The first foreigner to have ever bought a real estate property in the United States was Peter Minuit. This opened the doors to foreign real estate investors. After a couple of centuries later, foreign real estate investment has grown into huge proportions, accounting for billion-of-dollar worth of industry.
The low risk attached to US real estate market, the availability of countless properties, and the steady market liquidity attract foreign investors in droves. The initial snag, however, is the process of understanding the legal ramifications of foreign real estate investment.
What you have to understand is that foreign investment in the United States can take a lot of forms. A foreigner has various options. He can acquire direct interest. He can acquire an interest in the real estate through a partnership, a corporation, or a limited liability company. The latter is the typical structure used by foreign investors.
Limited partnership or Limited Liability Company offers financial protection or indirect asset protection, especially in cases of bankruptcy, law suits and taxes. Foreign investors are generally taxed on the property as if they hold the property in direct interest.
Ideally, you should secure the services of a real estate accountant to help you out with the tax ramifications, but it would help if you, at least, know the basics before you actually talk to an accountant.
There are tax consequences that you have to deal with when you buy a real estate in the United States. You would need an Individual Taxpayer Identification Number which you will use with all your tax transactions. Your investment in real estates can be treated as a portfolio investment and will be accounted for as an investment income which can either be fixed or a periodic income. This is typically taxed at 30% on gross revenues. This tax though does not apply though to all foreign investors. Tax rates would vary depending on the tax personality the foreign investor opted for. For instance, a corporation would be taxed differently.
Other things that you should take note of are availability and requirements of tax refunds and state tax laws on real estate properties as they may differ from federal laws, among other things.
By knowing all these things, you may save yourself from a lot of hassles when you finally approach a real estate accountant. You’d be in same wavelength when you finally get down to talking business. It is, however, very important that you secure the services of an accountant. You’d have an easier time dealing with the taxes ramifications. You’d also have assistance ensuring that you comply with all the accounting aspect of your investment. This is especially true if you are purchasing a real property for investment purposes.
Do You Need to Secure the Service of a Real Estate Lawyer?
If you are considering buying a property in the United States, you should secure the services of a real estate attorney – someone who could help you with the legal issues concerning your purchase. It is tempting to forego securing the service of a lawyer to save money, but this could cost you a lot of money in the long run. Make sure that you have an experienced and trustworthy lawyer to help you out. Make sure that you have thoroughly checked out his credentials, profile, history of successful cases handled by him, and other factors that would influence your decision. You could check online and look for a lawyer working within the state where you are considering purchasing a property or just ask us for a recommendation.
Functions of a Real Estate Lawyer
There is no actual distinctive function for a lawyer in a real estate case. However, you would really need the assistance of a lawyer for various tasks. In certain states, a real estate lawyer would review the sales contract for you. He would also check on the title and other documents relating to the property. A lawyer would also review your mortgage contract and make the necessary adjustments or corrections. You could also get him to review with you the legal and tax issues concerning the purchase. A real estate attorney could also make the necessary adjustments relating to various expenses and costs involved in the purchase. He would assess your eligibility for tax refunds and draft the documents and statements relating to this.
Putting it simply, a real estate lawyer will be your watchdog. He would guide you through the whole process of purchasing a real estate in the United States in order to make sure that you will be legally protected. You will have a capable and trustworthy liaison to help you out with the contract. He will also face legal disputes if any arise.
Tips on How to Invest in Real Estate Successfully
Now, if you’ve fully bought into the idea of real estate investing in the United States, you might just want to know how to go about investing in real estate successfully. If you want to be successful in this venture, the first thing that you have to avoid is overanalyzing. Of course, it is a good idea to carefully think through your actions but it is a bad idea to overanalyze your investment to nonexistence. You might lose a great opportunity.
Before you purchase the property though, it might be wise to work with a Realtor that has experience and knowledge of Foreign buyers in the US. The Realtor can help educate you on area, return on investment, and check property values. If it sits well with you and you can reasonably afford the property, go ahead and make the purchase.
If you are considering the property for a quick flip, make sure that the property is in perfect condition and in good area. This is to ensure that you could double or actually triple your return of investment. If you can inspect the property yourself, do so. If not, a good and trustworthy Realtor and home inspector can help you with this task.
Another important thing to remember when you’re buying real estate is good financing. You should take your time to carefully consider all your financing options. Foreign investors can email in their queries to various lending institutions offering financing to foreign nationals. It is a good idea to ask about their terms and rates, even request a fee worksheet breakdown because these terms tend to change frequently and you want to know what you’re in for. Your real estate agent can help you with reviewing some of these fees.
The bottom line, however, is that it is very important that you do your homework before you actually buy a real property. Investing in real properties in the United States can be profitable especially during these times. In fact, it may be the wisest and most perfect investment you can make right now.
If you need a recommendation to an attorney, reach out. We are here to help!