The American real estate market has made quite a recovery in recent years, and many investors are taking the opportunity to join in on the action. Do you want to buy a property in the US but don’t know if you’re qualified to? Well, this blog is for you.
Related: How to Buy an Investment Property in the US from Abroad
There are two types of people who can buy a property in the US: citizens and non-citizens. While citizens buying property is a no-brainer, non-citizens buying is somewhat of a surprise. The US is one of a few countries to allow non-citizens to participate in real estate. It’s easy to see why the government allows it, though. In 2015, non-American citizens bought in over $100 billion in US real estate. The cities with the most real estate contributions from non-Americans were based in Florida, including Orlando, Miami, and Tampa.
Related: Investing in Orlando Real Estate: The Real Deal
What to Know About Non-Citizens Buying Properties
As you could expect, buying a property as a citizen has more perks than buying as a non-citizen. Still, don’t let that deter you; don’t miss out on lucrative opportunities!
Like citizens, non-citizens will need to have good credit and the ability to borrow money to get a mortgage and finance the property. Unlike American citizens, however, non-citizens will need to pay a down payment of about 40%-50%, instead of the usual 20%. As a result of this massive down payment, the buyer will be allowed to not pay income taxes of the property for the first 10 to 15 years of the purchase. This is due to the many tax deductible expenses associated with rental properties.
When you want to buy a property, it’s important to think about the kind of property you would like to buy. As a foreign buyer, your list is slightly limited. Non-citizens can purchase condos, duplexes, triplexes, quadraplexes, and townhomes. Housing cooperatives, however, are out of the picture.
If you buy a property but are not able to be present in the US for closing, don’t worry. By using a power of attorney, the provided documents will be at the right place at the right time. Speaking of documentation, non-citizen buyers will need documentation from their home country and any American documentation they have. They will need an ITIN, or Individual Taxpayer Identification Number, as well. The ITIN is an identification number for foreign nationals who are obligated to pay US taxes but do not have Social Security Identification.
Things start to get complicated when taxes are involved. Generally speaking, the traditional taxes of a property will be accounted for, as well as different taxes that depend on whether the home country has tax treaties with the US. This obviously varies, so be sure to consult tax professionals to know what taxes you are required to pay based off your situation.
The type of visa a foreign buyer is on can also play a role in how they can buy a property. Probably the most common example is that of H-1B Visa Holders.
H-1B Visas
These visas are non-immigrant work visas given to highly skilled people to work in the US for three years, the visa can be renewed after that period. If you’re an H-1B Visa holder and you plan to buy a property in the US there’s some good and bad news you need to know. The good news is that you can buy a property. The bad news is that you cannot own the property and manage it at the same time. The solution? Property management.
Related: Consider Property Management Options for Your Rental
Property management will take care of most things involving your rental. Collecting rent, accepting new tenants, and keeping the property functional are just some of the perks investors get from property management. Sounds costly, eh? Not exactly, in fact, some investors see a higher return once they’ve used property management! So maybe there really wasn’t bad news for any H-1B Visa holder.
Might want to take that back. H-1B Visas have been a somewhat trendy topic during the recent presidential election. Since President Trump’s inauguration though, not much has been done towards the issue, except that the visas will be based on a new “preference system”. Overall though, in terms of an actual impact, not much has happened, but this is definitely an issue aspiring visa holders should take note of.
If you plan to buy a property in the US, you’re likely in for a great financial investment. The process will be different than that of a citizen, but it is totally worth it in the end. Start your property search with Mashvisor today!