How a Foreign National Can Buy Real Estate in America

KofiLGS

KofiLGS

New Member
Credit Maria Gudelis


Opportunities for real estate investment for foreigners is wide and varied in the United States. It doesn't matter where you're from and what currency you'd be using to purchase a property, you have a property waiting for you.

There are generally three kinds of real estate investment available to foreigners. These investments include the commercial estate investment and residential property investment. Residential properties are further classified into single family properties, apartments or condominiums and recreational properties. Regardless of what kind of real estate you are interested in, there are all sorts of tax ramifications, financing options and legal requirements that you have to deal with.

Why Should You Invest in the U.S. Real Estate Market?

You've probably heard of the increasing number of foreign real estate investments in the United States. This is not surprising. With the troubles that the real estate investment market is facing in the United States, greater opportunities in real estate investment were opened to foreign investors.

With the dollar's value in its all time low, foreign investors are finding real estate bargains all over the United States. There are no shortages of deals in this market. More and more distressed properties are being sold everywhere and foreigners are pouring in millions buying these foreclosed or distressed properties. The United States real estate has become a fairly attractive long-term investment for foreign investors.

In November of 2006, the National Association of Realtors released a report entitled "Foreign Investments in U.S Real Estate: Current Trends and Historical Perspective". The report showed that there has been a steady increase in foreign real estate investment in the United States. This is especially after the euro and the loonie became stronger in the face of the continuous devaluation of the US dollar. Prime bargains were opened to foreigners. Many foreigners have now looked into the possibility of retiring or settling in the United States.

If you're a foreigner, you would find a lot of reasons why you should invest in the United States real estate market. Aside from the fact that the floating exchange rate has given you a lot of leverage over the bargaining table, the financial market is a pretty good reason why you should invest in the US real estate.

The financial market in the United States in relation to the real estate market is quite liberal and the restrictions against foreign investors are pretty reasonable. This is ideal for foreign companies that are seeking to invest in the real estate market in the United States in order to avoid tariff restrictions and are considering setting up an office or a company in the United States.

Furthermore, despite the devaluation of the US dollar and the wide foreclosures of a lot of property, the real estate market remains to be stable, though slightly shaky, due to foreign investors' capital appreciation. Domestic real estate buyers may not necessarily share the same opinion, but the market has remained to be strong for foreign real estate buyers. This may be largely credited to the fact that there is minimal risk for them.

Why are Foreign Real Estate Investments Safe and Profitable?

There are a lot of investments you can make, but the safest you can make right now is investing your money in real properties. This is another good reason aside from the fact that you can make a pretty nifty profit, if you like, particularly now with the widespread property foreclosures and seemingly continuous US dollar devaluation. This is especially true if you are going to use the euro or the loonie when making your investment.

But why is US real estate investment safe for foreigners?

It is undeniable that stock investments are not a safe avenue at this point. The recession has not only affected the US economy; the same recession has greatly affected worldwide stock investments. Stocks values are dropping. It is also a fact that even without the current economic situation, stock values fluctuates.

On the other hand, real estate investments are pretty stable if you would compare it to stock investments - or even bond or mutual fund investments. With real estate investment, you'd be putting your money in an investment that would grow in value as years go by.

What are the Benefits of Foreign Real Estate Investment?

US state government supports foreign investments and along this line has formulated various tax breaks to encourage foreign investment on real estate. Many of these tax breaks are not available in many countries. In fact, most countries would frown at foreigners owning real properties within their territory.

Foreign real estate investment in the United States is open to everyone. As long as you can afford to buy the property or at least comply with the mortgage requirements and payments, you can secure for yourself a pretty good property in the United States. Again, with the current economic situation of the United States, this is the perfect chance for you to make an investment.

Another great benefit that you can take advantage of is the availability of mortgage financing. Lenders have opened their doors to foreign investors who are looking into purchasing a property. So, you don't have to actually deplete your bank account. You can actually secure a mortgage loan and gradually pay it off.

I'm Canadian, What Are My Financing Options?

There is a steady increasing rate of Canadian real estate investors in the United States; and accordingly, the government has made certain that they have attractive financing options available to them.

If you're Canadian - or if you're a foreigner - you'd find a lot of reasons why you should buy a piece of real property in the United States. For Canadians, the parity of the currencies or the apparent devaluation of the US dollar is a pretty good reason itself. But how do you finance your purchase?

There are various financing options available to you depending on which state you are in. In Arizona, for instance, you'd get favorable financing terms if you are purchasing a property for recreational purposes, that is, you do not derive any income or benefit from your purchase or ownership. You will be required, however, to sign up a disclosure agreement and give a 30% down payment for your loan. To qualify though for a loan, you may be required to show availability of liquid reserves for a period of three to six months. You may also be required to present a minimum of 3-month bank statement.

If you are purchasing a property for investment, you'd probably meet stricter terms. Requirements may be more stringent. For instance, you could be required to give a down payment of more than 30% and you may be required to show one year worth of liquidity reserves.

Regardless of your reasons, if you feel like you can fulfill the requirements of a financing loan, you can then proceed to actually applying for a mortgage loan. Also, keeping yourself updated with the financing terms flux may be a wise idea.

Understanding the Tax Ramifications of Real Estate Investment

The first foreigner to have ever bought a real estate property in the United States was Peter Minuit. This opened the doors to foreign real estate investors. After a couple of centuries later, foreign real estate investment has grown into huge proportions, accounting for billion-of-dollar worth of industry.

The low risk attached to US real estate market, the availability of countless properties, and the steady market liquidity attract foreign investors in droves. The initial snag, however, is the process of understanding the legal ramifications of foreign real estate investment.

What you have to understand is that foreign investment in the United States can take a lot of forms. A foreigner has various options. He can acquire direct interest. He can acquire an interest in the real estate through a partnership, a corporation, or a limited liability company. The latter is the typical structure used by foreign investors.

Limited partnership or Limited Liability Company offers financial protection or indirect asset protection, especially in cases of bankruptcy, law suits and taxes. Foreign investors are generally taxed on the property as if they hold the property in direct interest.

Ideally, you should secure the services of a real estate accountant to help you out with the tax ramifications, but it would help if you, at least, know the basics before you actually talk to an accountant.

There are tax consequences that you have to deal with when you buy a real estate in the United States. You would need an Individual Taxpayer Identification Number which you will use with all your tax transactions. Your investment in real estates can be treated as a portfolio investment and will be accounted for as an investment income which can either be fixed or a periodic income. This is typically taxed at 30% on gross revenues. This tax though does not apply though to all foreign investors. Tax rates would vary depending on the tax personality the foreign investor opted for. For instance, a corporation would be taxed differently.

Other things that you should take note of are availability and requirements of tax refunds and state tax laws on real estate properties as they may differ from federal laws, among other things.

By knowing all these things, you may save yourself from a lot of hassles when you finally approach a real estate accountant. You'd be in same wavelength when you finally get down to talking business. It is, however, very important that you secure the services of an accountant. You'd have an easier time dealing with the taxes ramifications. You'd also have assistance ensuring that you comply with all the accounting aspect of your investment. This is especially true if you are purchasing a real property for investment purposes.

Do You Need to Secure the Service of a Real Estate Lawyer?

If you are considering buying a property in the United States, you need to secure the services of a real estate attorney - someone who could help you with the legal issues concerning your purchase. It is tempting to forego securing the service of a lawyer to save money, but this could cost you a lot of money in the long run. Make sure that you have an experienced and trustworthy lawyer to help you out. Make sure that you have thoroughly checked out his credentials, profile, history of successful cases handled by him, and other factors that would influence your decision. You could check online and look for a lawyer working within the state where you are considering purchasing a property.

Functions of a Real Estate Lawyer

There is no actual distinctive function for a lawyer in a real estate case. However, you would really need the assistance of a lawyer for various tasks. A real estate lawyer would review the sales contract for you. He would also check on the title and other documents relating to the property. A lawyer would also review your mortgage contract and make the necessary adjustments or corrections. You could also get him to review with you the legal and tax issues concerning the purchase. A real estate attorney could also make the necessary adjustments relating to various expenses and costs involved in the purchase. He would assess your eligibility for tax refunds and draft the documents and statements relating to this.

Putting it simply, a real estate lawyer will be your watchdog. He would guide you through the whole process of purchasing a real estate in the United States in order to make sure that you will be legally protected. You will have a capable and trustworthy liaison to help you out with the contract. He will also face legal disputes if any arise.

Tips on How to Invest in Real Estate Successfully

Now, if you've fully bought into the idea of real estate investing in the United States, you might just want to know how to go about investing in real estate successfully. If you want to be successful in this venture, the first thing that you have to avoid is overanalyzing. Of course, it is a good idea to carefully think through your actions but it is a bad idea to overanalyze your investment to nonexistence. You might lose a great opportunity.

Before you purchase the property though, it might be wise to check the property value. If it sits well with you and you can reasonably afford the property, go ahead and make the purchase.

If you are considering the property for a quick flip, make sure that the property is in perfect condition and in good area. This is to ensure that you could double or actually triple your return of investment. If you can inspect the property yourself, do so. If not, a good and trustworthy agent can help you with this task.

Another important thing to remember when you're buying real estate is good financing. You should take your time to carefully consider all your financing options. Foreign investors can email in their queries to various lending institutions. It is a good idea to make sure that you've had their terms and rates on paper because they tend to change these terms and charge you with a lot of junk. Your real estate agent can help you with reviewing the escrow charges.

The bottom line, however, is that it is very important that you do your homework before you actually buy a real property. Investing in real properties in the United States can be profitable especially during these times. In fact, it may be the wisest and most perfect investment you can make right now.
 
J

jitendrasnv

Banned
Hi,

Thanks for the wonderful information.I was not aware of this process but the thread made me aware a lot about the real estate scenario.

Thanks again !!!
 
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hugheswilliams

New Member
the information is very interesting.Yes, I know all this.But can you to direct me more on the first move,maybe a good real estate agent to help me to buy investment property in America,I have a client looking forward to invest in real estate in America. He is interested in Canada or America.
 
F

Florida Realtor

New Member
coldwellbanker said:
This piece of information is very useful and highly informative. Thank you for sharing it. There are a lot of foreign nationals who were looking at US Properties but this year as the market hits rock bottom the scenario looks dicey. But people can look at this as a long term benefit and invest now.
We see alot of foreign investors in south florida
 
D

DarrenG

New Member
Thanks for the information and article...it will definitely be useful
 
F

Florida Realtor

New Member
The Regional Center Investor Citizenship Program



The EB-5 Visa program provides for a conditional, two year resident status to qualifying investors and their families who invest at least $1 million ( or $500,000 in designated target areas) in monitored business creating at least 10 permanent American full-time jobs.
After two years, if all requirements of the EB- 5 Visa program are met, unconditional and permanent residency can be granted to the investor and his or her family.
 
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sandrapowel86

New Member
Hi, there. Thanks this was really useful for me.
 
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darrmont

New Member
Run a mile

If you are considering buying property in the USA I would advise you to run a mile and don't even think again about it. America is seen as a glamourous and wealthy place by most people and that of course applies to some areas and some people. The cath is that you will end up buying a house in a run down ghetto (of which there are very many in the USA) which would often make African townships look OK.
The government in the USA portrays itself as the land of the free - utter balderdash, americans are more heavily taxed than most other developed nations and to make matters worse the US goverrnment spend it all on wars and the military. The infrastructure of the country is crumbling, people are poor and desparate. House attract a huge number of taxes and charges and requirements for licences. Local officials seem to issue such demands willy nilly and agents are unregulated so they can do whatever they like in terms of charging and dealing with tenants. Don't get me wrong I love to holiday in the USA and always enjoy that but it is not somewhere you want to own property unless you are very sure and either in it or next door to it so you can look after it. Most houses in big cities are basic holes for throwing money into and it will give you more grief than ever you could have thought possible.
 
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speedy gonzales

New Member
If you are considering buying property in the USA I would advise you to run a mile and don't even think again about it. America is seen as a glamourous and wealthy place by most people and that of course applies to some areas and some people. The cath is that you will end up buying a house in a run down ghetto (of which there are very many in the USA) which would often make African townships look OK.
The government in the USA portrays itself as the land of the free - utter balderdash, americans are more heavily taxed than most other developed nations and to make matters worse the US goverrnment spend it all on wars and the military. The infrastructure of the country is crumbling, people are poor and desparate. House attract a huge number of taxes and charges and requirements for licences. Local officials seem to issue such demands willy nilly and agents are unregulated so they can do whatever they like in terms of charging and dealing with tenants. Don't get me wrong I love to holiday in the USA and always enjoy that but it is not somewhere you want to own property unless you are very sure and either in it or next door to it so you can look after it. Most houses in big cities are basic holes for throwing money into and it will give you more grief than ever you could have thought possible.
So have you invested in the USA and it didn't work out ??

Obviously if you don't live in the USA it makes it difficult to even wonder where to begin but it all comes down to due diligence. I have and I know many others that have been investing quite successfully in area's of the US.

The problems begin when people trust the word of others. No doubt since the US market collapsed many so called experts in US property have sprung up selling homes to foreign nationals from Canada, Australia, UK, India etc etc. They are not realtors or real estate agents....they are marketing companies. These guys give the bad rap as all they seem to sell is homes in war zones and inner city ghetto's. They wouldn't have a clue about the homes location as they most likely never see the cities or area's they are selling homes and work on the theory that you probably won't see it either.
 
Drew Drew

Drew Drew

New Member
Like anywhere else is this world, it's buyer beware with rental properties in the US.

We know of several unsavory characters in the Detroit metro market that sell garbage to foreign investors that is bound to fail.

Do your homework, hire independent inspectors and assume the worst - which is what smart business people do with any investment.
 
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owendale

New Member
darrmont said:
If you are considering buying property in the USA I would advise you to run a mile and don't even think again about it. America is seen as a glamourous and wealthy place by most people and that of course applies to some areas and some people. The cath is that you will end up buying a house in a run down ghetto (of which there are very many in the USA) which would often make African townships look OK.
The government in the USA portrays itself as the land of the free - utter balderdash, americans are more heavily taxed than most other developed nations and to make matters worse the US goverrnment spend it all on wars and the military. The infrastructure of the country is crumbling, people are poor and desparate. House attract a huge number of taxes and charges and requirements for licences. Local officials seem to issue such demands willy nilly and agents are unregulated so they can do whatever they like in terms of charging and dealing with tenants. Don't get me wrong I love to holiday in the USA and always enjoy that but it is not somewhere you want to own property unless you are very sure and either in it or next door to it so you can look after it. Most houses in big cities are basic holes for throwing money into and it will give you more grief than ever you could have thought possible.
A few points with any investment , you need to make more than it costs everyone will agree. I have invested in the USA ok also in a big city ... No big hole no cesspit but the post here seems far too negative and bitter... Many people I know have invested and will hold till retirement and if done right they will be getting more from the property than they do from their pension. So the post above will look forward to an happy retirement? Probably been ripped off bad and also possibly debt... Cash flow is very hard to create and property can be a very negative experience ,but that is only because you overpay and get ripped off big time. I know of lots who have had Florida villas repossessed because uk based so called experts promise heaven and angelic holidays for you and your family if you can get your villa rented out for 80% of the time... I always say to people as a Florida realtor if you can not afford it , then don't buy it Never relie on others to fund your investment. Thank you for the post above I really appreciate the time you took to share your views.. Please if you have any more investment ideas then dod not hesitate to come back and lets all share our knowledge and views to help each other..

Best regards
Owen Dale
 
Drew Drew

Drew Drew

New Member
Everyone is entitle to their opinion, which is influenced by their experiences.

Darrmont has obviously had bad experiences with investing in US properties, which have propagated his negative opinions.

There are billions of US private equity dollars chasing portfolios of US housing. What do they know that Darrmont doesn't?

It would be much more productive if Darrmont would share stories of what they did wrong when they invested in the US so others can learn and avoid the same mistakes:)
 
jfue1165

jfue1165

New Member
Great article

This is very thorough info. Well done.

Jairo
 
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