that wasn’t our first choice.

“Eventually, after I fired them, the job was finished by a terrific local guy.
Before we started the house, he had been the architect and supervisor for a
large stable, a nice little house for our workers, a large gate, water system,
etc. He had done a great job and he’s extremely competent and, in general,
an exceedingly nice and honorable young man. We didn’t consider him for
the main house because we wanted someone with experience in building
log homes. That was a mistake.

“He did a fantastic job in getting the house and remaining infrastructure
work done and had an extremely efficient crew of local workers. Man, what
a difference between using local workers and workers who have no tie to
the community.

“Clearly, the first arrangement with a fixed price was far superior to this
open-ended material purchasing arrangement. We’d certainly never go into
an arrangement such as the second one again.

“Concerning prices per square-meter for building, there is a great, great
range of prices, so it is difficult to speak generally. The variables involved
are many. For example, a huge part of the cost of materials is based on
transportation charges. Thus, if you’re far away from the suppliers your
materials cost can easily increase by as much as 30 percent. At times, I’ve had
delivery charges that were 50 percent of the value of the materials delivered.

“Labor costs, especially unskilled labor, vary from builder to builder,
regardless of what the law says. This, too, tends to be influenced by location. If
you’re building in a generally economically depressed area, the builder will pay
the workers less than in an urban area where there might be more work available.

“The type of house you’re building will make a great difference in cost
per square meter as well. For example, the log and stone house of the second
project required much more handcrafting than a block, concrete and stucco
house, such as the first one we built. But then comes design. The first one
had many curved walls, niches, a curved stairway to the second floor, etc.
All of this takes a lot more time to do and thus results in great labor charges.

“In the second project, in addition to the house, we built a large stable,
a small house for animal rehabilitation, a large flight cage for un-releasable
bats we’ve rehabilitated, a small house for our workers and a large storage
facility. All the prices per square-meter varied greatly, not only because of
the usual variables but also because we used several different builders for
the several projects.

“But, just to give a general idea, a very good price for a simple home
would be between $270 and $323 per square meter ($25 to $30 per square
foot). A simple house would be basically a one-story, rectangular structure
with straight walls and a simple roof line built with block, concrete, and
stucco. Some people refer to this type of design as a “tico house.”

“On the other hand, you should be able to build just about anything
you want, regardless of how complex and complete, for between $540 and
$645 per square meter ($50 to $60 per square foot).

“If you’re building a simple block and concrete house and you’re paying
between $40 and $45 per square foot, you’re probably paying quite a bit
too much.

“And if you’re building anything for $65 per square foot and above,
you’re probably building a mini Taj Mahal.”

Long-time Costa Rican resident Martin Rice is the author of At Home
in Costa Rica ISBN 1413460283.


Related Resources:

Myrtle Beach Real Estate – Building or Buying a Home
Costa Rica Home and Vacation Rental For Sale

Cayman Real Estate & Vacation Rental Properties

Mexico real estate – Cancun, Playa del Carmen, Riviera Maya, Cancun

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