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Frequently Asked Questions

INVESTING IN U.S. PROPERTY

 

1. Why invest in the U.S.?

The U.S. has the highest gross domestic product in the world (over USD 15 trillion).

Numerous world-renown cities like Los Angeles, New York, Houston, Washington DC and Miami.

Strong capital appreciation and rental returns in major U.S. markets.

The price of luxury real estate remains competitive in the U.S.

153 billion USD of foreign investment into U.S. residential property in year ending March 2017 (approx. 10% of the total market).

Dollar is pegged to the dirham/riyal (i.e., low currency fluctuation risk).

No capital controls or expropriation risk.

Property is fully transferable.

Rights are enforceable in the courts.

2. Can foreign nationals buy U.S. property?

Foreign nationals can own U.S. property. U.S. citizenship, residency or a green card are not required. The U.S. does not tax or impose a filing obligation on the acquisition or mere ownership of U.S. real property by a foreign national.

3.   How can I pay for my property?

All Cash. Cash purchases are permitted (often times via wire transfer to the closing company from a foreign bank). Cash buyers can save money on mortgage application fees and loan origination fees.

Mortgages. There are a number of brokers that specialize in foreign national loans (both conventional and Sharia compliant) with loans up to 70% of the purchase price. A number of loan programs do not require proof of income, employment or U.S. credit history. Down payments may come from a foreign bank account. Terms vary.

4. What fees can I expect to pay when purchasing U.S. property?

Buyers often pay for title insurance, attorney fees and recording fees (depending on location). Buyer costs often equal approximately 1% – 2.5% percent of the total cost of the transaction. If a buyer finances the property, additional financing charges may apply (e.g., lender fees, lender title policy, etc.).

5. Should I hire a local U.S. attorney?

It is recommended you hire a U.S. attorney to assist you with the purchase of U.S. property, particularly if you do not reside in the U.S. A lawyer can review your purchase agreement, advise on and form a purchasing entity to acquire the property, and manage/attend the closing. U.S. attorneys will often work on a fixed fee and/or capped fee basis.

6. What are the terms of the purchase of my property?

Property is typically purchased pursuant to the terms of a written sale contract. Contract terms generally govern (amongst other things) the purchase price, deposit, property description, inspection period and snagging, completion date (off-plan), rescission period (if any) and other fundamental terms of a transaction.

7. Do I purchase the property in my individual name or in a company?

There are various factors that go into determining the structure for the purchase of U.S. property. One factor is the purpose of the purchase (second home, vacation home, investment property, primary residence, etc.). Tax planning and liability protection are also considerations. Buying through a domestic corporation or limited liability company are the two most popular structures.

8. Do investors need to physically attend the closing?

No. Physical attendance is not necessary. A power of attorney may be required authorizing an agent to act on your behalf (often arranged by a local law firm). This is quite common and convenient for the buyer who does not want to come to the U.S. for the closing.

9. Who supervises the closing on a property?

Closings are typically handled by a title company which prepares the title deed, closing statements and manages the exchange of purchase monies for title to the property. The title company will then record the deed with the relevant county (as proof of ownership) as well as any mortgage on the property.

10. Will I pay U.S. income tax if I buy U.S. property?

It depends on whether the property is income-producing. If the property is income-producing, then the income is subject to U.S. tax. That said, an investor can make an election to be taxed on a net basis, which will often greatly reduce (or even eliminate) taxable income in early years.

Foreign nationals who finance their purchase with a significant loan may not pay income taxes on the rental income in their initial years of ownership.

If the property generates taxable income, the U.S. has recently passed legislation reducing the tax rate on U.S. corporations to 21%. The tax rate for individuals ranges from 6% to 37% of taxable income.

11. Can I open a US bank account?

Yes. Foreign nationals can open U.S. bank accounts. U.S. residency or citizenship is not required.

Disclaimer: The above information is provided for informational purposes only and does not constitute legal, brokerage or tax advice.