The United States is very friendly to foreigners looking to invest in property in the country.
There are no government restrictions or additional fees imposed on non-US citizens purchasing US real estate. In fact, there are very few differences between a foreign and domestic buyer when purchasing a property in the US.
This guide is for foreign nationals interested in buying a condo or home in Orlando or any other location in the US. Using the experiences of foreign buyers we’ve worked with as a starting point, we developed this guide with a focus on tax issues, US practices, and determining the type of properties best to purchase. When read in conjunction with our Home Buying Guide, we hope this guide will help any foreign buyer better understand the world of real estate in the United States.
1. Can a foreigner purchase a house in the USA?
Yes. The US government has no restrictions on foreign investments in US real estate, so it is pretty much a level playing field for both US citizens, US resident aliens and foreign nationals. Read--> What International Buyers are Looking for in the Florida Market
2. What are the major rules for foreigners buying property in the US?
- Financing is readily available to foreign buyers when buying a property in Florida.
- Foreign buyers must properly structure their real estate investments to avoid or hedge against the estate tax
- The foreign investment in real property tax act FIRPTA requires the government to withhold a percentage of the proceeds to cover potential capital gains tax that might be due. The withholding rate on the capital gain amount realized is equal to 15% of the proceeds. The amount withheld is returned to the seller once they file and pay their tax bill.
3. Do foreign buyers have to pay extra stamp duties?
No. There are no extra stamp duties imposed on foreigners buying US property, unlike Hong Kong, Singapore, London, Vancouver, Toronto, Sydney and Melbourne, which all add between 7% - 30% additional tax on foreign buyers. The United States does not penalize foreigners when buying US property.
In general, however, combined transfer taxes (i.e stamp duty, mansion tax, title insurance, attorney fees, title transfers, and other closing costs) in Florida real estate, generally, run at 3% of the purchase price without a mortgage. An additional 2.2% of the mortgage amount for mortgage recording tax should be added if obtaining a mortgage. When purchasing a new development, it is practice for the buyer to pay additionally the developer's transfer taxes of approximately 1.825%. Accordingly, total closing costs in the united states will range from 3% to 6%.
4. Do I have to pay a brokerage commission when buying a property?
No. Commissions are always paid by the seller. The commission is evenly divided between the buyer and seller's real estate brokers, so buyers don't pay anything to have a real estate agent working on their behalf.
5. Can a foreigner buy a house in the USA with a mortgage?
Yes. Mortgage loans for foreign nationals are readily available. For instance, many private banks offer foreign national loans. Below are highlights of general terms for foreigners national mortgage:
- 25% Minimum down payment
- $3 million maximum mortgage amount, which translates to a property value of $4.3 million
- 12-36 months reserves (mortgage payment, common charge, and taxes) are required to be on deposit (in addition to the funds on deposit)
Interest rates vary on a daily basis, so connect with us for the latest rates.
6. Do I need multiple brokers to find a property?
In the US, it is wisest to work with one professional real estate broker during your search. Unlike London, Paris, and Brazil, the US market is very transparent. To encourage velocity in the real estate market, The Real Estate Board of Florida Department of State, for example, requires brokerages to share their exclusive property listings within 24 hours, so a good buyer’s broker can get you in to see any apartment on the market. Committing to one broker will ensure that you get the highest service level from that broker, as all the broker's attention will be on you and your search.
7. What types of property can I buy as a foreigner?
Generally, foreign investments in US real estate are restricted to purchasing condos, and free-standing or multi-family homes.
8. How should I structure the property purchase to minimize taxes?
Deals can be structured an infinite number of ways, however, there are two ways in particular that our investors will choose to avoid the estate tax one must consider how the estate tax may affect the owner as well as whether there is any tax treaty between the US and their home country that might treat income, expenses and capital gains differently than the United States. Generally, we suggest obtaining advice on structuring the deal.
- Consider Federal and state tax issues, as well as the impact of tax treaties.
- Seek local counsel in the US for structuring (LLC, foreign Corp, etc.) and tax advice.
- Always consult your attorney before signing contracts
9. Do I have to worry about income taxes?
Generally, a buyer will be able to offset their rental income by cash expenses, like property taxes, maintenance, mortgage interest, and non-cash expenses, like depreciation. Accordingly, early years will create paper losses, which can be carried forward 15 years. Therefore, owners won’t pay tax on the rental income until the losses are used up, typically around 12 years.
10. For foreigners selling property in the USA, what issues should I be aware of?
When selling a property, the two main costs are:
a) transfer taxes of less than 2% and b) broker sales commission of 5% to 6%.
In addition, there are taxes to consider, capital gains tax and estate tax. With proper planning, the estate tax can be avoided or hedged against. Capital Gains tax in us for non-residents is the same as it is for residents if purchasing in the name of an LLC or individual. The maximum federal rate is 28%.
- US estate tax for foreigners
- US capital gains tax on real estate for foreigners
- Foreign Investment Real Estate Settlement Procedures Act (FIRPTA)
