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🏡 Can Foreigners Buy Property in the USA?

Absolutely! Foreign nationals, regardless of citizenship, immigration, or residency status, can buy property in the U.S. I’ve personal purchased over 120 investment properties n the US as a foreigner!

You can buy residential, commercial, and land. Ownership rights are the same as those for U.S. citizens. There are no additional taxes or restrictions at the federal level for foreign buyers.

That said, there are specific administrative challenges faced by foreign buyers, and making a mistake during the purchase process or when filing your US tax return can prove extremely costly.

Let’s dig in and find out how to purchase property in the USA as a foreigner safely and remotely…

🟢 Key Takeaways for Foreign Property Buyers

✅ There are no Federal restrictions that prevent Foreigners from buying a property in the USA

✅ You do not need a visa, greed card, or residency status to buy a property in the United States

✅ There are some state level restrictions on the purchase of certain types of land and property for Foreigners from specific countries

✅ As a Foreigner, you can buy a property in the US remotely without visiting the United States

✅ Foreign nationals do not get any type of residency, immigration status, or right to work in the US just for buying a property in the US

✅ Mortgages are available for Foreign nationals who want to buy US property

✅ Foreigners from most countries should set up a US LLC and US bank account to purchase a property in the USA – although you should consult a professional about the best setup from someone from your own country

✅ There are certain tax considerations Foreigners should be aware of before buying a property in America – Including how to file your US tax return, and being aware of certain withholding taxes

📈 Why Invest in U.S. Real Estate?

According the the National Association of Realtors, from April 2023 to March 2024, foreign buyers purchased $42 billion worth of residential properties in the United States.

While everyone has a different motivation for buying a property in the US, the American real estate market offers foreign nationals a range of potential benefits:

💹 Economic Stability: The U.S. is perhaps the most stable global economy.

🔒 Property Rights: Foreigners enjoy the same strong property rights and protections as US citizens.

🏘️ Diverse Opportunities: From urban condos to suburban homes and land, there’s a wide range of investment options.

📈 Potential for Appreciation: Property values in the USA have always appreciated over time. The average annual growth rates over 30 years is 4.6% p.a. – although properties in some markets appreciate more than others.

💸 Rental Income: High demand for rental properties in major metro markets areas can provide stable and consistent rental income. Gross rental yields of more than 10% are not uncommon in high-demand rental markets, and capitalization rates of 6% to 8% are quite possible.

💵 Currency Benefits: For some foreigners, there are specific advantages to owning US dollar denominated assets that also produce income in US dollars.

⚠️ State-Level Restrictions on Foreign Property Ownership

While federal laws are generally welcoming for foreign property buyers, some states have introduced or passed laws restricting property ownership for certain foreign nationals

Most of these restrictions are focussed specifically on the purchase of agricultural land, or property located within a certain distance of military installations and/or critical state infrastructure.

🌴 Florida: Enacted a law in 2023 restricting property purchases by citizens from specific countries near military installations and other important state infrastructure.

🤠 Texas: Proposed legislation (SB17) aims to ban individuals holding passports from certain countries from purchasing or leasing real estate such as agricultural land.

🏭 Ohio: Introduced a bill to restrict green card holders from certain countries from purchasing agricultural land in specific areas.

It’s crucial to review state laws and consult with local real estate professionals and legal advisors to understand any state-specific regulations that might restrict your ownership if you intend to buy agricultural land in the US, or property located in restricted areas.

Whether you’re looking for a vacation home or an investment property, the US property markets offers a range of options to suit all goals, motivations and budgets.

📝 What Documents are Required or Foreigners to Buy Property in the US

You will need a few different documents to purchase a property in the United States.

If you are buying your US property with an LLC (recommended) you will need the all of the corporate documents and your EIN number – which is the tax identification number for your LLC.

Corporate Documents Required for a US Property Purchase

The corporate documents for your LLC will vary slightly depending on the state in which you register. In general, you will need:

📑 Certificate of Organization
📑 Register of Members
📑 Company Registration
📑 Articles of Association
📑 Operating Agreement
📑 Certificate of Good Standing
📑 Any relevant Corporate Resolutions such as for an authorised signer
📑 Your EIN approval letter form the IRS

Personal Documents Required for a Property Purchase in the US

As well as the corporate documents listed above, you will also need:

📑 Valid passport / Government-issued ID
📑 Proof of funds, if buying in cash – or for the down payment and closing costs portion of your purchase if you are buying a property with a mortgage
📑 Pre-approval letter from a Mortgage broker, if financing your property

📑 You will also need to apply for an ITIN (International Tax Identification Number) when you file your first US tax return.

💰 Financing Options for Foreign Property Buyers

Foreign nationals can obtain mortgages in the U.S., though the type of loan product – and the process of getting approved for a mortgage in the US – may be a little different than for US citizens.

In most cases, foreign property buyers will use a DSCR loan to purchase an investment property in the US. These types of loans are great for international buyers because lenders don’t require you to have a US income, credit, tax returns, or a social security number.

Typical DSCR Loan Terms of Foreign Property Buyers

💰 Down Payments: Typically 25% or more. you should also budget for closing costs (3% to 5%), and at ;east 3 months cash reserves that most lenders will require.

📅 Loan Terms: Most DSCR loans will be for a 30-year term.

📈 Interest Rates: May be higher than those offered to U.S. citizens. Typically, interest rates on DSCR loans for foreigners range between 6.75% and 8%. usually the interest rate is fixed for the entire time of the loan.

⚠️ Fee and Penalties: Be aware of late fees, lock-in periods and early repayment penalties – especially for the first few years of your mortgage.

🚨 Be aware of scams! Never pay money upfront to get a loan approval.

It is best to work with a specialist lender that provides mortgage financing specifically for foreign nationals. If you want to get pre-approved for a DSCR loan within 2 to 4 business days, schedule a call with one of our real estate investment experts.

📝 Step by Step Process for Foreigners Buying Property in the U.S.

If you’re thinking about buying a property in the United States for the purposes of investment, the process is a little different to that of domestic buyers.

While US citizens will typically start the process by seeking a pre-approval for a mortgage, for foreigners typically use a different type of mortgage product, so the purchase process starts with finding a suitable property.

1️⃣ Determine Your Investment Goals: Decide whether you’re buying for personal use, or long-term investment for appreciation and cashflow.

2️⃣ Understand Tax Implications: Familiarize yourself with U.S. tax laws, including the Foreign Investment in Real Property Tax Act (FIRPTA), which may require withholding on the sale of U.S. property.

3️⃣ Choose a Location: Research regional and local property markets that align with your goals. metro markets in the Midwest, Northeast and South tend to offer better investment opportunities. Coastal markets tend to be more popular with lifestyle buyers.

4️⃣ Set up Your Investment Structure: Most foreign investors will purchase their property in the US using a US LLC (Limited Liability Company). This protects your personal liability, and makes it easier to open a US bank account and get a mortgage.

5️⃣ Find a Property: Work with an agent or buyer representative who is experienced in assisting foreign buyers. You can use our own investor portal to view turnkey investment properties that are already pre-approved for foreign buyers.

6️⃣ Secure Financing: While about 50% of foreigner buyers pay all-cash for their US properties, financing options are available from specialist lenders.

7️⃣ Close the Deal: Complete the purchase process, which may include remote closing options through U.S. embassies or consulates, using an approved signer to sign on your behalf, or signing the documents yourself and getting a local notary and apostille and mailing them to the US.

It is highly advisable to work with a buyer representative or real estate agent with specific experience helping foreign nationals buy property in the United States. A good agent will help you to find your ideal property, and navigate the purchase and closing process.

🏠 The Closing Process for Buying a US Property as a Foreigner

Once you have found your ideal property in the United States, you will put in an offer. Once that is accepted you will move to the final due diligence and closing process:

1️⃣ Sign a Purchase Contract: You will sign a purchase contract. make sure there is a contingency to give you time to get an indepedent home inspection and appraisal (valuation).

2️⃣ Appoint an Attorney or Closing Company: As the buyer, you get to appoint your own attorney or closing company to handle the transaction.

3️⃣ Pay and Earnest Money Deposit (EMD): You will need to pay a small good faith deposit (usually $500 to $1,000). You will send this to an escrow account with the closing company or attorney handling the transaction.

4️⃣ Due Diligence: Now it’s time to conduct your final stage of due diligence. You should get all of the following reports:

• Home Inspections: The is will determine if there are any problems with the property that require repairs. It will also provide useful information such as the useful life in major items such as the roof and furnace.
• Appraisal: This will determine the current market value of the property and ensure you don’t overpay. If you are paying cash for your purchase you will order the appraisal yourself from a local licensed appraiser. If you are buying with a mortgage, your lender will order the appraisal.
• Title Report and Insurance: Your attorney or closing company will order a title report to make sure there are no liens or defect with the title. They will also order title insurance to protect your investment. You should also order your own home insurance policy.

5️⃣ Loan Underwriting: You may need to provide further documentation to your mortgage lender. If you are using a DSCR loan, you may have to provide a copy of the lease agreement and rent roll.

6️⃣ Clear to Close: Once all of the reports have been received and verified, and the loan underwriting is complete, you will receive a Clear to Close (CTC) and closing Disclosure (CD) for your mortgage lender, and a Settlement Statement from your Attorney or closing company. These will show you exactly how much you need to transfer to escrow to close, and an itemized list of all costs associated with the transaction.

7️⃣ Closing: On closing day, you will need to sign the final documentation, including deeds and mortgage paperwork. You can sign remotely and get a notary and apostille in your own country then mail the documents to the closing company in time for closing day. Or you can appoint an authorized signer to sign on your behalf.

💰 US Tax Considerations for Foreign Property Buyers

The US tax code looks very favourable on real estate, and it can be a very tax-efficient investment. That said, if you fail to file your US tax return correctly (or on time), you could be taxed at the FDAP rate (fixed, determinable, annual, periodical), which is a withholding tax of 30% of your gross income.

🚨 Foreign property buyers for certain countries may be subject to double-taxation on their US rental income. If you set up your investment structure incorrectly you may also end up paying more US tax than you need to.

Make sure you get professional advice from a qualified tax accountant to make sure your taxes are filed correctly and on time, and you pay your US taxes at the standard graduated rates as a US citizen.

Different Types of US Taxes for Foreign Property Buyers

💸 Rental Income: Subject to U.S. income tax either as FDAP or ECI (graduated rates with deductions).

🏠 Property Taxes: Levied by local jurisdictions.

💰 FIRPTA: Requires buyers to withhold a portion of the sale price when purchasing from a foreign seller, to ensure tax compliance.

🪦 Estate and Gift Taxes: If you die while you own a property in the US, your estate may be subject to US estate taxes at a rate of 40% of the estate value. There are many ways to mitigate US estate taxes, including strategic investment structuring, and tax treaty benefits.

📝 Tax Treaties: The U.S. has treaties with many countries to prevent double taxation. If a tax treaty exists between your country and the US, it may provide you with some benefits that avoid double taxation and provide estate tax relief.

Make sure you consult with a tax professional such as a CPA who is experienced in international real estate transactions so you properly understand and navigate your own specific tax situation.

📌 Conclusion

Purchasing property in the U.S. as a foreign national is entirely feasible and can be a lucrative investment.

While federal laws are accommodating, it’s essential to be aware of state-specific regulations and understand the financial and tax implications. Engaging experienced professionals will ensure a smooth and compliant transaction.

Speak to an Expert: Book a call with one of our US real estate investment expert and start exploring your investment in the US property market