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Hi
I am thinking of investing in a small hotel in C Rica next year. I am working out my budget before I commence my search, maybe somewhere between 300-400k USD. I would be very grateful if someone could give me any idea of what the normal profit percentage is here on any investment of that size after expenses
Many Thanks
10% net return if it is well run. Negative return is a lot easier and more common than you would believe.
Alberto
It depends on many things. Are you buying the place… or just becoming one of a number of investors? If you’re running the place and have your hands on the operation you can count on a much better chance of turning a positive profit… if not… just keep your money in the mattress!
Edited on Nov 26, 2008 11:32
Many thanks guys, I was thinking that 10 p cent would be a good return alright. I would definitely be looking at running it myself, only way to go
Good Move running the place yourself. If it is an established business that’s made the travel guides and has a following you might even do better than 10%. As with any business there are so many variables that must considered. With the way the economy is right now… any travel related business has some risk to it. On the other hand… with the economy as it is… there aren’t many place you can park your money these days! So why not give the hotel thing a try! If you’ll be living on site, working the place yourself, then the price tag isn’t that high.
You are thinking of investing in a small hotel in Costa Rica next year, but what about your work-permit…….?
Good point, my lawyer has asked me would I like to apply for citizenship, not sure where that leaves me in terms of work permits. I am trying to locate a profesional business evaluar to help me in my search also. Someone who can evaluate each potential site without any vested interest of course. Anyone that could point me in the right direction there? Any help much appreciated
You cannot just apply for ‘citizenship’. You must go through the hoops by first getting some kind of resident status. Three years later, you can apply for resident status which then allows you to legally work.
Then after about 5 years, you may apply for citizenship, which in turns allows you to vote.
I think you should the rules pertaining to living and workingOur attorney has told us that one is eligible to apply for citizenship after having been a legal resident of Costa Rica for seven years. That time does not have to be continuous. That is, one could be a resident for fourteen years but only spend six months of every year here, for example.
Once you have the seven years in-country, you may apply. Among other things, there is a rigorous test (in Spanish, of course) on Costa Rican history, government, etc.
There are so many factors that determine proftability. You would need some hard facts about it and that means looking at both sets of books. Figure occupancy rate (past performance)and competition (will there be more hotels being built in your area). Some of the highest occupancy rates come from remote areas. You also have to figure how many rooms you have. The bigger the more money you make, but also the harder to fill – therefore the more potential to lose money.
I know of a nice hotel that went from 15 room to 30 rooms and stayed full. But guess what? after they expanded it, the owners hated the lifestyle as it became too much work. Now you need the expense and headache of middle mangement. Best to stay small and distinctive. Try for the under $100 mark and always have a view and a pool. Good luck
16 rooms 65% occupancy rate:
10 rooms at $65 + $650 a night times 30 or about 20k a month
minus food, maintainece, 4 workes, water, electric, trash, taxes, insurance etc. I say you can clear 10K a month. Now do you have a loan to pay off??? If its new, you will also have to advertise…
Are you the charming type – that helps alot.
Many thanks for that 2BNCR. Though I doubt I can get a 16 bed in my price range. Thankfully no loans for me so just looking for small to decent returns for my money with a decent lifestyle. Im Irish so of course I have charm
You will have to be in a prime tourist location to average 65% year round. There will be some months of less than 10%. My figure of 10% net return is pretty accurate from my experience in small hotels. This is an annual number. Some months you may do really well with occupancy but only by reducing the rates. Unfortunately your expenses usually remain the same.
It is a business and there are lots of ways to lose money…….. cultural reasons as well. If you keep that in mind, you can enjoy your lifestyle choice and maybe qualify for residency as a tourism investor.
Alberto
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