Can Foreign Investors Buy Real Estate in the USA?

Answer is Yes, but a number of steps are to be made aware.

· Documentation Requirements:

I. You have to apply for a ITIN (Individual Taxpayer Identification Number) with the IRS (Internal Revenue Service), which is the country’s only governmental tax collecting agency. The government requires that every owner of a US property, pays their yearly taxes to the IRS and the only way to do so is by having said tax idenfication number.

Keep in mind that getting an ITIN does not change immigration status nor does it give the right to work in the United States.

**For more information regarding types of available visas, it is highly advised to consult with an immigration lawyer, which can be provided upon request.

II. In order to get the ITIN, you will need to fill out an application with the IRS and give them a certified document such as a passport, showing proof of identity. Once you have your ITIN, you are able to purchase any US properties.

· Financial Requirements:

I. It is critical to show proof of funds equal to or greater than the intended purchase price of the property, by presenting a current copy of either a foreign or US bank statement.

Said proof of funds has to be submitted with the offer when presenting it to the property seller’s agent, otherwise he/she may not accept your offer and ultimately will not proceed with the transaction.

II. In case cash is not readily available, the second alternative may be to get a bank loan, preferrably from the client’s country of origin. One of the best ways to get financing, can be by (hypotecating) securing a loan, which will pledge as collateral any high valuable items you may own, such as a house or a vacation property in your country.

If this procedure deems to be a challenge, please contact us for options that are available for foreign nationals.

· Property Ownership Types:

I. As a foreigner you can purchase any type of property, whether it be Residential (single and/or multi family) or Commercial. The purchase can be made by an individual and property title transferred to the investor's personal name.

II. Another option is to buy under a US corporation’s name, usually under an LLC (Limited Liability Company). In this case, multiple owners are allowed, regardless of the relationship of said buyers.

** For more information regarding types of available business entities, it is highly advised to consult with an attorney and/or CPA > Certified Public Accountant.

· Acquisition Expenses:

I. Inspection, which is the buyer’s responsibility is usually ordered ten (10) days after acceptance of your offer by the seller. Property Inspections can range between $450 to $850 depending on the company and the size/type of property being inspected.

Said inspection comprises of a thorough investigation of the conditions of the property, such as plumbing, electrical, leaks, etc (mold and termite has to be ordered through other specialists).

II. A Survey is also needed but only when purchasing a single-family home. The survey is a documentation that shows if any violations committed by the previous owner or if any exterior work and/or illegal additions were made.

The survey allows to clear out any potential encroachment or setback restrictions. It is not needed when buying a condominium or townhome, because exterior modifications are not permitted in these property types.

III. An Estoppel Letter is needed when purchasing a condo or townhouse but not for a single-family home. Said letter gives you a full history and preview of any liens, unpaid balances or near-future expenses, which are typically for renovation projects in condominium buildings which vary between:

1) replacing old balconies from metal handrails to glass rails;

2) replacing or fixing roof; to

3) renovating lobby or pool area, etc.

IV. Closing Costs can vary between 1.5% to 1.8% of the purchase price and is to be paid by both buyer and seller. Closing cost entails all transaction related fees, such as attorney’s fees, title search fees, etc.

V. Commissions are not paid by the buyer but rather by the seller. As a foreign buyer you won’t have to worry about any additional cost with respect to agent commission.

· Recurring Expenses:

I. Yearly Property Taxes

II. Maintenance Fees called HOAs (Home Owner’s Association) which is paid monthly to the building’s management office or condo association. Said monthly fee is to cover the maintenance and upkeep of the common area and common services, such as trash pick-up, swimming pool services, etc.

III. If renting the property whether it’s a single-family or condo, a Commission of 1 full month (or 10% of the yearly lease amount) is due to both brokerages by the Landlord and paid upon the move-in of the new tenant, whom pays first+last months+security deposit.

IV. Management Fees which include, collecting monthly rent checks, contacting repair companies when an appliance or a repair is needed in the premises, paying HOA fees, annual property taxes, basic accounting, etc on behalf of the Landlord vary between $100 to $150 per month, per property.

V. A reserve for preventive maintenance on personal property is also suggested in case any minor interior repair is needed or requested by your tenant(s).

(A professional accountant is highly recommended for more details on tax issues.)

· Expenses at Sale of Property:

I. A 15% of the sale/contract price, also known as the “total amount realized” has to be witheld and submitted immediately to the IRS at the time of sale.

II. Always remember that failing to pay property taxes will result into major financial penalties by the IRS and eventually the loss of said property.

III. Keep in mind that a 4%, 5% or 6% (depending on the case/transaction) of the sale price is to be set aside as a commission, which in turn is divided by both real estate agencies (buyer’s and seller’s).

Contact us now (786) 326-552! Or visit The Mortgage Source Company LLC at https://mortgagesource.co for more information.

We've helped many clients from Europe, mainly France and Latin America realize their investment dream in American Real Estate.

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