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What do I need to know about investing in Costa Rica?

In Costa Rica, pursuing a traditional bank loan can be extremely time-consuming and expensive, with double-digit interest rates, and require an enormous amount of paperwork. Private lenders who work with Gap Investments provide loans for 1-3 year terms, therefore filling the “gap” quickly and efficiently for qualified borrowers looking for short-term solutions. Investing in Costa Rica as a lender working with Gap Investments has never been easier!

Gap Investments has well-trained professional advisors and analysts acting in the best interest of borrowers and the investors they represent.


What are the ways I can participate in a private/hard money loan?
There are many ways you can participate in a private money loan transaction. You can fund a new loan, buy an existing loan, or combine your investments in a fractionalized note with other investors.


Why do they call it “hard money”?
The term “hard money” is used in conjunction with a loan that is “hard to get” from a traditional lending source, such as a bank.  The term also comes from the asset pledged as collateral in return for the loan. When a borrower pledges the asset as collateral, the asset goes “hard” as collateral against the loan.
The terms Equity Lending and Private Money Lenders are more acceptable and descriptive of the professional lending practices in place today. Private parties funding loans, individually or as a group, for transactions has now become an accepted form of financing, given the challenges of the Costa Rican banking environment.


Who will be involved in the process of investing or purchasing a private/hard money note?
Multiple parties are involved from origination through to closing. In addition to yourself, your legal representative and Gap Investments consultants are the only ones involved in the process of investing in Costa Rica.


Is Loan-to-Value (LTV) the best criterion to use when investing in private money loans?
Yes. Gap Investments appraises the property and checks all issues associated with the property. Issues can include cash flow for commercial properties, liens, taxes, etc.


Aren’t private/hard money loans more expensive for borrowers?
The issue with private money loans is not so much that they are more expensive but that they are readily available. Private money lenders in Costa Rica can and do compete with banks.  Applying for a traditional bank mortgage in Costa Rica can be a lengthy process. It can take over 6 months in many cases!


What are the closing costs to the investor on a private/hard money loan investment?
There are no costs to the lender, as the borrower pays closing costs.


Legal/Advisory Fees.
We can recommend reputable lawyers that specialize in facilitating loans. They have the ability to close quickly and are cost-efficient. Unfortunately, using your own lawyer that does not specialize in loans makes the process far more complicated than it needs to be. This causes undue delays and unnecessary costs for the borrower.


Do private money loans only cater to desperate or risky borrowers?
Not at all. Many borrowers prefer private money lenders to banks. They can originate loans faster, require less documentation, and are more savvy and open to alternative collateral sources than banks.


Is it true I can use funds from my IRA to originate a loan?
Yes.  It is possible through a self-directed IRA.  We can help you set that up with our Gap Investments IRA specialist. For more information, click HERE.


-Co-written by Lawsen Parker (Operations Manager) and Glenn Tellier (Founder of Grupo Gap)



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