In the United States popular funds like Vanguard or Charles Schwab offer investment returns of about 4%, which is considerably better than interest rates offered for insured CDs from banks. At 4% an annual interest of $10,000 USD will require an investment of $250,000 USD.
To us it seems reasonable to compare annual rental receipts for property with annual interest receipts for securities investments. The current house at Montavia Estate (including adjacent outdoor areas like carport, patios, storage, lawn, etc., a land area of perhaps .5 acres) would rent for at least $10,000 USD per year. Using securities as a comparison, the house could be said to have a value of $250,000 USD. With minor modifications annual rental income from the house could easily be raised by 50% to $15,000 USD per year increasing value of the house to $375,000 USD at the 25X multiple explained above.
We can divide Montavia Estate into segments by elevation. The house is part of the highest segment that includes a large orchard. Both are just over 1 kilometer (3,500+ ft) above sea level and adjacent to the public road. Together they occupy a type of promontory called in Spanish “Mirador” which means “Golden View”. Such properties with good road access located near major population centers are extremely rare in Costa Rica, much sought after and typically are snapped up by investors planning to build a hotel or other commercial center.
We can think of the orchard between the house and public road as a hotel site. At a small level perhaps with only 5 tourist suites, it is easy to imagine that a hotel in this location would have revenue of $400 USD per day and we can round this to approximately $150,000 USD per year in gross rental revenue. At the 25X multiple explained above $3,750,000 USD is the value of that hotel.
An established rule of thumb for commercial development is that initial land acquisition should be about 15% of build out finished value. By this analysis the value of the orchard as a future hotel site is $562,500 USD (as is, unaltered). The estate is about 11 acres. The house and orchard combined are about 1 acre. If we add together the value of the house with minor alterations and the orchard as a future hotel site, the acre adjacent to the public road is worth about $937,000 USD. That is the value of about 9% of the property with no additional buildings added and only minor changes to what is now there.
If we continue down the hillside, it is easy to find at least a dozen building sites adjacent to very good internal roads. There is also quite a bit of beautiful wilderness habitat and there are extensive service buildings, including a workshop and organic plant nursery.
What all of this is worth, considered only as a financial asset, depends on potential income revenue. We can imagine using prefabricated modules that require no actual construction to boost property value for all 11 acres well past $3,000,000 USD. A very conservative number, not including new structures added for the property would be $1,500,000 USD, which is 3 times the current asking price, so considered only on the basis of financial return on investment, the present asking price represents a 2/3 discount from present value.
Of course, the primary value of such a unique place is non-financial and thus beyond calculation. If you are at all interested, please go to the property. Walk around, look, listen, especially to your heart. We are happy to provide you with a guide who not only knows the property in great depth, but is also a man who has earned for himself substantial wisdom.
We are happy to help you with your visit in every way possible. Please contact us. We look forward to meeting you!
P.S. – Anyone who tosses around the term “comparables” doesn’t have a clue. For this property in this time in this universe, there are none. We did the financial comparison, but we ask you, can a digital stock certificate produce food and medicine that will heal your life and add years of true enjoyment to it?