Can Foreigners Invest in US Real Estate?
Can Foreigners Invest in US Properties?
Investing in real estate has helped countless individuals around the world build wealth, especially in the United States. While many countries around the world do not have regulations/laws encouraging foreigners to purchase land/homes as investment properties, the United States is an exception. With tax laws favoring investors that put money into the economy, there are many lucrative opportunities and advantages that attract foreign investors to the US Real Estate Market.
What is required?
Although an individual is not required to become a citizen or file for a visa to purchase an investment property, it is required of all buyers of real estate to receive an Individual Taxpayer Identification Number (ITIN) from the Internal Revenue Service (IRS). Although the use of a real estate attorney is not required, it is recommended for foreign investors, just to cover all bases. In essence, all that is required of an individual to purchase US Properties is the monetary ability to do so.
Foreign investors are given the opportunity to sometimes use US Banks and funding for financing of their investment home. Because of the elevated risk, foreign investors are encouraged to put a substantial down payment, which will help in lowered APR. It is generally understood that foreign investors will accrue more interest, which results in higher fees. It is recommended that an investor puts at least 40% down on a property to get a reasonable finance rate.
The USA utilizes “Power of Attorney” laws, so that a remote owner does not have to actually be present to purchase a home in their name. This provides great relief and cost savings for individuals who find it unnecessary or a hassle to travel to the USA every time they want to make an investment. Remote closings have become a norm among real estate investors, and most title companies or property developers are familiar with the process of using an attorney to sign off on the purchase of a property.
Different nations have different policies and treaties concerning the USA, so this is a pretty broad subject with many differences. In some cases, tax laws from both the foreigners home country, along with their country their investment is located, may have to be paid. The United States has different tax treaties with different countries, so the regulations are variable.
Foreign investors, who purchase a property with 40-50% down, looking for financing, can take advantage of technicalities in the US law that can help to avoid paying income taxes on rent collected at their property. There are numerous tax write-offs that an investor can use to save some money; mortgage interest, house renovations and updates, common charges, property taxes, and depreciation all have the ability fall under this category. Of course an investor never wants to consider depreciation when looking at an investment, but it is always worth mentioning that it’s a possibility.
Know your money!
Investing in a region that one is not familiar with is never an intelligent venture, unless you have a trusted on-site partner who is willing to help with due diligence. The United States has laws that are very specific on foreign investments, tax obligations, and many more subjects related to investment properties. It is always a good idea to brush up on local laws and regulations, as there are often opportunities and advantages that the general public doesn’t know about. For more information on foreign relations, and specifics detailing your individual situation, contact us to learn more!