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Real Estate in Nicaragua: What’s Behind Its Red-Hot Coast Line and Beach Front
by Dr. Steve Sjuggerud
Advisory Panelist, Investment U
Tuesday, September 13, 2005: Issue # 468
As long as Americans think of Nicaragua as “Russia with palm trees,” it’ll be a good buy…
I’ve said that for many years. And it’s still true. (Most people don’t know that there aren’t many palm trees – or Russians – in Nicaragua now.)
I first went there in 1992 (soon after the Sandinistas were booted), and I’ve been going there ever since.
In the last few days, I’ve traveled most of this Pacific coast by 4×4 (not a small feat!), looking at nearly every major beach front development opportunity for real estate in Nicaragua that’s currently available for investors.
I built a house there in one of those developments in the 1990s.And after my trip last week, I’m thinking about doing it again. Let me tell you a little about what I saw… and how you can get involved, too.
Nicaragua’s Real Estate Development Heating Up
“Mike, watch out! That a red light ahead!”
“Oh, Steve, don’t worry. You can ignore a lot of the red lights in Managua (the capitol).”
“You can? Hmmm… So how do you know which ones to speed through and which ones to stop at?”
“You learn fast If you stop at one that you shouldn’t have, the drivers behind you will let you know about it pretty quickly with their horns.”
“Oh, I see…”
He was right. I turned around, and every car behind us zoomed through the light just as we did. (This system becomes complicated. Later, Mike sped through yet another red light, only this time, he was pulled over by the police.)
Mike Cobb was driving me to Gran Pacifica, a 2,200-acre real estate development on the coast of Nicaragua, about an hour from Managua.
When it’s all said and done, Gran Pacifica will likely be the biggest coastal real estate project Nicaragua has ever seen, with plans for an oceanfront Marriott and multiple golf courses, in addition to a large, planned community. Mike’s development is not alone. There are many underway…
How Coastal Real Estate Developments Are Shaping Up Right Now
Just as Mike drove me through Gran Pacifica, Jorge Estrada drove me through his Cumbres de Monte Cristo development, Olli Fischer drove me through Iguana Golf & Beach Resort, and a representative from the International Living office drove me around Rancho Santana.
Mike’s Gran Pacifica project is a massive undertaking. A huge pile of money has been spent pushing mountains of earth around (literally), getting hotel-quality power to the property, improving roads, getting government approvals, etc.
Again, it’s not just Gran Pacifica. Most of the projects I visited are in this stage of development – selling a dream a few lots at a time, and piling massive amounts of money into infrastructure.(Rancho Santana is the exception, which is ahead of the pack and already operating successfully… more on this in a minute).
What Potential Buyers Aren’t Seeing
The sad part is, even though many years and millions of dollars have to be spent on infrastructure, the potential real estate buyer doesn’t “see” any of this effort. In the U.S., we take electricity and roads for granted. In Nicaragua, it’s not that simple – each of these infrastructure projects has had to wrestle and spend money to get these basic necessities in place.
The costs really add up. For example, roads made of “Somoza stones” (common for Nicaragua) cost almost $100,000 per kilometer. Mike has 11 kilometers of dirt road to his real estate property, which means a million dollars for a simple road.
All of these projects face the same thing: miles of dirt roads before you get to the dream. And every project will tell you that the government is going to pave it someday soon. I wouldn’t bank on it…
These real estate developments are each bearing massive infrastructure costs along the coast line of Nicaragua. But the essential work is getting done.
Buying Property in Nicaragua Is Like Buying Into Costa Rican Beachfront… 10 Years Ago
My instinct tells me what we’re seeing is a bit of a property bubble in Costa Rica that’s spilling over into Nicaragua.
After having a chance to see it and think about it, I’d say buying in Nicaragua now is like buying in Costa Rica 10 years ago.
In Costa Rica 15 years ago, the beaches were jungles. Ten years ago, we had developers with big dreams pushing some earth around and peddling lots. Today, we have real expatriate communities on the coast, and homes with million-dollar price tags.
Developers are now doing the same thing in Nicaragua.
Will these coastal developments be like those a few hours south in Costa Rica’s Tamarindo area, with million-dollar beach homes? It’s possible
I’m not saying prices in Nicaragua will soar like they have in Costa Rica. But so far, the development pattern has been the same, with a 10-year lag. These projects in Nicaragua are just below critical mass (with the exception of Rancho Santana).
Can Things Possibly Go Wrong?
Sure, this market could have its problems and growing pains. A real estate bust in the U.S. might cause investor capital to dry up completely.
But interestingly, most of these major coastal real estate projects in the development stage are not relying on U.S. financing Whether they’re financed by Nicaraguans (like Cumbres de Monte Cristo), Brazilians (Arenas Tola), or Danish venture capitalists (Iguana Golf & Beach Resort), these projects still have a good chance of being completed.
Of course, many of them are relying significantly on U.S. buyers to purchase their lots. The U.S. buyer’s appetite for foreign property may totally disappear if something bad happens in the States, or in Nicaragua.
Rancho Santana, The Leader So Far
After visiting every major development, Rancho Santana, owned by our affiliate International Living Properties, S.A., is at this point, the only one that is fully operational.
The place was busy when we stayed for one night. A group of Brazilians and some Americans were there at the same time we were. I don’t know who else was visiting, but those were the accents we heard in the restaurant while waiting to use the high-speed Internet on the property. Others were using wireless phones at the pool looking over the ocean only 20 yards away – indicating phone service is available right down to the water’s edge.
We ate well in Nicaragua (I can highly recommend El Churasco and Los Ranchos in Managua for good steaks). But the best meal I had was at Rancho Santana’s restaurant. Even more amazing, our entire meal was on the table within fifteen minutes. (Right now, there’s an American husband and wife handling the restaurant. I don’t know how long they’re staying, but I hope they’re there for a while!)
In short, Rancho Santana is the one development that seems to be “over the hump.” It’s going to make it.
So, Why Buy Property In Nicaragua?
In short, the country is darn cheap with some stunning coastal settings. That’s it.
For an example of cheap, Mike Cobb had a massive, beautiful, custom-made coffee table at his house that was at least eight feet square. It’d be thousands of dollars in the U.S. He paid $325 for it. A towering armoire, of the same construction, was about the same price.
How can it be so cheap? The materials are cheap, and the labor is cheaper As another example, our driver was a fantastic guitar player. He showed me his top-of-the line guitar, with a back of solid, AAA-grade Cocobolo wood (Nicaraguan rosewood) with a cutaway, which he had custom built for – get this – $160. This guitar would be worth 10 times that in the U.S., at a minimum. (I think I’ll have to pick up one of those guitars…)
For a frame of reference, I asked Mike Cobb what regular people earn. Mike told me Gran Pacifica pays day-laborers about $100 a month, depending on the season (he pays more if crops need to be harvested, when competition for labor heats up). Out in the middle of nowhere, this is the going rate. An English-speaking driver might make twice that – still less than $2,500 a year. Wow.
As for beauty, the picture below showing a home at Rancho Santana is the view we had along the coast every day. It’s temperate all year in Nicaragua, with an offshore breeze blowing from Lake Nicaragua 300 days of the year. Warm (but breezy), safe (in these communities), and a very low cost-of-living make Nicaragua an interesting proposition for real estate investing.
I hope to find the time to write up a much larger report than this later in the week, detailing the pros and cons of each the places I visited and the contacts I made. But I’ve got to run and catch yet another plane now.
For now, let me leave you with my best contacts…
Here’s how you can learn more about the best coastal real estate developments I saw on my tour of Nicaragua beach front. Just email these contacts for more information:
- Rancho Santana (www.ranchosantana.com)
- Gran Pacifica (surfer@granpacifica.com)
- Iguana Golf & Beach Resort (invest@iguanagolfcondos.com)
- Cumbres de Monte Cristo (sales.montecristo@gmail.com)
- Coco Beach (cocobeach@cablenet.com.ni)
- Arenas Tola (info2@arenastola.com)
And here are a few more:
- For surfers… Barry Oliver runs the Century 21 real estate office and is a fantastic surfer who knows all the Nicaraguan surf spots. Pick your real estate price range and the type of surf you want to be near, and Barry will get it for you (barry@c21sanjuandelsur.com).
- For folks looking to invest in a business in Nicaragua, Raul Calvet is the man to know. He’s probably the most knowledgeable person in the country when it comes to tourism-related investments. And he is one of the world’s nicest people. (info@rcalvet.com)
- Lastly, International Living, an affiliate of Investment U, has an office in Nicaragua, keeps up with all the projects going on down there, and helps Americans who are looking for property. Visit http://www.internationalliving.com/nicaragua/ and make sure you scroll down and read some of the “postcards.”
As I mentioned, hopefully I’ll be able to send a more detailed letter about my trip later this week.
Today’s IU Cribsheet
- For more information on Nicaragua, refer back to our January 26, 2004 Investment U article: Nicaragua: Free at Lastand Profitable, Too, which expounds on the political, legal and economic changes that have truly helped to stabilize the country and move it forward.
- I strongly encourage you to sign up for the free, twice-weekly Investment U E-Letter. It’s full of actionable investing wisdom you can put to use right away to become a better investor.
Good investing,Steve
Important Note: In the interest of full disclosure, we want you to know that our affiliate, International Living may receive commissions from sales at the properties mentioned above.
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