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Depending on individual preferences, some prefer buying a luxury home in Costa Rica just for their own use, while others are also interested in combining personal use with income from luxury vacation rental.

This can be an interesting business when you are not in Costa Rica. You can very often delegate the management of those properties to a local management company that would find new tenants, collect the rent, and maintain the villa in tip-top shape.

Sounds nice, but you might ask yourself what return on investment you can expect.

I analyzed the whole luxury vacation rental market in Costa Rica and about 150 different homes, their vacation rental prices and their occupancy rate.

The average minimum rental price per night is $ 1463 in the green season and the average maximum rental price per night is $ 3528 in the dry season. That makes an overall average rental price per night of $2495 throughout the year.

The highest rental price per night found was $27 000 and came from renting a whole luxury hotel in the Papagayo area. The lowest one was $325 per night.

The average occupancy rate for luxury vacation rentals in all Costa Rica is 23,88%.

Be aware that the occupancy rate depends completely on the property features, its location, the marketing activities of the owners or vacation rental managers, and the concept and unique selling proposition.

So these average numbers should be taken with a grain of salt. The following gives you an overview of the different identified locations with the regarding occupancy rate.

LOCATION AVERAGE
OCCUPANCY RATE
Dominical 17.78 %
Mal Pais 5.56 %
Manuel Antonio 78.5 %
Nosara 10.74 %
Ocotal 25.28 %
Papagayo 18 %
Playa Azul 27.2 %
Playa Flamingo 28 %
Playa Junquillal 55.19 %
Playa Conchal 21.48 %
Playa Tamarindo 33 %

To get further to an average return on investment, let’s first analyze the luxury home asking prices. 

 

Luxury Real Estate Asking Prices at one Glance

MIN. ASKING
PRICE/SQ. FT.
MAX. ASKING
PRICE/SQ. FT.
AVERAGE ASKING
PRICE/SQ. FT.
POPULARITY
RANK
Dominical/ Uvita
Area
$ 137,06 $ 500,00 $ 280,00 #1
Escazu/ Santa Ana
Area
$ 90,00 $ 663,00 $ 233,00 #2
Manuel Antonio
Area
$ 123,00 $ 538,00 $ 270,00 #3
Jaco Area $ 156,00 $ 645,00 $ 321,00 #4
Papagayo Area $ 533,00 $ 936,00 $ 780,00 #5

For example, the average asking price for a luxury villa on the Kai’s Homes website is at $1.6 Million.

With these numbers, we can now calculate the average return on investment you can expect from luxury vacation rentals.

As you will soon see, the 23.88% average occupancy rate, although seeming low at first glance, manages to produce an average ROI of 9.93% per year. Not bad at all.

 

Average listing price (investment) $ 1.6 Million
Average occupancy rate 23.88 %
Average rental price per night $ 2495
Average Property Management fees 5 %
Property Taxes (Luxury Tax of 0.55% on assumed taxable value of $ 1.3 Million) $ 7,150
Rental Profits per year = ($2495 x 365 x 23.88% x 0.95) – $7150 $ 198,753
Profits Tax Rate of 20% $ 39,750
Return On Investment= ($198 753 – $39 750 0,8)/ $1.6 Million 9.93 %

 

Should you be interested in properties in Costa Rica, don’t forget to take a look at my well selected properties, of which 90% have nice views and are located in nice neighborhoods.