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Real Estate Investing School Podcast
161. International Real Estate Investments with Andrew Bilak
00:50:12
Welcome back to the Real Estate Investing School Podcast. In this episode, Joe interviews Andrew Bilak, a Canadian real estate investor who has turned his attention to the vibrant market of Costa Rica. Andrew owns two vacation properties in Costa Rica...
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- [00:00]
A
Welcome to the Real Estate Investing School podcast. I'm your host, Joe Jensen. Today we've got Andrew Bilak. Andrew's a real estate investor from Canada focused on buying cash flowing rental properties abroad. His current focus is Costa Rica where he owns two vacation properties. He has a consulting and marketing business that helps expats navigate and simplify the buying process in Costa Rica. Now welcome, welcome to the show. Andrew. I'm excited about this, this is something I've been interested. I just got back from Costa Rica, I've been there a couple, I'm like, man, I bought some stuff out in Hawaii and I'm like, where's like the next Hawaii? And obviously I'm not the first person to think that because South America, Mexico, Costa Rica, I see it blowing up. So anyway, excited to have you on the show and learn more about this.
- [00:47]
B
Yeah, awesome. Joe, thank you for, for having me on here. It was, it was sweet, you know, you sliding into my DMs and being like, hey man, we'd love to get you on the show and chat a little, you know, so thank you.
- [00:57]
A
That's how we do it. I was excited seeing what you were talking about and what you're doing. So you've been, you've been in, in real estate, what, five or six years now?
- [01:06]
B
Yeah, five years now.
- [01:08]
A
Five years.
- [01:09]
B
Awesome. Started in, in student rentals.
- [01:12]
A
Okay. In Canada or where was your first investments?
- [01:15]
B
All of my properties outside of, outside of Costa Rica are in, are in Canada. So I started with student rentals. I actually bought in the same college town where I went to school, University of London, Ontario. And I bought two student rentals there with a partner. That was like the first kind of foray into real estate and it definitely didn't come without its challenges of dealing with, with student renters. But yeah, an amazing cash flowing assets, I mean, charge by room, you got turnover every one to two years. It was a good foray into real estate.
- [01:53]
A
So were you a student at the time or what kind of turned you on to that?
- [01:58]
B
I was not a student. At a time I graduated, I think it was like five years ago. I knew I wanted to get into real estate. I didn't know exactly where to dive in first. Especially in the age of kind of social media, you have so many different options being thrown your way. So for me I was like, you know what, I know that market. I had a little bit of help. I reached out to some people who are already in the student rental space. They gave me some, you know, good guiding principles and at the end of the day, it was just kind of jumping in, but just making sure the numbers were solid, conservative solid. Giving yourself wiggle room, knowing, you know, your maintenance costs are going to be a little bit higher, especially on the wear and tear student rental. So that was the good. It was interesting because I had never bought a property before, and we bought that first student rental, me and a partner, and then the seller, upon closing, we got to meet the guy and he actually owned a bunch more on the same street. It was kind of like a student ghetto there. And he was like, yeah. So within six months, or, sorry, within six weeks, we bought our second property.
- [03:00]
A
Oh, wow.
- [03:01]
B
The student rental directly across the street.
- [03:04]
A
That's awesome, man. I've got some questions on that. It's like one I mentioned a bit here about this partnership. It sounds like that was kind of a nice way for you to get into the game. I assume he was more experienced then. Or how did you find your partner? And, and how. How did that. How did you guys, like, structure these deals when you're first getting going?
- [03:22]
B
Actually super funny. My partner was my girlfriend at the time. Ex. Ex girlfriend.
- [03:28]
A
Okay, Ex girlfriend at the. Ex girlfriend now. But at the time.
- [03:31]
B
You're still dating at the time. Yeah. So it was interesting because it was kind of like we came in into this deal. I sought outside mentorship from people who are like, who knew what they were doing, got some capital saved up, and we deployed that. We actually had to borrow funds on the second one. But it was an interesting learning opportunity in the sense of, yeah, great, great, great opportunity. Getting into your first real estate deal and then quickly your second. And then realizing, you know, down the line, things didn't necessarily work out. We had to sell the properties. But luckily it was at a time when the market was at its peak. So it definitely came with so many learning experiences. Being a first time in real estate, but also first time with a partner. First time with a portfolio partner that you're exactly.
- [04:16]
A
Your personal partner as well. Yeah. So was she experienced in real estate? Were you guys just going in this blind together and just like, just figuring it out together?
- [04:24]
B
We're like, let's do it. Like, you know, we wanted to get into it. So I'm a little bit more. I put a lot of emphasis on like, due diligence in general. Like, I wasn't like, you know, let's jump into it, figure it out. I was like, listen, I want to know how to make sure numbers. Okay. How to make sure that we ensure that the, like, we're not getting burned on day one and I'm just not like that. But it was kind of like a, you know, I, I, you know, fine, tooth comb, everything. And before I do do it at the end of the day you just got to jump in.
- [04:56]
A
So what kind of due diligence do you do? Like, do you have like just like a deal calculator, you run things through and then kind of look into the area like when you, when you dive into your due diligence to make sure you're not making mistake. What are some of your, I know we could do like a five hour thing on just that, but like give us some of like the basics. I think that's one of the biggest things that keep people out of is like I just don't want to like shoot myself in the foot and I don't know what I'm doing. So I won't do anything, you know.
- [05:22]
B
Yeah. So definitely, I mean a lot of people that like were in the game would definitely call the parameters in which you're looking to purchase something in a buy box. You have your, you know, your expected returns, you know what your cash flow is on a monthly basis, what your growth projections are. I didn't know what that was called at the beginning. I just knew there were some guiding principles. I'm like it needs to be in a growing market. It has to be in an area that I know that I'm going to get steady cash flow. And what our expected return, we want it to be after five years. We didn't hold on to it for five years. We actually held on to it for a couple of years. But with, in Canada the market is sometimes an anomaly especially I'm from Toronto, so London is like a two hour drive away from Toronto and the Toronto market is insane with growth like year over year over the years. And so the London and the surrounding areas all around Toronto really got a lift up from the growth in that market. So the growth projections that I had were conservative. I run numbers conservatively. You need to, you need to. Yeah, like best case scenario, there leaves no room for mistakes, no room for maintenance. Like nothing. So for us we got really lucky with the crazy growth that we had. But just you need to know expectations of what is reality versus what you want your projections. But be, be super conservative at the end of the day. Always be conservative.
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A
Cool. So you buy these, you end up selling them when you guys break up or whatnot. And is that kind of what, is that why you guys sold them?
- [07:01]
B
Yeah. Yeah. Nice. We were kind of, like, oh, the other does want to. Want to buy out the other. Whatever. The market was crazy at the time. Like, I think we sold, like, like, a 35%, like, growth in equity over two years. And so.
- [07:14]
A
That's awesome.
- [07:15]
B
Yeah. You know what? Let's just. It's good timing. Lesson learned. If I could do it again, I would have a document in place, a contract. Whether it's a buddy of yours, a random business partner, or a girlfriend partner, whatever you have, just make sure you have an agreement ahead of time. If you run into a situation where things end up getting salty, just, it's. It's good to have that when the times are good. Because when the times are bad, you can look back on that.
- [07:44]
A
Yeah. Have some sort of operating agreement that stipulates, like, who gets to make decisions, how those decisions are made. Like, you know, because what if you didn't want to exit? What if the market was bad and they were forcing the exit and you were going to lose money? Like, like I said, it was easier for you guys because, like, well, we can exit and we're all going to win, so, whatever, we can clean our hands of it. But it might not always be that case. Yeah, I'm a big fan. I always say, you know, contracts keep friends. Friends. You know, people are like, oh, we're friends. We don't need a contract. Well, you know, we're dating. We don't need a contract. Like, the contracts is what keeps the piece. Like, when. So. Because when things are down the road, even if there's no, like, bitterness, it's just like, wait, I thought we said this, I thought we said that. And you look at the contract and go, oh, I guess we did say that. I've had that happen, like, where I was totally on the wrong. Just with a tenant about, like, if they had paid first and last month's rent, I thought they'd only paid first. And they're like, no, we paid last month's rent. And I was like, you sure? Like, I don't think so. And then I, like, looked it up and, oh, you're right. Yeah, I did my bad, guys. Like, I, you know, I wasn't trying to take advantage of them. I just didn't remember. Right. And so, like, having things in writing is always just going to make everybody's life a little simpler, you know?
- [08:53]
B
No, I completely agree. So, like, your North Star principle, like, whenever there's disagreements, agreements, whatever, you just want to check out, you know, what you guys have agreed upon before time just come back to it. You know, this is what's out lied. You know, if you're both in agreement, if you want to change it, great. Like you guys can make amendments to that deal, but it's, that's going to be your guiding document pushing you through your partnership from day one.
- [09:16]
A
Okay. I want to ask you about Canada. So most of our listeners are in the United States. I'm, I live in the United States. I've never bought anything else outside of it Canada. What is the loans, like, how do you leverage debt there? Like, I know the property can be really expensive and I know in the United States we have a lot of very advantageous government programming programs for loans that can help people get in, you know, a lot cheaper and better interest rates and like 30 year locked loans. What, what's it look like in Canada? How are you leveraging debt? Is it beneficial or you not? Like what's that look like? There's. And then. Yeah, we'll start with that.
- [09:56]
B
Yeah. So I mean looking down south of the border at like my American friends, I envy them when you guys have these 30 year fixed terms and yeah, that's it. Like you know, people locked into Covid, like sub 2, sub 2% loans for the next 30 years, they're laughing, they're just absolutely laughing. Yeah, we have one year, three year and five year terms. So no matter what, which one you choose, it could be variable or fixed. You are going to be taking on a new mortgage at that, at that term date. So whatever rate you had before, it doesn't matter whatever the rate is, if your term is up. See this is, this is the problem with the market here. It's like so many people took cheap, cheap loans when Covid was around.
- [10:41]
A
Yeah.
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B
You know, the people who had three year loans, those were up last year. And the people who have those five year loans at like, you know, 1.8%, 2%, they're going to be refined. If rates stay the same, they're going to be like refinancing at like 6% and that's.
- [10:56]
A
And this is even for primary, like for primary residents because, because we have stuff like that for like investment DSCR loans, you know, but like if it's a primary residence, we can get the good stuff. But even on a primary putting 20% down home, you're still looking at a one, three or five year lock.
- [11:15]
B
Yeah, one is a little uncommon. Usually one are for people that, you know, need to, you know, borrow, you know, money at a higher interest rate or hard money and they just need something to tide them over for a year, most commonly three and five. And then the bank typically, you know, you get pretty serious qualifications here. You know, they take the going rate and they add a little bit on top of it to qualify you to see if you can actually carry that mortgage. And so like I said 3 and 5, you're refinancing even those terms. The terms can be 20, 25, 30 year ams, which bring your monthly payment down, but you're pretty much like at the end of those terms are paying what the going rate is in the market today.
- [11:56]
A
So they'll give you a 20, 30 year amortization to get the payments down. But it's, and now it's not ballooning at year three and five. It's just re, it's just an arm, an adjustable rate mortgage. So it's like they don't have to like pay the loan off a year five, they'll just adjust the rate and you just roll with the new rate.
- [12:13]
B
Correct, correct. And then like regular times when, you know, rates fall within maybe like one, one and a half percent, you know, positive, negative from what they locked in at, different from what people locked in at during COVID And a lot of. Yeah, yeah, yeah. And especially investors, especially speculative investors, you know, they're getting burned right now because the market has softened across the board. And people, they want to sell at a loss, but they also can't afford some of their carrying costs. So that's one element that's different. Another one is we don't have a 1031 exchange. You know, that's crazy. Like you have to pay capital gains. I mean, your primary residence is capital gains exempt. But for investors, you know, if you want to switch out and you know, upgrade your property, roll, roll any, any gains that you have from one into something else, something bigger, a different project, still have to pay capital, you got.
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A
To pay for it.
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B
Yeah.
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A
What about down payments? I know we have problems where you can do 0%, 3 and a half, 5% down if it's a primary. We call them house hacking, these special loans. What do you guys have? What's the down payment like on primaries and investments and stuff?
- [13:23]
B
20%. The only time you're getting less than 20% is there's a program here called the first time home buyers program. I use that up a long time ago, but I believe it's maybe like 10% you can put down. But then again, it's, it's this like a kind of snake, even the tail, because you can put down 10% to get into your first property. But you know, if you're looking at a rate that's like 6%, your mortgage payment is insane because you're taking out 90% of that debt.
- [13:50]
A
Yeah. Yeah, that's so interesting. And so just for the listeners in the United States, like, guys, I keep saying this like we have a gift, like we're so freaking lucky. Like, take advantage of these loans because, yeah, I mean, when you can get a 0% or 3%, you know, down and then lock it for 30 years, even if it's locked at a high rate, but you know, it's functional and sustainable even, you know, it's like it won't, it won't ever change. You know, you're set for 30 years. Like, it's just, it's such a gift to investors that people just don't even realize. They're just like passing it by year after year. And you could do it every year, 10 times in a row at that 5% down and 30 year lock. Like Andrew's sitting here pissed off right now. Stop rubbing in my face, man. And I'm like, guys, listen to me. Take advantage, brother.
- [14:42]
B
The only thing that's going here is in bigger markets, but it's not necessarily a positive because Toronto, Vancouver, some of the most expensive places to live in in the world.
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A
Yeah.
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B
In terms of, in terms of housing costs. And so while, yeah, great, like, people tolerate and you know, that's, that's the game, those are the rules we have to play by in order to get into property here. And so the caveat is like, great, if you can get, find a way to get in. You know, you're looking at crazy equity appreciation, like appreciation in your home and gain on equity. And in a year, 2, 3, 4. And so those people who have all of that equity in their homes, they can refinance and buy another property, buy a second property, you know, something else. And so that's, that's the one caveat. But now it's getting to a place like the housing costs here are just getting out of control. And so the barriers to entry are so high. And what we're seeing more of here is like you're starting to see generational housing. Like you're starting to see, you know, kids still living with mom and dad, but you know, grandma and grandpa are moving into the house. And you know, you got three generations living under one house and everyone's chipping in to make those astronomical payments, you know, to get. Yeah, like, no, you're looking at like two bedroom, semi detached homes going for like $1.4 million here.
- [16:04]
A
It's crazy. And so I lived in Hawaii for a while and that's how it is there. It's very, very common to have multi generational housing. Like one, culturally it's, it's more common. But then, and then you just add the economics and the price. Things are so expensive. It just like really forced it even more. And, and even in Utah I'm starting to see that become more and more of a thing. Like so when housing prices go up, people just, it's, it's harder people just staying. Why would I leave and be paying crazy amounts? I'll just live in the, you know, guest room. Like it's, it's getting crazy here too. And we're not even as bad as, as Toronto yet, you know, But I.
- [16:43]
B
Mean you're looking like you're Hawaii, right? Like, it's just like you could tolerate that maybe because you are living in this beautiful climate. Like, you know, Toronto's got, let's call it five months of winter. So you know, you're, you're paying for this lifestyle that you know, you're, you're slogging away here and summers are fantastic. But at the end of the day, like from a lifestyle perspective, I think more and more people are finding it. No, I know more and more people are finding it very challenging to sustain a living, to plan for a long term lifestyle that you can retire on and stuff like that. No, people are just trying to like, just make it from today to tomorrow. It's kind of scary and then it.
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A
Makes you just want to move to paradise. So let's pivot to Costa Rica. I'm super excited. I have a couple questions. You can tackle these how you want. Okay. So I want to know one, just how you even got like turned on to that, how your vacation rentals are going. I want to know how you, is it safe? Like, like the government to be trusted? Like, I don't know. That seems that's I think always a scary thing for us. Like just, you know, are you really going to own this? How do you control that? And then also how you leverage debt there as well. So we can kind of tackle that however you want. Those are some of the topics I want to talk about with your Costa Rica buying.
- [18:01]
B
Yeah, definitely. I'd like that segue. There was a good, good timing for me the first time I went to Costa Rica. I was young teenager one with my family on a vacation. It was the first time I went surfing. Like I loved it. I was hooked yeah. Later in my life, I lived in Australia for a bit. I went surfing there. And I hadn't been to Costa Rica in, I don't know, 10 years. So as an adult, I was like, you know what? I want to. I've got the surfing edge. I want to go back down. So I went surfing. I spent two months there. It was just out of this world. Fantastic. I spent most of my time near Santa Teresa. It's on the Pacific side. Very popular destination, beach town to go to. And being in real estate, I kind of signed up to different newsletters, different investing groups. And one of them, I think it was like a week after I got back from, from my trip, they put on a webinar being like, invest. The title was in how to invest in Costa Rica. And I was like, okay, let's go. I'm still on a high from the trip. I'm like, you guys give all of my attention. So I jumped on the webinar and it was about a development that was like 25 minutes from where I was. I was like, I know this.
- [19:09]
A
Nice.
- [19:10]
B
Did like, I was, I was right there. So I had a little sense of familiarity and I didn't know what my next real estate investment was or what I wanted it to be. And I was like, I watched the webinar and I was like, pre development, Sorry, pre construction in this new development. And it was going for 140,000 US and I was like, I'm in. Too bad, too bad. Like, 900 square feet gated community, 12 minute walk from the beach. I'm like, down. But the minute I kind of, like, mentally committed to that, my wheel starts spinning, going, well, does my due diligence process, does my underwriting process apply to this? Like, we're talking America. I'm like, I don't know where to even begin. And so from that, the biggest hurdle that I went through in buying that first property was finding the truth to the answer to the questions that I was asking in regards to buying a property down there. Like, I'm thinking like, okay, and there's a whole list of things. It's like, okay, how do I find, Is this a good area? Is it safe? What's the cost? Is there financing? Okay. Pre construction? There isn't. What's the deposit structure? You know, is. Is this a legit company? Who are these? Like, there's. There's a million questions. And I ended up getting all them answered. But it took. It took me two months of like, consistently going through different avenues to find the answers that I needed to. And so that to me, and that's, you know, working with other people that are looking at buying their dream vacation homes. They come to me and I kind of put them through this same kind of process that I went to. And it's consistently being refined. I mean, Costa Rica is no longer that hidden gem. I mean, it got Travel and Leisure rated it number one place to retire for this year. It, it was rated the top 2024 destination to travel. And as of last week, travel leader once again put out. Costa Rica is the number one place to. Don't quote me on this, I got to double check the headline. But it said number one vacation for purchasing luxury real estate. Luxury vacation homes. And the secret's out. You know, it seems to be this perfect storm because there's softening in real estate back home in Canada and the U.S. rates are high. People still have money, people want to travel, people want to invest. So where do they look? You know, you're looking at places, Central America, Costa Rica from, I think from Miami is like a two and a half hour flight from Toronto. It's five direct access to coming there to international airports. Costa Rica abolished its army. It's one of the safest places in Central America. I felt very safe there. And the value for property to get in is great. But the only caveat is financing is extremely difficult, difficult. And so the number one way financing properties is they either into their own, they finance, refinance their primary residence or any additional properties that they own. Because the interest rate that you would pay if you can get a lender in Costa Rica to give you a loan which is very, very stringent, it's a very stringent process because, you know, it's not just, you know, you have expats that are coming in that are looking for loans for international properties. And if they don't pay, you know, what's their recourse? They're going to have to chase you in what, the states, Canada, wherever you're from. So yeah, even if you do get financing, even there are lenders out there that are companies from the states that have come in and set up shop and provide expats with, with options to get funding. But those start at nine and a half percent and they go up to 11. So that's why a lot of people who are going down there and are buying, they are still buying cash, but they are acting so, you know, your heloc, your home equity line of credit is the interest payments that you'll pay on that are much less expensive than nine and a half to 11%. And so people who have built up equity and want to get into the game, that is the number one route that they take. They are their own banks.
- [23:32]
A
Yeah. So self funding these and luckily some of them are cheap enough like you said, you know, a couple hundred grand that if you have equity you might be able to convert that over and just buy these in cash and not have to deal with trying to get loans and cross borders, stuff like that. But what about ownership? Is it like, yeah, you can live in Canada or be a U.S. citizen and just own, own land and structures in Costa Rica or do they have like, do they have rules around, you know, letting foreigners own land and property?
- [24:05]
B
Costa Rica is really good like that. They give non citizens the same ownership rights to land and property there as they would Costa Ricans. So you don't need to become a citizen, you don't need to be a permanent resident. You can come in and you can buy property from day one. And they've just recently, as of this year I believe or last, towards the end of last year, it used to be somewhere in the round amount of like 200,000 you would need, you can get investor grade, an investor grade visa with purchasing property up to the value of 200,000. They've now reduced it to 150,000. So if you buy a property for $150,000, you can apply for investor grade residency which gives you the same access to or gives you the same rights as citizens. The only thing you can't do is vote. So you can come in and you can pretty much get yourself, you can buy your way into a visa or sorry into residency in, in Costa Rica through property ownership and, and then you.
- [25:07]
A
Can stay as long as you want on your trips.
- [25:10]
B
Visa runs in, in Costa Rica that's 180 days. You have to, you can only stay for that duration and then you have to leave the country and then come back.
- [25:19]
A
So when you say that you have the same ownership rights as the local citizens, is that similar to U.S. and Canada ownership rights where it's basically just like you own it? Because I know like anyway different places can have different ownership rights, but you don't really own it, you know, but they let you kind of feel like you do or do they just. Is it very the same as like Canada and the U.S. where it's like.
- [25:39]
B
Yeah, you, you own it very much the same. You go into the land registry, you get your, your finca number, the ownership of your property and it's registered in Your name. The only thing, once again is finding trusted sources. You know, if you're buying in a development, you got to do your due diligence. You know, it's, it's, it's critical to have people that you can reach out to and get information. It's not hard to find information about, you know, specific builders or properties, but you just need to ask the right people because there are people that have been burned, you know, providing deposits on pre builds and developments that go belly up soon after buying, you know, private properties there one off single family homes. You know, think you're talking to the owner, it's not the owner. So yeah, have trusted boots on the ground to provide you some background information on certain things to know, where to look, to know. You know, it's very easy to tap into, you know, the land registry and see who the actual owner is. But once again, you know, there's a language barrier. There's this air of, because I know, I went through it. This air of, okay, I want to buy a property in Costa Rica right away. That feels heavy to me. Heavy in the sense of like, where the hell do I start? Yeah, yeah, having. And the number one place where people come to me for is people want to know like areas and costs and market research. That's the thing. It's like, what's the underwriting process? How do you source that? And typically it comes down to understanding what the main reason is that you want to buy because this, for a vacation rental. Are you looking to relocate and actually live in Costa Rica? What is the main reason that you want to move there? And then from there you can kind of peel the onion back here. Be like, okay, you want to have, you want to buy your dream vacation home. You know, you're, you're coming down, you want to buy a property. Okay, well if you're going to be buying it cash or if you're going to be doing financing, financing the form of maybe nine and a half. You went down that route because you really want to buy a place, but you're going to go through a private lender or one of these lending companies. Okay, so if you're going to be down there two months, a month, six weeks of the year, what are you going to be doing with the property for the other, you know, 300. Yeah, whatever it is, 40 days a year. And the benefit of Costa Rica is there's no regulation on short term rentals. I mean in some developments there's an hoa and there might be some sort of regulations, but I'd say the majority of it is it's free reign. I mean, Costa Rica depends on tourism, drives a large portion of its gdp.
- [28:21]
A
Yeah.
- [28:22]
B
So to regulate that would really hinder people coming into the country.
- [28:27]
A
So they're not trying to discourage that at this point. They're still like, yeah, bring it on.
- [28:31]
B
Yeah, 100. So there's a massive short term rental market. But the thing is, is like with any short term rental, you have to stay competitive. So, you know, great, let's rewind here. You know, you want to come into the country, you want to buy a property, you know, the financing route that you're going to take, okay, well, I'm going to take out some equity in my home, you know. Well, you're going to have to pay interest on that and you're going to have to pay it back, that loan at a certain point. So in your underwriting process you have to account for that. The next step would be to go and take a look at, you know, I'd say there's three different places that you can buy. Not like cities, but three different words escaping me. But essentially you want a beach, mountain or jungle.
- [29:12]
A
Right.
- [29:13]
B
Has their own preference. So from there you're like, okay, you know what, I want to buy the beach. Okay, great. Do you want super developed, like you're talking Tamarindo. There's all inclusive hotels up there, but there's also really expensive luxury areas. It's probably one of the most developed areas. The majority of people buy along the Pacific coast. And I actually don't want to generalize that, but I'd say that's where the largest pocket of interest is. Yeah, like Tamarindo, Nosara Samara, Santa Teresa, Hako Vida. You're walking, you're working all the way down the Pacific coast. So want to buy a beach near the beach. Okay, great. Let's take a look at, you know, what you're looking to do. Like you want something super quaint, a little off the beaten track. I mean, you're probably not gonna be buying Hako Tamarindo or Santa Teresa. Those are very, very like popular tourist destination. Destination. So yeah, without kind of extrapolating this process, you know, bit by bit here, you choose where you want to invest and then from there taking a look at, okay, well, let's see what is within your budget. You know, are you looking, do you want to buy into development, established development, gated community, or do you want to buy, you know, a property in and of itself, like a single family home? Let's take a Look at what your, you know, what your savings are and how much you actually have now that you've pulled out of your properties or you want to borrow against it. And then let's plug that in and take a look at what you can afford. And then after you can take a look at that, you also want to take a look at the feasibility. So great, you're there for a week, a month, however many times you want to come down, however long you're there for, you want to rent it out for the remainder of the season. Now there are microclimates in Costa Rica. There's, there, there's, we don't, there's no, like spring, summer, fall, winter, it's rainy season and dry.
- [31:00]
A
Yeah.
- [31:01]
B
And dry season is where you typically find like peak season for rentals. So that would start I'd say in November, all the way to April. That's from shoulder to peak, back down to shoulder season. And that is where the majority of the money will be made from your rental. So knowing that, you know, let's take a look at what you can actually make. So you kind of, you understand what your budget is, you understand possibly the amount that you will be, have to be paying in, you know, financing your own debt through your home equity line of credit or another line of credit or taking out financing through one of these private lenders. So you factor that in, you take a look at how much this home is going to cost you. And now let's take a look at how much this will run you on Airbnb. So typically what I would do is I would take a look at Air DNA. It's a great third party software tool. You can search within Costa Rica, you can get more granular with, you know, a paid version gives you a little bit more better market fundamentals. But if you're just looking to buy free version, you can take a look at the surrounding areas. Obviously look at comps based on the house that you have two bed, two bath, whatever it is, however close it is to the beach and look at your occupancy rate and your average daily rate. But I would also take a look at actual airbnb properties that are listed on the platform, that surrounding area and actually verify what those numbers are. So take a look at that. You can generally get a really good understanding of what you can expect to make from short term rentals. There is also a midterm rental market there. There's a lot of like digital nomads, you know, in today's day and age. There's A lot of people that work remotely, so, you know, people don't have a set home location, they bounce from place to place. But in terms of long term rentals, it's, it's not really something that drives a large portion of the market. And you also have to be really careful with long term rentals because the Costa Rican rental laws are very in favor of the tenant. So you have to be very careful with that.
- [33:08]
A
Interesting.
- [33:10]
B
So you understand your budget, you know your location, you have a general idea of what your financing will be, you have a general idea of what your, you can make on your short term rental. So then you plug that in altogether, you take a look at what this can actually make for you. And if you care about actually just, you know, making money on your property, this is going to be the best indicator to see how profitable you can be.
- [33:36]
A
Yeah. And for property management, are you, are you buying in like a resort type hoa, like gated, so like they kind of just maintain everything for you or how are you doing, like management?
- [33:48]
B
Yeah. So to give you an idea, I bought like 40 minutes south of Santa Teresa. It's near Tambor, it's in a gated community there. It's like right on the water, the ocean is right through, like you can walk through the community, you get beach access through it. Yeah. There is an HOA that can offer property management, but honestly don't always take, you know, the convenience of what the place that's selling you on that property as face value for the best option. There a lot of different property managers, there's a lot of local people. Local people are fantastic. They have all of the ins, they know the best cleaners, they know how, you know, to help your guests to, you know, even if you know to supply airport pickup to offer like a complete vertically integrated experience for your guests. But even when you're not there, you really, really need a property manager. It's really hot in Costa Rica, really hot. And so if you just, you know, have your stay and then have a couple people come through and you close your doors and you don't check on your unit every once in a while, it's gonna get stale in there, it's gonna get hot, humid mold can grow. You need to have coming in. I would recommend on a weekly basis, open the door, Turn on your AC, turn on your fans, 20 minutes, get air circulating, make sure nothing's coming through. I mean let's, let's be real, you are in the jungle. So also want to make sure that the place is clear of Any living things that come in and could call that their home. So boots on the ground. This is like, it's so underrated because you know, we live in North America, these are first world countries. So you know, we think property manager, great, like you know, they can, they can organize our cleaner repair guys, no problem. But there's other nuances of buying in Central America that you don't necessarily think about that are really important. And your property manager is going to be your key communicator, key boots on the ground. And I can't stress for you enough that this might be the most important purchase or sorry, most process. The important process, vetting process. You go through other actual underwriting of the property that you're going to buy.
- [35:58]
A
I believe that I always say that, yeah, property manager is the MVP of remote investing and that's just within the states, but going out of country, even more so. I'm sure that it's that weight is, is so important. So you did you find like a local, just like a company or is it more just like some contacts you.
- [36:17]
B
Had and you just like pay some.
- [36:18]
A
People just mom pop like hey, yeah, like.
- [36:22]
B
And honestly you got to go down if you're, it's. You got to be really rich or really comfortable in your ability to handle any things that, that come about. If you're gonna buy side unseen, you gotta go down, you gotta get a feel for it, you gotta meet when you go down there, that is the best and easiest way to meet contacts. Just walking around, walking, especially in the community, walking around. Hey, how are you? How long you guys been living here? Oh, great. Do you have any like recommendations? Do you have anything that you can suggest, any things to like know negative things that are going on in this community? And even if you're not buying in a gated community or a place that has an hoa, like if you're going to be buying in a particular area, go down and talk to the locals, talk to the people, talk to the Ticos and Tikas that are working at any of the shops and restaurants and just get a feel for it. How do you like the area? Where are you from? You know?
- [37:10]
A
Yeah.
- [37:10]
B
Do you know of anyone that you know, can help with repairs? Do you know of anyone that can, you know, offers any like property management, cleaning services, stuff like that? The locals are super friendly, super helpful and it's just a beautiful country overall. But you got to go down and, and you got to talk to people and that's the best way to source your kind of boots on the ground team, I mean, referrals obviously go a long way. If you have someone who's down there that you trust and, you know they have a track record of their property doing well, and they're happy, that's. That's another option. But, you know, I always like meeting my team and kind of vetting them and just getting a feel. You guys, you got to get a feel for each other.
- [37:51]
A
Do you. Do you speak Spanish, Andrew?
- [37:54]
B
I honestly took after my. Three years ago, after I went to. On the first trip in a long time down in Costa Rica, I. I ended up taking some Spanish courses. So I wouldn't say. I'd say, like, I'm an intermediate Spanish speaker.
- [38:08]
A
Okay, so. But has the language barrier been an issue when you're trying to, like, vet these people out or vet properties out and communicate this? Are enough people speaking English that it's okay, like, you don't need to speak Spanish, or is it just, like, you really need someone to speak Spanish?
- [38:24]
B
My final place was closed. Like, there were a bunch of deficiencies that went down there to just kind of take a look at my unit, see how things are going. If there was, like, a picture that could. Or a little clip that could sum up what you just asked me, there, it would be the group of workers standing on one side, me standing on the other side. And the one thing that brings us together is Google Translate on the phone. And it's like, okay, if you're worried about not being able to communicate in Spanish, whatever, dude. If you have your phone and Google Translate, it's. It. It's perfect. It's perfect.
- [38:56]
A
There you go.
- [38:57]
B
Everyone talks to each other. You look, you hold over the phone. Everyone's huddled around it, whether it's the Spanish coming back to me or the English going to them. And then after, it's like, ah, yes, yeah, see, okay, yeah, no problem. Or I'm like, oh, yeah, yeah, no, yeah, that's good. That's good. Okay. We get each other now. We understand. It's. It's. It's great. Technology is. Is a wonder, especially in a. In Central America, if you're not a native Spanish speaker.
- [39:18]
A
There you go. Google Translate. There you go. I like it. That's. That's wild, man. So. So if people are, like, hearing this and they're like, dude, I want to dive into this. I want to buy, you know, a vacation room or a home out there. But, you know, maybe they don't have the contacts and they're nervous about, you know, flying out there and staying for Two months and meeting all these people, you know, you offer some sort of resources. What extent of the are the resources that you offer with helping people with the buying process? I mean are you like turnkey where you can set them up with property management, find the deals and lock it in or is it just like some of the pointers of like how to navigate like you've been talking today? What, what, what is the extent of what you offer?
- [40:02]
B
Yeah, so I'm just putting out free resources. I have a free group as well for people to come together, ask collective questions, help each other out network. But at the same time I'm just continuing to put out content that helps educate people on the majority of the things that we've talked about but also provide, you know, detailed roadmaps on how to do that themselves if they so choose to. But if they don't want that or if they need help along the way, I'm kind of still becoming very fully integrated in offering top down services for people that want to buy their dream place in Costa Rica.
- [40:40]
A
Gotcha.
- [40:41]
B
That's, you know, I need help with closing, I need a lawyer, I need a realtor, I need a property manager. I need you to help me underwrite my property. I need you to help me understand if this is a viable short term rental. Because that's my goal when I'm not there and I want to make, you know, at least help the place carry itself or make money from it. I provide all of that. So you know, my goal is to help people get through that process as seamlessly as possible through that free content, actionable things that they can do on their own. But at the end of the day if they, you know, they want that help, I can provide them with that, with those services from top to bottom.
- [41:21]
A
So you could connect them with a verified property that's legit, that you know, the attorneys to close on it. So make sure the process is done right, management to maintain it. When they're gone. You could connect them with all those moving parts and all of those moving.
- [41:35]
B
Parts and like all of the. And I'm continuing to expand my network in all of those major cities and towns are continuing to buy in and the do's and the don'ts and the pitfalls. My goal is with that, that free, with the free content, the education and even just actionable things that they can download and checklist and do on their own. My goal is, is based upon, I'm the target audience for that is me when I was buying my first property. Yeah a lot of people fall within that same category. So that's kind of where it is.
- [42:11]
A
So how do people find you? How do they find these resources? If people want to start diving into it or they want to even go harder and work with you directly like how do they find the free resources? How do they connect with you?
- [42:21]
B
Honestly I wanted to make it as streamlined as possible so if they go to my Instagram they can find all of these things. My Instagram handle is at andrewbillak A N D R E W B B I L A K and then from there you can tap into. You know I put out a weekly newsletter highlighting this, highlighting projects actionable tips. The group is through there. Basically whatever you need you can find through just going to my Instagram account.
- [42:51]
A
Love it man. This is super cool.
- [42:53]
B
I.
- [42:53]
A
It's something I'm very interested in. I think it's yeah. Especially like right now I guess when. When interest rates are so high cash like I look at. I mean I didn't even ask if they are these real quick and then we'll kind of wrap into that though are like are you making money on these? Are they actually cash flowing? Like are you renting it out enough that it's like these are really making money as good investments or is it just like more of a long term play and it's a dope asset to have.
- [43:18]
B
Yeah. So I guess I should have prefaced that I bought two. The second one is another pre build that's being built. It's a bungalow that's like a three minute walk from the beach. So that first property I bought was 140,000 the day we got possession. The day that I got possession closed on it which was a two year build and it was closed this December about 140 and the units were already reselling for 220 so it was like a 30% unrealized return on equity from day. So the market is really continuing to grow. Second property. That's why I wanted to move in. I might have to sell the first one to keep to finance the second one because it is a pre built so I am going to have to pay off cash. Luckily it is a two year extended period in terms of the timeline to build this two years. So I'll see how things go. But in terms of this one being done, I went down with my girlfriend. We furnished the whole place, set it up real nice and then you know, unfortunately we were heading into shoulder season but since going live it's been booked every single weekend in shoulder season. The one thing I will say that I'm sure you've heard every talking, you know, Airbnb talking head. That's a, that's way ahead of the game in terms of short term rentals than I am. It's, you know, you cannot rest on your laurels of, oh, I have a place in Costa Rica that I want you, that I'm going to put on Airbnb and it's going to crash. Yeah, it's competitive. You need to offer, you need to, you need something to offer. And especially in like, you know, this isn't like someone's taking a road trip to your Airbnb in Austin or, you know, somewhere like that that they aren't too far away. Like, people are planning vacations, they're taking their friends, they're coming down and they want an incredible experience.
- [45:10]
A
They spent real money before they even showed up. You know, it's like, so they want it to be legit 100.
- [45:18]
B
So you got it. It's competitive, but it's, it's actually not as competitive as you think because a lot of people do rest on their laurels of, I have a place in Costa Rica, I don't care. Like, it's, it's gonna be fine. It's gonna do fine. So, I mean, if you live near the beach, you better have, you know, beach chairs, activities, you know, soccer ball. One thing that I will say like a tidbit, if you are gonna have a place to connect with locals in your area that offers fishing charters, that offer kayaking tours, that offer all of these things that you can offer when people are looking at your Airbnb because, you know, just because you can't control the end result or have or own the means to provide people with a fishing tour or something like that doesn't mean you can't connect with the locals. And the locals will love you for it. And it's important to kind of give back in that sense of, you know, this isn't your, this isn't your home, even though you own it. So, you know, make sure that you find a way to create these symbiotic relationships with the locals that at the end of the day, you're also providing a great experience to your end. Guest.
- [46:22]
A
Love it, man. I love it. Well, what's kind of one piece advice as we wrap out here? When I know you gotta go, I gotta go, but I could talk about this for a while. I think this is super exciting, I think. Oh, I was saying that, you know, with debt, the numbers, when you started looking at Cash, cash return. You know, back when you're, you know, sub 5%, it's usually, oh, if you leverage debt, you're going to get better cash on cash return even if your cash flow is lower. Now with interest rates at 7, 8, 9, 10%, it's almost the opposite. It's like you're actually getting a better cash turn, not using debt. And so I think we're going to see an increase in the, in these foreign buying because it doesn't make sense to use debt on these. So if you're buying cash either way, you can go buy these really cool unique properties in these paradise locations. And I've been seeing, following a guy doing the same thing in Mexico and it's just, it's crazy the opportunities there if you have, especially if you have the cash to do it, whether you're tapping into home equity or however you find that cash, if you're buying. I think it makes a lot of sense in today's economy. Now if interest rates go back down to 3%, you know, you'd probably be crazy to drop that much cash into a place like this. But right now it's kind of like, why the heck not if you have the money, you know.
- [47:31]
B
Yeah, it's a bit of a perfect storm. And there's one caveat I can add is any person who's looking at buying like an incredible vacation rental down in Costa Rica, don't look at it through the lens of oh, where is the best opportunity for short term rentals? Look at it first through the lens of where would I like to go with my friends or my family? Because at the end of the day, you know, this is, this is a place that you get to go and enjoy and then, you know, if it intersects with an amazing opportunity to also rent it out while you're not there, that's where the magic happens.
- [48:05]
A
I love it, man. Well, any final words of advice or principles or, you know, just kind of anything you'd want to share with the listeners about real estate or your journey or designing the kind of life you want.
- [48:18]
B
I mean, I one day thought I would buy something down in Costa Rica and it just kind of happened based on, I feel like something serendipitous. This came across my desk three years ago after coming back from a vacation there. And I guess for me it's kind of like the signs are always there even if you're going through a pivot or not knowing where to invest next. So just explore everything, explore everything, see where things go. I never anticipated this is kind of where I would be, you know, providing education and helping people on their journeys down in Costa Rica from buying their own place. But it's just really interesting to see how the universe works. So open the door and don't be afraid to see where things go, even if it wasn't your idea of where you thought it would be.
- [49:08]
A
I love it and it's a unique niche, but I think it's a needed space. There's not as much, say, knowledge and support there. The littlest bit you can provide takes people a long way. Talking with you and growing your group's a lot easier than flying down there three different times, spending months on the ground, you know what I mean? It's like, it's a lot lower barrier entry to, to go to somebody like you. So we, I, I appreciate the, the content providing and information you've shared with us on the podcast. And yeah, hopefully, you know, if anybody wants to reach out again, it's just your name on Instagram, Andrew Bilak. B I L A K. Check him out. But this is exciting, man. I'm glad you're able to, to make the time. I appreciate it.
- [49:50]
B
Yeah, cheers, y'. All. I really appreciate you having me on.
- [49:53]
A
Yeah, we'll have to do a surf trip down to Costa Rica sometime. That'd be great.
- [49:57]
B
Let me know. You let me know.
- [49:59]
A
You're like, I'm down. Sweet, man. Well, this is Joe Jensen signing off for the Real Estate Investing School podcast, reminding you that one day can be a lot sooner than you think.