Marshall Minotto Network has many years of experience of working with International buyers and sellers both from Eastern and Western Europe, China, Russia, Canada and South America.
The low cost of Florida real estate creates tremendous opportunities for foreign real estate investment. You can take advantage of these values for capital gain, income or for personal use.
The most important first step an international buyer can make is to set up an account in the country they are looking to purchase real estate in and transfer their countries currency into the country they are looking to make the purchase. Insuring funds are ready.
The Foreign Buyer/Investor should start Pre-Planning before purchasing any property within the United States. By Pre-Planning this will hopefully eliminate any future consequences that none of us want to encounter.
How you structure your purchase will be dependent on if you are a Resident Alien or a Non-Resident Alien.
We can refer the Foreign Buyer/Investor to:
A) Foreign Investment Attorney
B) Tax Specialist
C) U.S. Immigrant Visa Attorney
D) Currency Exchange Company
These entities can work with your advisor’s so any purchases made in the
United States are structured properly.
I do not live in the United States. How do I invest?
It depends on what type of property you are looking to purchase. Lots of homes and condos come on the market and are gone in days. There is not enough time for you to get on a plane fly to Florida, inspect the property and then think about it for a few weeks. I wish it was different, but it is not.
However, investment property is not a personal decision. You should not care about the color of the bathroom, the arrangement of the rooms, etc. You are evaluating a completely different set of factors and using an agent to view properties and gather information is acceptable.
We have sold many properties to individuals that never saw the properties. Many of them bought, rented out and then sold the properties without ever visiting them.
If the property is for personal use, it is a completely different story. Still, we can do capture videos that can be viewed online and over time get a good feel for what you are looking for.
Naturally, we welcome you to visit and view properties first hand.
Federal Government Requirements
In the United States there are very few restrictions on international real estate investors, buyers, or sellers. The only exceptions concern national security, hostile countries, purchase or control of federal lands, and purchasing a business in a sensitive category.
As an international investor (foreign national) you may take title to real estate in your own name, in the name of a domestic corporation, foreign corporation, a limited partnership, a limited liability company, a joint venture, a real estate investment trust (REIT), or a foreign pension plan.
As a foreign national investor purchasing property in the United States you may acquire, transfer, or be involved in a real estate transaction without the permission or approval from any federal, state, or local governmental entity. You just need to comply with the following three issues.
Visitors VISAS & Immigration Laws: Title 8 of the United States Code details all U.S. Immigration Laws. Every non-U.S. citizen who wants or needs to enter the United States must have a VISA. There are over 40 kinds of non-immigrant visas so you should consult an immigration attorney and a U.S. Embassy or Consulate to find out which type of visa is appropriate to your situation.
Most foreign nationals who want to own property or live permanently in the United States commonly use the following types of visas.
B-1 (Business Visitor): This visa allows you, as a foreign citizen, to incorporate in the United States, acquire property, sign contracts, and perform other specific business activities. However, it doesn’t permit you to directly manage a U.S. based business or receive U.S. sourced wages (income from employment).
L-1 (Intra-Company Transferee): This visa pertains to foreign individuals who own or work for a foreign corporation that is directly related to a U.S. corporation. It allows you to enter the U.S. if you are employed in an executive, managerial, or special-knowledge capacity for that corporation.
E-1 (Treaty Trader): This visa is available for foreigners from nations that have a trade treaty and commerce with the United States. It permits you, your spouse, and your minor dependents to live in the U.S. for an indefinite number of years.
E-2 (Treaty Investor): This visa allows a foreign person to live in the U.S. while actively investing in, operating, and managing a United States based business.
EB-5 (Million Dollar Investor): This visa is available for non-U.S. citizens who plan to make a capital contribution of $1 million ($1,000,000) or more to a U.S. Based enterprise.
H1-B (Temporary Professional Worker): This visa allows a foreign person with a bachelor’s (4-year college or university) degree or higher to remain in the US for up to 6 years while employed in a professional position with a United States employer.
O and P (Extraordinary): These visas are available for aliens of “extraordinary” ability in the sciences, education, business, or athletics to live and work in the United States.
Federal Taxation: Non-immigrants or non-residents must pay taxes on the income that they make from their investments in the United States. You are not taxed on income made outside the United States unless you overstay your visit. If you overstay your visit you can become classified as a “Tax Resident” which can result in all of your income from all sources worldwide being subject to U.S. tax. You are considered to be a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year of your visit. Therefore it is essential that you keep track of the number of days spent in the United States each year.
However, there are exemptions to the specific time limits on stays for medical conditions and when you have specific connections to another country. You should consult an accountant (CPA) who specializes in these matters to find out about U.S. taxation law. Information can also be obtained from an immigration attorney or at a U.S. Embassy or Consulate.
Most probably you won’t be eligible to receive a U.S. Social Security Number (SSN), which is also a U.S. citizen’s Taxpayer Identification Number (TIN). Instead you are required to obtain an Individual Taxpayer Identification Number (ITIN). A ITIN can be issued by the Internal Revenue Service (IRS) or by a Certified Professional Accountant (CPA) approved by the IRS. You will have to fill out a Form W-7 (in English language) or a Form W-7(SP) (in Spanish language) in order to request your ITIN. On the W-7 form you will be required to give a valid reason for your application.
ITIN Guidance for Foreign Property Buyers and Sellers http://www.irs.gov/individuals/article/0,,id=120219,00.html
Reporting and Compliance: If you have income from any source in the United States, including real estate, you are required to file a federal income tax return for the year in which your income was received. Also, some states and cities collect income tax and require a return to be filed.
The federal government also requires all foreign buyers of agricultural land to report their purchase within 45 days of closing the transaction.
Real estate agents, brokers, attorneys, and escrow (closing) agents, must report all cash transactions over $10,000 no matter the type of property or reason for the transaction. That includes binder (escrow) deposits and escrow payments. Cash transactions less than $10,000 made at near intervals that add up to more than $10,000 are considered to be one transaction. Therefore, if you pay cash for property, expect that you might be questioned about its source. IRS Form 8300 is used to report cash binders and transactions.
There are other laws that may pertain to your particular situation so it is always important to consult with the appropriate professionals and government agency officials before entering into a contract to buy or sell real estate in the United States.
1. Buying with Cash Brought into the United States: Although cash or its equivalent is almost always acceptable, there can be issues concerning the amount, its transfer into the United States, and how it was obtained.
U.S. law provides that all cash transactions over $10,000 be reported to the federal government. The requirement for reporting involves everyone connected to the transaction including real estate agents and brokers, attorneys (lawyers), title companies, closing agents, and lenders. They may want to know how you earned the money and where it comes from in order to determine that it was legally obtained.
If you finance your real estate or business purchase with a loan from a foreign lender (bank or private) it might be considered a cash transaction because the loan is closed overseas before the property closing. Then the borrowed money is transferred into the United States to be available for the property purchase closing.
2. Financing and Credit for Foreign Buyers: Foreign buyers of real estate in the United States have the option of taking out a loan to make a real estate purchase. In rising real estate markets and usual economic conditions, there are numerous lenders (banks and mortgage brokers) that will lend money to non-United States citizens to buy real estate. In times of crisis or unusual economic conditions many of these funding sources tighten up and restrict or discontinue such loans.
NOTE: At this time in 2012 financing in the United States is very tight and difficult to get. Lender programs for foreigners are hard to find. There are a few “asset lenders” and “private money lenders” who still make loans to non-U.S. citizens for property in the United States, but their interest rates are high and terms are restrictive.
You should try to obtain funding in your country with a lender who is willing to work with you. Then make arrangements to transfer and “season” your money by keeping it in a U.S. account for a specified length of time. Then you can pay cash for your real estate purchase.
It is important that you line up financing BEFORE placing an offer on property to make sure that your loan can be approved and funded before the contract period expires. Each lender will have their particular requirements, application forms, and timing for approval. Most lenders will have different loan programs to choose from depending on your qualifications, the amount to be borrowed, and the terms of the loan. Interest rates, down payments, fees, and credit standards can vary greatly among lenders so it pays to shop for the best loan.
Foreign buyers who have no established credit history in the United States won’t be known to the three credit scoring services: Equifax, Experian, and Trans-Union. Without a credit score most lenders won’t be able to process your loan, so alternative forms of credit will be needed to prove that you are a good risk. Alternative credit can be letters or statements from previous lenders or other providers of services stating that you have a history of making monthly payments on-time and paying off loan balances when due. Letters or statements can be from banks, other types of lenders, utility companies, telephone companies, cable television providers, retail stores, or any place that you bought a product or used a service in advance of paying for it.
Most United States based lenders will also want to have proof of your income and ability to make payments on the loan. Salary or wage statements from an employer for the current year, income tax returns for the previous 2 or 3 years, and proof of stock dividends or interest earnings will be requested.
Almost all banks and other lenders will require that the money (funds) you use for your down payment and closing costs be deposited in a United States bank for a specified length of time. This is known as “seasoning the money.” If your money is not deposited in the lender’s account they will ask for proof, in the form of bank statements, from the other bank where the money is located. Sometimes it takes a few weeks to get this verification of deposit. It is not unusual for a lender to require that your funds be seasoned for 2 to 3 months.
An appraisal of the property you are purchasing will be required by the lender to make sure that the real estate or business is worth more than the amount you are borrowing. The past and existing title (ownership) will also be investigated to find out if there are any liens or claims against the property. In the case of real estate purchases an up-to-date survey of the property will also require.
Escrow Account for Property Taxes and Insurance: If your down payment for the purchase of a home is not over 20% of the purchase price your lender will almost always require you to have an escrow account. Along with your monthly payment of principal and interest on your loan, you will pay 1/12 (one-twelfth) of the yearly (annual) cost of property taxes and homeowner’s insurance. This account will accumulate the tax and insurance payments until the end of the year when the lender will forward the full payments to the appropriate local tax collector and your insurance company.
Also, a lender may require a monthly payment of Private Mortgage Insurance (PMI) if your down payment is less than 20% of the purchase price. In case of a land purchase, no insurance will be necessary unless there is a liability risk.
If you buy a condominium, the exterior building maintenance and insurance is included in the monthly association fee. It is still wise to purchase liability insurance and personal property insurance to cover the interior and your personal possessions.
The Foreign Investment in Property Tax Act (FIRPTA)
Seller agrees to comply with IRS reporting requirements. If applicable, Seller
agrees to complete, sign, and deliver to Escrow Company (Title
Insurance Co. or Attorney) a certificate indicating whether Seller is a
foreign person or a non-resident alien pursuant to the Foreign
Investment in Real Property Tax Act (FIRPTA). Buyer acknowledges that
if the Seller is a foreign person, the Buyer must withhold a tax equal
to 10% of the purchase price, unless an exemption applies.
The Foreign Investment in Real Property Tax Act (FIRPTA), was enacted in
1980 and provides, that if the Seller of real property is a foreign
person, the Buyer must withhold a tax equal to 10% of the gross
purchase price, unless an exemption applies. 26 U.S.C.A. § 1445(a). A
foreign person is a nonresident alien individual; a foreign corporation
not treated as a domestic corporation; or a foreign partnership, trust
or estate. A resident alien is not considered a foreign person under
There are numerous exemptions to the FIRPTA requirements. The most common
exemption is when the seller furnishes a non-foreign affidavit stating
under penalty of perjury that the seller is not a foreign person. 26
U.S.C.A. §1445(b)(2). Another exemption is a transaction involving the
transfer of a property acquired for use as the buyer’s residence and
the amount realized (purchase price) does not exceed $300,000. 26
Although FIRPTA generally provides that 10% of the purchase price must be
withheld, the amount withheld should not exceed the seller’s maximum
tax liability. 26 U.S.C.A. §1445(c).
Any necessary withholding should be accomplished by requiring the escrow
agent to withhold the required funds. The escrow company should be
instructed to send the funds to the IRS at close of escrow. Additional
information regarding this issue may be obtained in IRS Publication
Department of the Treasury/Internal Revenue Service — Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Corporations
The foregoing is for informational purposes only and is not intended as
definitive legal or tax advice. Transmission of this information is not
intended to create, and receipt does not constitute, an attorney-client
relationship. You should not act upon this information without seeking
independent legal counsel. If you desire legal advice, tax or other
professional advice, please contact your attorney, tax advisor or other