How It Works

You, the investor, are interested in investing in real estate projects in Costa Rica and come to Gap Investors Ltda, where we show you available projects for investment. The investment is in the form of a syndicated loan, where a group of lenders collaborate to provide funding for a single loan. We broker the syndicated loan, form a holding company for the exclusive purpose of acting on the lenders' behalf for that particular loan. You directly own the company in proportion to the amount invested. The borrower's property title is transferred to a registered trustee, in trust to the holding company. Funds are then provided on an as-needed basis during the development process. The funds are used for all aspects of the development project, including studies, design, construction and marketing. Borrower pays interest and fees on the loan. At the loan's end the borrower repays the principal, generally via unit sales or refinancing from a commercial bank. Borrower payments are retained in a segregated account from which monthly payments are made directly to the financial institution of your choice. You gain interest on the loan and receive the principal.

Example Scenarios For Residential Development

Please note that all scenarios below are for example purposes and should not be considered indicative of the costs, fees, or outcome of any project. All projects are managed on a case-by-case basis.

Imagine that an undeveloped property in Costa Rica is in an area where residential development would provide the property owner a good profit. The 2.5-acre property is appraised as is for $1,000,000, and there is a plan for subdividing into 20 home sites.

Through Gap Investors, lenders bring in an investment of 60% loan-to-value ($600,000) for a 1 year term at 15% interest. In addition, both Gap Investors and the lenders will take a commission on the home sales for 8% and 12% respectively. The closing cost is 10% ($60,000), and the first year's interest ($90,000) is pre-paid, providing approximately $450,000 to be used in preparing the land to be subdivided and building 4 homes within 1 year.

The homes are 2500 square feet of construction and market price is approximately $240,000, but early home sales and up-front cash sales typically go for less, let's say $200,000. If a home buyer would prefer owner financing, the minimum down payment is 25% ($60,000, for the regular home price), and the remainder is financed for 10 years at 10% (approximately $2,400/month). Additionally, pre-sales are to be reserved with 10% deposit (approximately $20,000).

Scenario 1: 4 Homes Sold For $200,000 Cash, 4 Lots Pre-Sold.

In this scenario the home buyers have either purchased the homes for $200,000 cash or secured their own bank financing for the purchase. 4 additional lots have been pre-sold, providing deposits of $80,000 total and contracts to purhase the completed homes at $200,000 each.

The home sales generate $800,000 in revenue, less the commission for Gap Investors ($64,000), the investors ($96,000) and the real estate agent at 5% ($40,000). The net is $600,000, but there are more houses to build, so the owner secures a regular bank mortgage for $600,000 (which is possible at this point), for which the closing cost and first year of mortgage is $87,000, pays off the principal to Gap Investor and leaves $513,000 for further development, namely the 4 pre-sold home sites.

The investors gain $186,000 on an original $600,000 investment, or 31.0%.

Scenario 2: 2 Homes Sold for $200,000 Cash, 2 Homes Sold with Owner Financing, 3 Lots Pre-Sold.

In this scenario 2 home buyers have purchased the homes for cash ($400,000 in revenue), 2 homes have been sold with owner financing ($120,000 in revenue from down payments, plus $4,800/month payments), and 3 lots have been pre-sold ($60,000 deposits).

The home sales generate $620,000 in revenue, less the commission for Gap Investors ($41,600), the investors ($62,400), and the real estate agent who makes the entire home value's commission up front ($44,000). The net is $472,000. The owner secures a regular bank mortgage for $600,000, which costs $87,000 for closing and servicing, but also gains $57,600 in income from the monthly house payments (minus $4,608 for Gap Investors and $6,912 for the investors), leaving $331,080 for further development, namely the 3 pre-sold home sites.

The investors gain $152,400 on an original $600,000 investment, or 25.4%, plus $6,912 yearly for 10 years of home payments ($69,120) after the principal has been repaid.

Scenario 3: 4 Homes Sold with Owner Financing, 3 Lots Pre-Sold.

In this last scenario all 4 home buyers used the owner financing option ($240,000 in revenue from down payments, plus $9,600/month payments), and 3 lots have been pre-sold ($60,000 deposits).

The home sales generate $240,000 in revenue, less the commission for Gap ($19,200), the investors ($28,800), and the real estate agent ($48,000). The net is $144,000. The owner secures a regular bank mortgage for $800,000, now possible because the revenue generation from home payments is $9,600/month, which costs $116,000 for closing and servicing. This leaves $319,008 for building the 3 pre-sold home sites.

The investors gain $118,800 on an original $600,000 investment, or 19.8%, plus $13,651 yearly for 10 years of home payments ($136,510) after the principal has been repaid.

Please note that all figures above are for example purposes and should not be considered indicative of the costs, fees, or outcome of any project. All projects are managed on a case-by-case basis.