Local people like us knows purchasing properties in the U.S. is a very straight forward process. Our infomation below are targetted for foreign readers who have cash and are looking to invest their capital into the real estate market in the U.S.
If you're a foreign investor and are looking to find out more information on purchasing real estate in the U.S., we hope this guide can answer one of your many question and would give you more confidence before investing your cash.
Are any types of properties restricted for foreign buyers?
Coops usually are not allowed to be purchased by foreigners. The reason is because there are very strict rules for these conservative corporations. Most require buyer's source of income proof and if the corporation decides to sue the owner for any reason, it would be very difficult to sue an overseas buyer without expensive lawsuits and time.
Do foreign buyers have to be in the U.S. to close?
The answer is no, you do not need to be present to close the purchase transaction. All you need to do is provide your lawyer/representative the "Power of Attorney" and that person will have the right to close on your behalf.
What are your tax liabilities as a foreign investor?
First, as a foreign buyer, you have different tax liabilities compared with a local residence of the United States. Depending what type of tax treaty is between the country of your origin, its best that you consult with a tax advisor in your own country for due diligence.
As for as captial gains taxes, foreign sellers can defer capital gain taxes by investing in another investment property (Section 1031 of IRS code). Since this is very complex, it would be better for you to consult with a professional on this.
Does rental income required to pay U.S. taxes?
Yes. Foreign property owners are required to pay taxes on the net income (rental revenues minus expenses incurred). Even if you don't own any taxes because you are incurring losses, the owner is required to file taxes for the property.
Avoiding the US Estate Tax?
If under any circumstances, that the foreign buyer dies, his/her property will be taxed by the US government up to or close to 46%. You can however, avoid this by planning ahead. By setting up a Limited Liability Corporation (LLC) and a foreign corporation, this LLC will own the property and the foreign corporation will own the LLC. The buyer will own the stock shares of the foreign LLC. This way, US government is not allowed to receive anything upon the death of the foreign investor. It's also used as a means to transfer a property as shares to avoid the real estate taxes.