My own builder went bankrupt partway through my house. So when someone asks me whether to build or buy in Costa Rica, I don't start with the floor plan. I start with the money.
Buying a finished house in Costa Rica is faster and carries less risk, because you're paying for something that's already built. Building gets you the exact house you want. It also moves builder and currency risk onto you. Construction loans are hard to find, so a lot of builds get paid in cash over a year or more.
| Buying a finished house | Building | |
|---|---|---|
| You're paying for | A house you can walk through | Plans and a builder's promise |
| Biggest risk | Hidden defects, title problems | The builder stalls or disappears |
| Financing | Mortgages are easier to get | Mostly cash |
| Timeline | Set by the closing date | A year or more |
| Currency exposure | Fixed at closing | Open the whole build if costs are in colones |
| Design control | Whatever's there | Full |
Is it risky to build a house in Costa Rica?
More than in the States. Stateside, a title company and a lender's appraiser both check the deal, and title insurance comes standard. Title insurance exists in Costa Rica through a few international providers, but it isn't standard practice. Most closings rely on your attorney's study of the national registry. The rest's on you.
Building adds a second layer. Plans and the professionals who sign them are registered with the CFIA (Colegio Federado de Ingenieros y de Arquitectos), and the municipality issues the permit. That'll tell you a licensed professional stamped the drawings. But it doesn't tell you whether the builder can pay their suppliers, or whether they'll finish your job before they start somebody else's.
I hear a version of this from a lot of people. Someone's bought a lot and gotten plans drawn, and they're days from wiring a big deposit. Then they hear the contractor's left other jobs half done. Can you get a deposit back if a builder vanishes? Maybe, through the courts. But it's slow, so plan as if money that's gone stays gone.
Plenty of people build and love it. They screen a builder the way a landlord screens a tenant, and money only moves once the work's done.
Who does building fit? People who can be on site often, or who've got someone local they trust. It gets harder when the timeline's tight. Or when the down payment depends on selling a US house first. That's why a lot of people buy first, then build once they've found a builder by reputation.
How do you pay for building a house in Costa Rica?
The land's first. Costa Rica's transfer tax is 1.5% of the greater of the sale price or the property's fiscal value. Stamps and notary fees come on top. All in, closing costs usually land around 3.5% to 4.5%. Your attorney can itemize them before you sign (transfer tax: Ley 6999; notary fees: the official arancel).
Then there's the build. Local banks are far more comfortable lending against a finished house than a set of plans. So a lot of people build with cash and look at a mortgage once there's a real house to lend against. That means the build budget sits somewhere liquid for a year or more.
Good builds pay in stages. Each stage is tied to finished work. An engineer or inspector who works for you signs off before any money moves. A big deposit with no schedule attached? That's how people lose money.
What a draw schedule with a contingency can look like
This one's an illustration in round numbers, and your contract's stages will differ. Say the contract's $300,000 and you're holding back $45,000 as a contingency.
| Stage | Share | Paid when | Amount |
|---|---|---|---|
| Signing deposit | 10% | Contract signed, permit issued | $30,000 |
| Foundation | 15% | Your engineer signs off | $45,000 |
| Structure and walls | 25% | Walls up and inspected | $75,000 |
| Roof | 20% | Roof on and inspected | $60,000 |
| Systems and finishes | 20% | Wiring and plumbing signed off, finishes in | $60,000 |
| Retention | 10% | Punch list done, final walkthrough | $30,000 |
| Contract total | 100% | $300,000 | |
| Contingency, held separately | Only if something runs over | $45,000 | |
| Cash to have ready | $345,000 |
The small deposit limits what a stalled builder's holding, and the 10% retention gives them a reason to finish.
The exchange rate's the other wildcard. A lot of materials and labor's priced in colones. The colón went from roughly 690 per dollar in mid-2022 to the low 500s during 2024. At those rates, ₡100 million of construction was about $145,000 in 2022 and about $196,000 in 2024. Same house, same builder, $51,000 more. That's more than the whole $45,000 contingency above (Banco Central de Costa Rica exchange rate data).
Is your contract in dollars or colones, and who eats the swing? Get both answers in writing.
Every owner-built project I've watched closely went over its original number. Size your contingency like you'll use all of it.
What should you check before buying a finished house in Costa Rica?
A finished house takes away the biggest risk, because you'll walk through what you're buying before a dollar moves. But you still need due diligence. Your attorney should pull the title and the plano catastrado (survey plan) from the Registro Nacional and check for liens (gravámenes). They'll also confirm the municipal property tax is paid up. It's 0.25% of registered value a year (Ley 7509), so a back balance is usually small. What your attorney and the notario each do and buying property in Costa Rica go deeper.
Hire your own inspector too. Renovations can hide shortcuts inside walls, and wiring's a common one. Was the work permitted? Unpermitted additions can cause trouble when you're selling or insuring.
You get certainty and speed. You give up control over the layout, and for a lot of people that's a fair trade for the first few years. Financing's easier too.
Can you build a casita to rent out in Costa Rica?
This one comes up a lot. It's a main house for you, plus a smaller unit on the same lot that earns rent or houses someone who watches the place while you're in the States.
It can work well. I built a casita first on my own property.
The second unit usually needs its own permit, and your lot's zoning and water have to support it. Check water first. A water availability letter from the local provider is one of the more common holdups.
Costa Rica taxes casita rent. It's 15% of gross rent after a standard 15% deduction, about 12.75% effective, and you declare and pay it monthly, by the 15th. Rent above ₡693,300 a month (1.5 times the 2026 salario base), or any nightly rental, also owes 13% VAT on the full rent, filed monthly (Ley 7092 as amended by Ley 9635; Hacienda). The rent goes on your US return too, where the foreign tax credit may offset part of the US tax. Renting out your Costa Rica property has the rest.
What if someone lives there free in exchange for watching the place? Ask your attorney whether that's employment. If it is, you could owe CCSS (CAJA) contributions and labor benefits you didn't budget for. A written agreement's cheaper than a labor claim.
What does the IRS care about when you own property in Costa Rica?
Build or buy, it's about the same.
A house you hold directly doesn't go on FinCEN Form 114, the annual foreign bank account report. But the Costa Rican account you pay the builder from does once your foreign accounts pass $10,000 at any point in the year, and US tax obligations when living in Costa Rica covers the rules.
The holding structure drives the US paperwork. Owning in your own name is the simplest case on the US side. Put the property inside a Costa Rican company and there's US reporting attached to that company every year, and which reporting depends on how the company is classified. The penalties for missing it are real. If you own or are about to buy into a Costa Rican corporation, talk to a cross-border professional, me or someone else, before you file. If you'd rather research it yourself first, that's fine too. I've written more on the structures themselves in how to hold title to Costa Rica property as a US person.
Keep every factura. When you sell, your gain's measured in dollars against your cost basis. The land, the closing costs, the permits and every construction payment go into it. Your facturas electrónicas are the proof. A build means dozens of payments to dozens of vendors, and it's easy to lose a third of them.
Did you own it and live in it as your main home for two of the five years before a sale? Then Section 121's exclusion can apply to a foreign home too. That's $250,000 of gain for a single filer, $500,000 married filing jointly. And Costa Rica exempts the sale of your habitual residence from its 15% capital gains tax (IRS Pub 523; Ley 9635).
What mistakes do people make when they build in Costa Rica?
- Using the inspector the builder's picked. Yours should work for you.
- Sinking the whole budget into the build, then selling investments at a bad time to cover an overrun.
- Titling the property without checking your US will or trust. Estate planning for US citizens in Costa Rica covers how they fit.
- Throwing away receipts. That shoebox of facturas is your cost basis.
What should you sort out before you sign with a builder?
Start with cash flow before you've looked at a floor plan. Where does the money for each stage come from, and what happens if the project runs long? Titling's the step after that.
Has a builder asked for a deposit with no payment schedule attached yet? That's a good time to talk. Part of what I do for people mid-build is manage the cash reserve that pays the draws, including how much sits in dollars and how much in colones. Get in touch to set up a call. If you're earlier than that, the Costa Rica readiness quiz takes a few minutes. I spend a lot of time on the ground in Costa Rica, and a lot of my week goes to exactly these questions.
This post is educational and does not constitute personalized investment, tax, or legal advice. Vitality Wealth Planning, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. Tax laws change; verify current rules with a qualified professional.