Where to deposit your Costa Rica investment property income as an absentee owner
Our agents sell a lot of investment property in Costa Rica to absentee owners and it is often a problem what to do with the rental income.
Many investors use their retirement funds to purchase a home for future retirement. Often, our agents or property managers take care of keeping the home rented, short-term or long-term. Where do you want the rent to go?
We have clients who move away and decide not to sell their home in Costa Rica because it is easy to get a 6 – 8% ROI by renting the home out, depending on the location. Others are snowbirds and use their home during the wintertime but have our agents rent it out the rest of the year. Is the rent deposited in a local bank account? Or wired to you month by month? Where does the rent go?
A matter of trust?
Are you sure you want your property manager to not only manage your investment property but also manage your money? Do you trust your property manager with that money? Do you want to get into trouble over financial issues with a property manager who does his/her principal job perfectly well?
But on the other hand, does your property manager even want your money in his/her bank account?
Money laundering laws make it more difficult every day to have an account with money that is not yours. For many property managers, it might become a problem to deposit the rent of their clients in their business account. Having your investment property income wired to your own country every month is not very economical either.
Your own bank account
Those same anti-money laundering laws make it impossible for you to open a bank account in a Costa Rican bank. Especially if you are not a resident or a citizen of Costa Rica. So if you own an investment property in Costa Rica while being a non-resident, you cannot open a bank account in your personal name. Therefore you won’t know where to deposit the proceeds of your income property.
My contacts at Scotiabank de Costa Rica have now confirmed the following solution. If you have purchased the investment property in a Costa Rica corporation, it possible to open accounts in the name of the company or S.A. that owns the investment property. As long as the shareholders are the same people who open the bank account.
At Scotiabank de Costa Rica you can open an equity account (Cuenta patrimonial) and you can proceed by using the passport plus 2nd customer identification e.g. license for one or both the shareholders. If you are interested in opening a bank account in a different bank, I invite you to do your own due diligence on this.
Now there is an important issue. One of the requirements for the Scotiabank account is to present financial information, which can be handled two ways:
1. Providing the lease agreement of the investment property to verify the approximate income.
2. Providing the last Costa Rican income tax report of the customer to support an approximate income in the account.
In addition to this, you need the following documents:
1. Providing certification of the legal status of the corporation issued no longer than 1 month ago, showing who the shareholders are.
2 . The constitutive Act of the corporation (copy)
3 . A document to validate the existing address (a utility bill in the name of the owner)
4 . Two identifications of each of the legal representatives that are the account signatories.
5 . Fill out the necessary documentation to open the account.
Owning a property in Costa Rica in a corporation requires additional obligations for the property owner. But don’t worry, we’ve got your back. Click on the banner below to learn more about the solution:
If you are a real estate investor and you are looking to purchase Costa Rica real estate as an absentee owner, feel free to look at our Costa Rica MLS with over 2,500 up-to-date properties for sale listed by 29 agents from coast to coast.
Ask how to invest in Costa Rica real estate by using your retirement funds like an IRA, a 401(k), or an RRSP (Canadian). Contact us now.
Contact me whenever you need to open an account for your Costa Rica investment property through any of our affiliate agents, I will connect you with the right agent at Scotiabank de Costa Rica.