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Increasingly more foreigners, particularly from Asian countries like China, have invested much in the US real estate market in recent years.
For some, it’s for personal reasons while others buy as investments. Some also plan to relocate to the country later on.
Before you start engaging in the US real estate market, you must get your feet wet and learn about local buying regulations, taxes, and the buying process.
In this article, we explain the key information you need to know when buying real estate in the US.
Topics covered in this article:
- Can foreigners buy property in the US?
- Getting an ITIN (Individual Taxpayer Identification Number)
- Can non-US citizens get property loans in the US?
- Can foreigners get residence permits when buying property?
- Best cities to buy property in the US as a foreigner
- Property taxes for non-resident foreigners in the US
- Setting up a company (LLC) when buying property in the US
- Finding a real estate agent as a foreigner in the US
Can foreigners buy property in the US?
Yes, foreigners have no particular issues to buy property in the US. In fact, the buying process is straightforward and transparent, the same as in most other Western countries.
I’m not saying that you shouldn’t invest in countries like Cambodia, you always have to weigh your risk to your profit potentials. But, investing in the US is easier compared to emerging markets.
We shouldn’t forget that the US consists of many states, each with different regulations for ownership of properties.
To make an investment in the US might require equally much research as to when you buy a property in the EU.
And you should not only have the US as your sole focus when researching regulations.
In fact, your nationality and country might have regulations that make it harder, or less favorable for you to invest in a US property.
Getting an ITIN (Individual Taxpayer Identification Number)
Unless you are a US citizen, permanent resident, or temporary (working) resident with a Social Security Number (SSN), you’ll need to apply for an ITIN. In short words, an ITIN is used for tax purposes.
The ITIN number will be needed for you to open a US bank account, to pay for your property, and other costs and fees, like taxes and utilities.
Before you can open a bank account, you first need to get an ITIN number. You can apply for an ITIN number at the Inland Revenue Service (IRS), which is the national tax authority.
You can find the ITIN application form by clicking here.
Can non-US citizens get property loans in the US?
Foreigners can get a Foreign Investment Loan, also referred to as a FIL mortgage, but you need to provide much information regarding your private finances.
Many foreign investors get frustrated by the long application and long buying process required. Be prepared to wait for weeks, in case you forget any documentation when applying for a loan.
Applying for a loan as a foreign permanent resident
If you’re a permanent resident alien, you need to bring your social security number and your green card. Fortunately, the application process is very similar between US citizens and foreigners who reside in the US.
Applying as a non-permanent resident foreigner
If you’re a non-permanent resident alien and have a social security number, but not a green card, you can get financing if you have a work permit (Employment Authorization Document) or a special employer-sponsored visa.
You also have to show that you’ll be able to live and work in the country for at least three years.
How much can foreigners borrow when buying real estate?
If you apply for an international loan at HSBC, you can be granted a loan of up to USD 3 million, which will be more than enough in most cases.
They are more than happy to have you as a client, my recommendation is that you give them a call for more details about the loan options you have.
HSBC is one bank that offers good services such as loans and amortization payments directly online, through your personal internet banking account.
Sometimes, people say that you’re not capable of opening a bank account without a US credit history. But nowadays, banks such as HSBC offer help to get your international credit history for opening bank account purposes.
To apply for a mortgage through a US branch is still not an easy walk and often takes a long time.
Down payments for foreign property buyers
Bear in mind that foreigners need to pay more in down payment compared to local citizens, the rate is generally 30%. But, if you can put more money on the table, you might get advantages such as tax benefits.
Benefits when buying property with a mortgage
Some of the benefits when using a mortgage are:
- You diversify your portfolio and use your money for other investments
- In case the property appreciates in value, you’ll get a higher return on investment (ROI)
Foreigners are able to receive property loans in the US. However, in case you don’t have a local credit history, you often need to wait longer, pay higher rates, and higher down payments.
Can foreigners get visas or residence permits when buying property?
You cannot get a long-term visa, or a residence permit for that matter, simply by buying a US property.
Maybe this doesn’t come as a surprise as it’s getting increasingly more difficult to get a US residence permit, even for educated people from developed countries.
Nowadays, people get green cards and working visas through lotteries, which speaks for itself. But, there’s another way to get a green card by investing in US property.
Getting an EB-5 visa through a real estate investment
If you invest at least USD 500,000 in residential projects that create 10 American jobs, you’ll be able to apply for a green card through the so called EB-5 visa program.
The EB-5 program has become increasingly popular among investors in Asia, who look for a future in the US and that are willing to put up the money needed.
Unfortunately, the US doesn’t have any long term visas for retired people, like the Elite visa currently available in Thailand).
Best states to buy property in the US
The bigger cities have seen property prices skyrocketing, a similar trend like in London in the UK. Here, people have started to target smaller cities like Sheffield, Birmingham, and York, instead of the capital.
When you look for a city to invest in a property, pay attention to the following three items:
- Recent and predicted growth of the population
- Recent and predicted growth of jobs
- Recent and coming growth of property prices
Florida has seen a big influx of Asian investors in the past years. Here, they can find top universities, great weather, and the taxes are comparably low.
But don’t only focus on Miami, you should have a glimpse at other places like Jacksonville, West Palm Beach, Orlando, and Tampa (just to name a few).
Unfortunately, the Florida market has stagnated. One of the reasons is that foreigners have used Florida (and mainly Miami) as a place to store laundered money.
But I highly recommend doing some research as people in Florida enjoy a great quality of life.
As mentioned, Asian investors have focused on cities in the coastal areas. This has resulted in fewer investments in states like Texas.
Dallas is one of the top 5 cities in the US where property prices are predicted to grow a lot, due to the current undervaluation of properties.
You should also take a look at Austin that has grown remarkably in the past decade but is projected to grow even more. Texas has a great economy and has performed better than a lot of other states.
It didn’t suffer as much during the subprime crash either. Investors predict that Nashville’s economy will do very well in the coming years, and real estate is undervalued.
With property prices that increase by almost 10% a year, you can’t neglect this city.
New Mexico has seen strong job growth in recent times and New Mexico is one of the hot spots to invest in rental units.
Real estate is comparatively low-priced and the city offers a beautiful environment with many companies setting up offices here.
With a population of almost 1 million, it’s the biggest city in New Mexico and the 32nd largest in the US.
Georgia has become increasingly promising and Atlanta has much to offer for investors that look for rental units.
Atlanta is a major city and yields exceptionally high, often outperforming many cities in Asia.
Property taxes for non-resident foreigners
There are a few regulations you should have a look at and that you’re probably not aware of at the moment. For instance, did you know that if you don’t put trust in your property, a federal tax of 50% may be deducted in the case of the death of the property owner?
As such, I recommend you hire a tax professional to sort out the tax regulations beforehand, which can save you money.
You can tax professionals online, but be sure to do due diligence.
Capital gains tax for non-resident foreigners in the US
You need to pay a Capital Gains Tax of 10%, 15%, or 20%, but the rate varies depending on the state.
Should I set up a limited company (LLC) when buying property as a foreigner in the US?
You can also buy US property through an LLC (Limited Liability Company).
There are two benefits of doing this:
1). In the event of a lawsuit for example, if you own a property in your name, you might not only risk the assets in your property, but parts of your personal finances might also be at stake. We all know that lawsuits can be filed quite frequently in the US (you’ve even heard about people suing McDonald’s for millions when they spilled hot coffee over themselves).
A lawsuit could be issued by a tenant, for example, in case the person gets injured while living in your property. If you set up an LLC, the property will be owned through that company, therefore your personal finances will not be affected in case a lawsuit is filed against you.
2). You can also enjoy reductions in taxes by opening an LLC, through so-called pass-through taxation. Property owners can get double-taxed in case they don’t own property through an LLC.
Finding a real estate agent as a foreigner in the US
If you’ve found a real estate agency, check their website and do some thorough screening. Ask people on the internet, check for testimonials and confirm that the agency is credible.
Many real estate agencies know that there’s a big influx of Asian investors in the US, particularly Chinese, and many of them hire agents that can communicate in Mandarin.
Agents registered at NAR (National Association of Realtors)
Check if the agent is licensed and a member of the NAR (National Association of Realtors). The agent doesn’t necessarily need to be a member of NAR, but it’s preferable.
In case the agent is a member of NAR, he or she will oftentimes be more serious. Otherwise, they face the risk of getting fined several thousands of dollars.
Can foreigners buy property in New York?
Yes, foreigners have no particular issues to buy real estate in New York.
Can Indians buy US property?
Yes, Indians are treated like other foreigners and have no general issues to buy property in the US.
Can foreigners open bank accounts in USA?
Yes, foreigners can open bank accounts in the US, but regulations differ, depending on the banks. Many banks require that you have an ITIN number (as explained above). Other banks might also require that you have a US-based address.
Contact a handful of banks for an individual assessment.
Can a tourist buy a house in USA?
Yes, foreigners having tourist visas can buy real estate in the US. You can even buy property without being in the US. Just keep in mind that much preparations are needed beforehand. For example, you need to verify the source of your money, according to the Patriot Act as of 2001.
How long can you stay in USA if you own property?
Even if you buy a house, you’re not allowed to stay in the use permanently. If you’re from the EU, you’re able to stay in the US for up to 90 days, while other regulations might apply for other nationalities.
Can I live in USA if I buy a house?
No, as mentioned above, you’ll not be able to live in the US permanently by simply buying a property.