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One of the most appealing aspects of purchasing a property in Costa Rica can be the opportunity to purchase a property with owner financing. What makes better sense; the seller moves his property and you the buyer get a fantastic deal with less money out of your pocket upfront. Not all owners are willing to “carry back” paper for the buyer but we are finding more and more sellers are interested if it will sell their property quicker.

Down Payment

Each owner financed deal has its own set of terms and conditions. The first element is the down payment. What is typical? What is acceptable? This will depend on the owner’s motivation to move the property. Some owners are willing to accept as little as 10% while some may want as much as 50% or more. These are all discussed and negotiated going into the offer for the property. But it’s exciting because all of a sudden you have more spending power and you may be able to get a property much more than expected.

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How does it affect my offer

The deal is not quite the same if you do not have all the cash. If the seller is offering owner financing upfront, they typically have a good idea of what they are willing to accept, or they may have a range. If the seller is looking for all cash then we have a bit more negotiating to do and the key points are;

  • How much will they accept as a down payment? 10% / 20% / More
  • How long will they carry the financing? 3 years / 5 years / 10 years / More
  • What will be the interest charged on the balance? 5% / 6% / 8% / More

These items will all be agreed to and put into the agreement.

Other special circumstances and conditions can come into play such as you need to ask the owner to finance the property until you sell your own house or receive money from another source. Don’t expect to get the same steal you might get if you offer all cash. If you make the seller a lowball offer and you also ask for owner financing, you can insult the seller. This will definitely not help to get you what you are looking for. But once again this is all discussed prior to drawing up the offer.

Creative financing

You can also try to do some creative financing, so getting that steal is still an option.

See if you can get an equity loan on your own house until it sells. Talk to your banker to see if they’re willing to finance offshore.

If you know someone who owns an IRA or a 401(k), see if they can roll it over to cover the missing funds. You are not allowed to use your own retirement funds to finance your house, but you can use someone else’s. If you know someone in your local network who would love to invest retirement funds at an attractive rate in a risk-free project, you can both have that great deal you’re looking for.

Try for private lending in the U.S. private lending market. You will find private lenders willing to give you much more attractive interest rates than you will find in the Costa Rica real estate market. Try on Bigger Pockets forum or on The Borrower’s Guide to Private Money Loans.

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