Basic Guide For Foreign Buyers of Real Estate in the USA

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As the Great Recession is slowly but surely fading away and hopes of an eventual recovery appear on the horizon, foreign buyers and investors are again starting to seek opportunities in the US real estate market. Although the steady recovery in the housing market is still “in progress”, many foreigners believe that US real estate is “on sale”, plus the dollar is historically weak, so many buyers try to snatch up bargains in residential and commercial properties. are doing here. However, a foreign buyer investing in the US will have to do extra due diligence in planning the acquisition due to the nuances of taxation laws, title retention rules, money transfer rules, and many other factors. There are many aspects to consider, I’ll focus on a few main ones:

(1) Document everything: Before you transfer even a single dollar here, make sure you can verify where the money came from. Any transfer in the US of more than $10,000, including your all-cash real estate purchases, will be reported to federal authorities, and when the Feds come to ask questions, you’ll need to make sure you’re tracking your legal sources of cash. can prove. According to the Patriot Act of 2001 and the Money Laundering Control Act of 1986, escrow and title companies, brokers, banks must report any large deposits and money transfers over $10,000 to federal authorities. Make sure you have documents supporting your sources of income, taxes paid abroad, bank account details, investment account details, in other words – a paper trail.

(2) Finance or Full Cash? If you’re planning to buy all cash, this has several advantages as “all cash” shoppers can enjoy deep discounts from motivated sellers in many areas. All-cash buyers can close deals very quickly, and some sellers prefer to deal with buyers this way. However, I recommend that you discuss the acquisition plan with a real estate investment advisor to see if purchasing with some form of financing due to the leveraged-enhanced ROI and distribution of risk among multiple properties may suit your investment strategy. would be financially more beneficial for

If you are looking to finance your real estate acquisition in the US, be prepared to face some tough times. Real estate financing is tough enough these days even for Americans, but it’s even tougher for foreigners. There are only a few institutional lenders that will consider loans for foreign nationals, but they all require a large downpayment (at least 30% or more) and verification of income from your home country. If you have a work visa in the US, such as an H or L, and an established credit history in the US, you may be able to qualify for regular financing with as little as 3.5%, even if you don’t have a loan right now. Also considered a “foreign national”.

If you have established a relationship with your home country’s bank or another foreign bank, you might consider obtaining financing from them and then bringing the loan amount into the U.S. as an “all cash” purchase, then Be sure to check where you have the documents. Where did the money come from?

Alternatively, there are a number of private lenders who will lend up to 65% of the asset value at 9-12% per annum, regardless of your immigration status, and if you are looking for a commercial property, you can easily finance it. May be able to, because commercial lenders base loans primarily on the merit and income of the property rather than the borrower.

(3) Take control of your assets: You can own property in the US in several different ways: as an individual, corporation (domestic or foreign), limited liability company, partnership, living trust, pension fund, or many other types of entity. Each of these forms has advantages and disadvantages, especially when it comes to taxation of rental income received from your investment property, transfer of property to related or unrelated parties, estate planning and many other situations. Before you buy property in the US, you need to decide how you will own that property, spend some time with a knowledgeable international tax advisor to learn about your options.

Investing in real estate is a very practical venture. You must consider the details before buying the first property. It’s very difficult to operate a rental business when you don’t see what’s going on yourself. I work with many investors and own many rental properties, and I can tell many horror stories about property management companies embezzling money from out-of-town investors, renting out units for cash. takes them but shows them empty, inflates repair bills, etc. How are you? Are you planning to physically control your investments while living in India or Russia and owning assets in the US?

(4) Before you enter, plan your exit. Are you planning to sell for profit? How long will you sell? Did you account for future capital gains tax? Will you be taking money out of the country? If you plan to sell for a profit but want to reinvest the proceeds into another asset, you need to familiarize yourself with 1031 tax-deferred exchanges that save you a dime of taxes until final settlement. Allows you to trade and consolidate assets for years and decades without having to pay. , It is a great tool for smart investors which can make you very rich, but still, you need to plan well in advance for this strategy and consult someone knowledgeable. Also, when you are selling property here as a foreign person, you are subject to all kinds of withholding, whether you have made any profit or not, including 10% withholding under FIRPTA, only Because you are a foreigner, 3 1/3% withholding in California because the property is non-owner occupied, etc. But, if you learn the rules and plan your ownership strategy in advance, you can avoid some of these roadblocks!

(5) Visa Considerations: I see an important misconception among many foreign buyers that I would like to address here: Don’t assume that owning real estate in the US will automatically make you eligible for a US visa. You can own $10 million worth of property in the US, but still be denied an entry visa. So, make sure to clear your visa status first and then come to the US to look at areas of interest and specific properties. Never Buy Unseen Property!!!

(6) Why real estate? Finally, ask yourself honestly: why are you investing in real estate in America? Visa, passive income, because of future market appreciation, or because you are thinking of making this your future home? If visa and investment potential are your main deciding factors, consider some alternatives that may provide you with similar ROI (Return on Investment) and visa opportunities, such as the EB-5 visa ($1 million dollar minimum), “Regional Center” ($500,000 minimum), E-2 Small Investor Visa ($200,000 investment), etc. Or you can combine several strategies depending on your preferences and access to capital.

Bottom Line: Here’s Where Your Investment in Real Estate Should Be Results and some serious planning is the last step of the path, As we say in Russian, measure seven times, cut once. It’s so easy to avoid costly mistakes Earlier You rush into this market instead of wasting time and money correcting mistakes made during a poorly planned real estate venture. Happy Investing!

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