Rich with a vibrant culture, friendly locals, endless beaches, and year-round warm weather, Nicaragua is the perfect place to take a vacation. But what if you want to buy a home, start a business, or purchase an investment property? We have a wide breadth of experience when it comes to investing in Nicaragua, especially in the San Juan del Sur and Tola real estate markets! Read on to learn more about purchasing property in one of the fastest growing real estate markets and tourist destinations in Central America.
Who Can Own Property in Nicaragua?
In most countries you have to be a citizen or a resident to own property. Fortunately, Nicaragua is different! You don’t have to be a citizen of Nicaragua to own property here. You don’t even have to be a resident. Many people from the United States, Canada, Latin America, and Europe own property in Nicaragua even though they are not from here nor live here full-time.
How Does Property Ownership Work in Nicaragua?
You can own property outright in your name almost anywhere in the country via a fee simple title. You can acquire the property as an individual or with a Nicaraguan corporation (Sociedad Anónima or S.A.), as well as with a foreign entity, whether it’s an LLC, corporation, an IRA, or trust. Anyone from anywhere in the world can own property and have exactly the same property rights as a Nicaraguan citizen.
Can I Buy Property Anywhere in the Country?
There’s only one restriction for non-citizens: foreigners cannot own property within five kilometers of the Costa Rican and/or Honduran border.
Do I Have to be a Resident of Nicaragua to Own Property Here?
You do not need to be a resident before or after you purchase property in Nicaragua. Owning property in Nicaragua does not require you to become a resident of the country.
Should I Become a Resident of Nicaragua?
Now that you know you don’t have to become a resident before or after owning property here in Nicaragua —but what if you want to become a resident? Will owning property make that easier? The answer depends on what your plans are for the property, but generally speaking, the answer is yes.
If you are purchasing property for your primary residence or vacation home, this can improve your chances of obtaining residency. Purchasing a business or acquiring a property that will generate income will facilitate the residency application process as well! There are different types of residency categories (E.g., investor, retiree, etc) and each residency category has its own requirements and incentives. Based on your property and plans in Nicaragua, a local lawyer can help you decide which type of residency best suits your needs.
How Can I Find the Perfect Property?
You need an experienced real estate agent who is familiar with Nicaragua, specifically the area where you plan to purchase property. A realtor who has a firm grasp on the local real estate market, language, customs, and legal process will make purchasing property much simpler. It is stressful and time-consuming to find properties online and navigate the abundance of information which is not always credible or accurate. Your real estate agent will know the properties for sale in your area of interest as well as the nuances of purchasing property in Nicaragua.
Choosing the right realtor is the key factor in having a successful buying experience. Beyond our many years of experience as real estate agents, the Invest Nicaragua Team also actively invests in the real estate market here. We keep our fingers on the pulse of the best deals and opportunities currently available in the markets of San Juan del Sur and Tola.
Let us help guide your property journey and make the buying process as seamless as possible.
The Purchasing Process at a Glance
1. Choose a qualified Real Estate Agent / Realtor
- Identify a qualified and knowledgeable real estate agent to assist you in your property search. Do your research and obtain referrals to ensure you are working with a real estate agent who will go above and beyond, not only before and during the purchase process but also after your purchase to help with your transition as a new property owner in Nicaragua.
2. Visit Nicaragua
- Come to Nicaragua to view properties with your real estate agent (in person) and meet with potential lawyers in San Juan del Sur and Tola. Spending hours viewing properties online can never replace the first-hand experience of having your feet on Nicaraguan soil and viewing them in person. We recommend spending your first few days exploring different areas to get a feel for the ambiance before you begin to view properties with your real estate agent.
3. Submit an Offer
- After identifying a property that you like and you are ready, we will submit a formal offer to the seller – Invest Nicaragua requires a $1,000 USD earnest funds deposit in order to submit an offer. The earnest funds deposit can be made via PayPal or cash. If we cannot reach an agreement on terms and price for the property, the deposit is 100% refundable. If we successfully reach an agreement the deposit goes towards the final purchase price.
4. Sign a Private Sales Agreement
- Once price and terms have been agreed upon, the buyer and seller will execute a Private Sales Agreement that outlines the price, terms, conditions, and contingencies of the purchase. This document can be signed digitally and does not require either party’s physical presence in Nicaragua for execution.
5. Choose a Lawyer
- With the assistance of your real estate agent, select a Nicaraguan lawyer to conduct the due diligence of the property and handle the legal aspects of the transaction. The lawyer will conduct a thorough investigation of the title and all pertinent information on the property, producing a report which shows that the property is in good legal standing.
6. Make a 10% deposit
- After executing the Private Sales Agreement, the buyer will make a 10% deposit into an escrow account, which will officially remove the property from the market and mark the beginning of the due diligence process. This deposit is refundable if there are any significant and incurable problems discovered during the due diligence process
7. Complete Due Diligence and Prepare for Closing
- After the due diligence is completed and approved, the final steps of the purchase can occur. The buyer is responsible for sending the remaining 90% of funds to the escrow account and the seller is responsible for providing three documents from local government offices: Municipal Tax Solvency, Free of Liens & Encumbrances Certificate, and an Approved Cadastral Map.
- Once all of the funds have been received by the escrow account and the seller has provided all of their necessary documentation, the closing can occur. At the moment of closing, the buyer becomes the legal owner of the property and the seller is sent their funds.
- The typical closing time from execution of the Private Sales Agreement to closing is approximately 30 days.
9. Register the Property
- After the sale, the buyer’s lawyer will take the title and accompanying documentation to the appropriate government offices to register the property in the buyer’s name and pay all applicable taxes and fees. This process typically takes a few months from the time of closing.
10. Complete Property Registration
- When the property is duly registered, the new title is noted showing the buyer as the registered legal owner of the property. The buyer is now able to sell the property if they choose.
It is important to put your original title in a safe place as it’s the most important document related to your property ownership. Typically your lawyer can retain the title in their archives if desired. This original title is necessary if you decide to sell your property in the future!
Additional Frequently Asked Questions
Purchasing as an Individual vs a Corporation (Sociedade Anonima, S.A.)
Buying under your personal name as opposed to a corporation is based on your intended use of the property and your overall goals with your investment. The best thing you can do is sit down with a real estate lawyer and discuss your plans for the property with them. They can give you expert advice on the process that’s right for your specific circumstances.
How do I Send Funds / What is the Escrow Process like?
Getting the funds dispersed for a property in Nicaragua is very similar to the process in North America and Europe. It’s best to utilize an escrow account which is governed by the terms and conditions set forth in the Private Sales Agreement. A lawyer can open an escrow account for you which will typically have a secondary contract called an “Escrow Agreement” that clearly outlines the guidelines of how funds will be dispersed during the closing. This is the best way to transfer and protect your funds during the purchase process. Funds can be sent to the escrow account via a local or international wire transfer.
What Is the Due Diligence Process?
After executing the Private Sales Agreement and making the 10% deposit, the buyer’s lawyer will begin the due diligence on the title and property. This investigation will look at the history of the title chain and confirm that there are no existing liens or encumbrances against the property. If any issues are discovered during the due diligence period, the seller has the opportunity to remedy them. Issues could include back due taxes or past owed HOA dues. If there are any issues that cannot be resolved by the seller or alternative methods, the buyer has the option to rescind the contract and receive a refund of their 10% deposit.
Do I Need to Be Present for Closing?
Closing is one area where buying property in Nicaragua is a little different from buying in other countries. It’s pretty common in North American and Europe for buyers to accept the title of a property using an electronic service like DocuSign. But in Nicaragua, the buyer and seller need to actually be physically present in Nicaragua for the closing. Either the buyer themselves can sign or they can appoint someone to represent them with a limited power of attorney. We highly recommend assigning a limited power of attorney with your lawyer to avoid an unforeseen situation that inhibits your ability to be present for the closing.
What Happens After Closing?
Once the closing has occurred, the process of registering the title in your name can begin. This process usually takes two to four months. Your lawyer will visit three or four government offices to get all the correct paperwork signed and sealed. Your lawyer will take care of this process and paperwork, so you don’t have to be involved. If you traveled to Nicaragua for the closing, you can go back home while you wait for the paperwork to be completed.
What are the Closing Costs and Expenses?
The real estate commission is paid for by the seller, so that is one expense you do not need to think about!
Closing costs will vary based on the specific terms of the deal and the assessed value of the property but a general guideline is as follows:
There is approximately 3% of fixed fees based on the final price of the property:
- 1% – Municipal Income Tax
- 1% – Registration Fee
- 1% – Legal Fee (This can vary slightly based on the law firm)
Please note that the Legal Fee is specifically for the creation and execution of the closing documents and their recording. The escrow account, title due diligence, and optional expedited registration fees, wire fees, etc., are not included in this 1%. You should add approximately $1,000 USD on top of the 1% to cover said miscellaneous fees.
In addition to the above fixed 3% in fees based on the final price of the property, there is also a Transfer Tax which is based on the assessed value assigned by the Nicaraguan Tax Authorities after the closing or the final price listed in the legal sales document, whichever is higher.
The Transfer Tax amounts are:
Range of amount Percentage to pay
US$0 – US$ 50,000 – 1%
US$ 50,001 – US$ 100,000 – 2%
US$ 100,001 – US$ 200,000. – 3%
US$ 200,001 – US$ 300,000 – 4%
US$ 300,001 – US$ 400,000 – 5%
US$ 400,001 – US$ 500,000 – 6%
US$ 500,001 and up – 7%
For example, a property valued at $250,000 USD should have an approximate closing cost of 7% (3% in fixed fees, plus 4% for the Transfer Tax), in addition to about $1,000 USD, on top of the sales price. Before you submit an offer Invest Nicaragua, with the help of your lawyer, can calculate your estimated closing cost to give you an approximation of the total amount of your potential investment.
Is Financing Available in Nicaragua?
Financing from local banks is available but is typically only granted for brand new homes and involves a rigorous application process to be approved. Bank loan rates range from 9% to 12%, depending on the bank, downpayment, and loan recipient’s financial situation. In practice, Nicaragua generally operates as a cash market.
Owner financing, where the owner acts as a bank or note holder, is available on a case by case basis. Typically, owners prefer a minimum of 50% down and the outstanding principal paid over the the next few years. Interest rates on these loans vary based on the deposit and final price agreed upon between the two parties. Again, this is a case by case basis and not available for all properties.
Cash is king in the San Juan del Sur and Tola real estate market, and it also allows you to take advantage of the best opportunities available. If you are looking for financing, first determine what amount you would be able to make as a downpayment and what type of monthly, bimonthly, quarterly, or annual payments you can manage to pay on the remaining balance. With this information, we can help you find potential owner financing options or private lenders.
What Are Property Taxes Like?
There are some perks of buying property in Nicaragua that you may not expect. The biggest one? Property taxes! If you’re used to high property taxes in Canada or the United States, you’ll be pleasantly surprised by the low property taxes in Nicaragua.
In Nicaragua property taxes are paid in arrears. So, you can pay your 2019 property taxes as early as January 2020. If you want to get a discount, make sure you pay by the end of March of the current year.
What About Rental and Property Management?
A normal concern for first time buyers is who will take care of their property if they are not physically in Nicaragua. Fortunately, there is a plethora of rental and property management options for owners who cannot or do not want to be hands on with their property. Local rental and property management companies can handle all aspects of operating your property in your absence, such as: acquiring renters and handling the check-in / check-out as well as communication, pay employees (caretaker, pool guy, gardener, etc), pay bills, supervise repairs and maintenance, etc.
Rest assured that there are various options to choose from and highly qualified individuals & companies to handle your rentals and property management. Property management typically cost approximately $100 – $150 USD a month while rental management is generally 20% – 30% of produced income, discounts are typically provided if a single provider handles both services.
Make Your Buying Experience a Breeze with Invest Nicaragua.
Not sure if buying property in Nicaragua is right for you? Come to Nicaragua and look around for yourself! The amazing people, scenic views, and stunning properties are all reasons why you will love visiting and potentially investing in the San Juan del Sur and Tola real estate markets.
Remember, you don’t have to be a resident or citizen to take advantage of these properties, and you won’t have to worry about paying steep property taxes.
To start browsing properties that are on the market today, check out Invest Nicaragua. We list a wide variety of properties around San Juan del Sur, Tola, and the surrounding areas. Our database makes it easy to find properties, and our team is highly qualified to help guide you in the process and make the right decision. Everything you need to know is right at your fingertips with Invest Nicaragua!
For more information please contact us.