United States property market at a glance

According to the National Association of Realtors, international buyers purchased more than $102.6 billion in U.S. residential real estate from April 2015 to March 2016, across all 50 states. Foreign buyers amount to more than 6% of the total sales.

What is the purpose of the property

Study
Vacation Home
Work
Investment

Very important question to answer before you start making any research.

  • A home where to live if you will be working in the United States
  • A home for your children if they will study in the United States
  • A vaction house
  • An investment

Any property purchase in the United States does not grant foreign owners any legal rights to stay in the country.

Standard immigration rules apply and you should seek professional advice from lawyers should you want to stay a period beyond a visitor’s visa.

Process for a foreign investor to purchase a property

Foreign Nationals are allowed to own real estate in the US. In fact, there are very few differences between a foreign and US buyer when purchasing real estate. No citizenship or green card are required, the foreign buyer will only need an Individual Taxpayer Identification Number (ITIN), issued by the IRS.

Foreign buyer can purchase the property directly in their own name or though a corporate structure such as domestic corporation, foreign corporation, limited liability company (LLC) , joint venture, real estate investment trust (REIT) .

All-cash purchases are permitted, but U.S. law mandates that cash transactions over $10,000 be reported to the federal government.

Commissions, the sales commission is always paid by the seller, so buyers don’t pay anything to have a buyer’s agent working on their behalf.

Each State in the United States has a different set of rules regarding property purchases, also taxes vary significantly from one State to another.

At the closing of the transaction, when the property is transferred, the new owner does not need to be in the US and can be represented with a “Power of Attorney”.

Financing & Income taxes

Income taxes

The US government requires that the Foreign National “elect” to pay US income taxes on any net income derived from rental property.

Foreign buyers who finance their purchases with a 40% to 50% down payment will likely not pay income taxes on the net rental income for the first 10 to 15 years

A Foreign Buyer’s overall tax liability may be different than that of a US resident depending upon the buyer’s home country’s tax treaty with the US, if any.

When a non-resident sells US property, the Internal Revenue Service (IRS) will typically withhold 10% of the gross purchase price of the property to cover taxes on capital gains.

Financing

These are usually standard terms offered by banks:

  • $100,000 on deposit with the bank
  • 30% down payment
  • $3,000,000 loan limit, which translates to a property value of $4.3 million.
  • 12 months’ reserves (mortgage payment, maintenance and taxes) are required to be on deposit (in addition to the $100,000 above).