The road is still under construction and they are down to about the last 2km. They were scheduled for completion last year but ran into some problems with the contractors. Our local contacts tell us that they are expecting completion in 2010.

Probably the biggest development is that the road from Dominical to Quepos is nearing completion. They have taken forever to finish it, but it’s pretty great today.

The pavement had made it to Palma Quemada, when i was there in late October.

When demand changes as quickly as it did, it can leave projects in a difficult spot. When projects were conceived assumptions were made about sales price, sales cycle, cost to build, duration of building, etc. When those assumptions are changed almost overnight you don’t have many options to right the ship.
In hindsight some developments and their prices look pretty silly, but when they were conceived it was believed to be good idea. Like the .com bubble a decade before companies like Worldcom and America Online seemed like solid companies during the rising market, but afterwards they became the signposts on the road of “irrational exuberance”.

For better or worse bursting bubbles seem to be a regular cycle of the system, as a real estate entrepreneur you need to adapt and take advantage by applying strategies specific to up or down markets.

Buy Right

Now that the market has started to stabilize it could be time to jump in for a profitable future. Good property buying is fundamental again, you can’t overlook the basics of the business and have appreciation swoop in like superman and save you from a silly mistakes.

Good fundamentals start with old fashioned due diligence, a tenet of real estate that has been grossly overlooked in the last decade.

Here is an example of what we have seen the last few years. Buyer arrives in Central America for the first time to spend a week looking at property. After looking at properties for the entire week they have attained “expert” status in market research. Now armed with all the information they need for deciding which property to choose, the buyer chooses then signs a purchase and sale agreement on the last day of their trip. A deposit is put down, buyer then heads home to secure the rest of the capital to close the deal….. I hope you are picking up on the sarcasm here.

Proceed With Caution

The culture of buying this way is developed in countries with efficient markets that have regulation and quick ways of dealing with unscrupulous events. Central America is different and needs to be approached differently.

During the boom times of the past this craziness has ended up working, mainly because of swelling property values. If this is your strategy today you better be sure lady luck has an arranged marriage with you, because without significant appreciation, buying mistakes can get ugly quick.

Due diligence at the bare minimum is confirming the basic assumptions, at a high level, and how we do it at Emerging Terrains, means testing every assumption you can think of involved in the life span of the deal.

Some initial assumptions to test

• Purchase Price: are you paying a fair price?
• Clear title: is title clear or has no one really researched it?
• Zoning: are there zoning regulations that negatively or positively effect your plans?
• Clear Title: is title clear?
• Cost Estimates: if you plan on adding a bedroom are your estimates are in the ball park of your expectations?

If you do this type of deal often and stay current with the information it can be a quick process, if its your one and only purchase it may take some extra time, but it is worth it.

Get your information from independent sources, do not under any circumstances rely on the numbers handed to you by the person selling the property, this includes agent and/or owner of the property.

This is a simple rule you can apply anywhere in life. If a persons income is directly related to making a sale, they are not subjective or neutral. This doesn’t mean they are evil, it just means do your own homework. An agent and owner can be great sources for where to begin your research, but they are not the only stop on your due diligence bus route.

Other possible sources include, other brokers, attorneys, engineers, builders, people from the area, neighbors, etc.

We use our own private investigators to answer these questions.

The purpose of this process is not only to confirm your assumptions, it will also illuminate your perspective with invaluable information about the project you are considering.

Some experiences we have had are as follows: a potential property was zoned differently than either our attorney or broker thought, another attorney we spoke to found the information, it saved us a lot of money and time because of the financing implications. After speaking to an engineer he came up with a plan neither we or the seller had thought of to place a road, the change made the property much more valuable.

Another time we discovered the owner was being strong armed by a community member to raise his price based on debt, our due diligence found this information after talking to the neighbors and community. Afterwards we were able to negotiate a much better price.

Pay attention to the horror stories

We have seen acquaintances buy property then find out the broker and the attorney missed a crucial piece of information on the title resulting in not being able to sell the property, in this case the seller was to blame.

There are endless scenarios like this that turn up in due diligence, the key is to get them exposed before you buy.

If your property has a title do a thorough title inspection, in Central America this means going all the way back to who issued the title. There are stories of properties changing hands two or three times before a blemish shows up, leaving the last buyer with hot potato.

Although the vast majority of real estate transactions don’t suffer from title issues the down side is so horrific, everyone should spend the time and money necessary to answer the important questions.

When investing, a good deal on a property only matters if you can profit in the future. With the earth shaking changes we have seen in the real estate market it stands to reason that an investor will have to wait longer to benefit from appreciation or sales. If this is the case then knowing what you buy is even more critical.

It is the gateway to Boca Brava, the Chiriqui Marine Park, and dozens of islands.

The island has several fishing lodges & hotels.