The Great Recessions are slowly but slowly fading away. With the hope of a recovery eventually showing ahead, foreign investors and buyers are looking for possibilities in market opportunities within the US housing market. Although the steady growth of the housing market is a "work in progress", most foreigners realize that American real property can be described as "On Sale", plus the dollar has historically been weak, which is why many buyers are attempting to get the deals on commercial loan USA and residential properties. But, foreign buyers who are investing in the US need to exercise extra care to make a plan for the purchase because of the nuances in the tax laws, title-holding rules, rules for money transfers and a myriad of other aspects. There are numerous factors to take into consideration, but I'll focus on the following factors:
(1) DOCUMENT EVERYTHING: Before you transfer even a single dollar to the US, be sure to prove the source of the money. Transfer of more than $10,000 into the US, as well as all purchases of real estate cash, will be reported to federal authorities. If the Feds are requesting information, it is essential to ensure that you can show the legal source of the cash. As per the 2001 Patriot Act and the Money Laundering Control Act of 1986, Title and escrow firms, brokers, and banks have to inform federal authorities of any deposits that are large or money transfers that exceed $10,000. You must have proof supporting your income sources, tax paid abroad, bank statements or statements from investment accounts or, more simply, the trail of paper.
(2) FINANCE OR ALL-CASH? If you are looking to purchase with cash, it gives you a lot of advantages since "all cash" buyers might get better deals from motivated sellers in many locations. Cash buyers of all kinds can close transactions quickly, and certain sellers prefer dealing with buyers this way. But, I suggest you talk to an investment advisor in real estate to determine if buying using the aid of financing could benefit you financially in your investment strategy due to the leverage-enhanced ROI and the distribution of risk across multiple properties.
If you're planning to finance your real estate purchase in the US, Be prepared for some challenging times. Real estate financing is difficult for Americans nowadays. However, for foreigners, it's more complicated. A small number of institutions are willing to consider loans for foreigners. However, they all require a substantial down payment (at minimum 30 percent or more) and proof of your income source in your country of origin. If you are a holder of a work visa to the US that includes the H and L visas, as well as you have an established credit score in the US, You may be able to get traditional financing for only 3.5 percent down, although you're still to be a "foreign national".
Suppose you've established relationships with your bank in your home country or with a foreign bank. In that case, You might consider getting credit from them and later bring the proceeds of your loan to the US in the form of an "all cash" purchase, be sure to provide proof of where the money originated from.
Additionally, many private lenders will loan as much as 65% assets value, with a rate of 9-12% annually, regardless of your immigration status. If you're searching for a commercial property, you may be able to finance it with less hassle as commercial lenders make loans based on the merits and the income of the property instead of the lender.
(3) CONTROL YOUR assets: In the US, you can hold title to the property in a variety of ways, including by way of an individual, a corporation (either international or national), a Limited Liability Company or partnership pension fund, living trust or any other kind of business entity. Each type of entity offers advantages and disadvantages, particularly regarding the taxation of rent earned from the investment property, then selling the house to unrelated or related entities, estate planning and various other circumstances. Before you purchase a property in the US, what you'll do with the property. It would help if you spent some time talking to an expert international tax expert to find out about the options available to you.
Investment in real estate is a highly hands-on business. It is essential to consider the details before buying the first house. It's tough to manage rent-based enterprises when you don't know what's happening. I've been working with many investors and have owned several rental properties. I've been able to share countless horror stories of property management companies stealing funds from out-of-town investors, renting out units in cash but not reporting them as vacant, inflating repairs, etc. How do you plan to manage your investment while you reside with your family in India and Russia and also own property within the US?
(4) BEFORE YOU ENTER, PLAN YOUR EXIT. Do you plan to sell your property for profits? How long will it take before you sell? Did you consider the tax on capital gains that will be due in the future? Are you planning to take the cash away from your country? Plan to sell your property for profit but put the proceeds back into an investment property. You should be aware of 1031 tax-deferred swaps that permit you to sell and consolidate properties over years or decades without paying taxes until the final disposal. This is a fantastic instrument for intelligent investors who can earn a lot of money; however, you must plan this method and speak with an experienced person. Additionally, whether you're selling a home in the United States as a foreign-born individual is amid all sorts of withholdings, regardless of whether you earned any money. These include 10 percent withholding by FIRPTA simply because you're an outsider or 3 1/3 percent withholding in California due to the property being not owned by the owner, etc. However, you can avoid certain withholdings if you know the rules and prepare your title holding strategies ahead of time!
(5) VISA CONSIDERATIONS: I'd like to discuss a fundamental misconception among foreign buyers: I don't believe that having basic properties in the US is automatically entitled to the benefits of a US visa. You could possess a house worth $10 million in the US and still not be granted an entry visa. Therefore, ensure that you obtain your visa approval before traveling to the US to examine particular areas of interest and properties. DO NOT EVER BUY PROPERTIES SIGHT UNSEEN!!!
(6) WHY REAL estate? Finally, ask yourself the fundamental question: Why are you investing your money in actual property here in the US? Due to visas or passive income, the potential for future market growth, or because you're thinking of building your dream home there? If investment and visa opportunities are the main factors that influence your decision, look at other options that offer the same ROI (return on investment) and visa possibilities, including E-5 visas (1 million dollars minimal), "Regional Centers" ($500,000 minimum) as well as E-2 small-investor visas ($200,000 investment) and so on. You can also combine several strategies based on your preference and your access to capital.
The bottom line is that your investment in real estate is a result and the final stage of a thorough plan. Measure seven times, cut once, or cut seven times and cut twice, or as we call it in Russian. It's easier to avoid costly errors before you even enter the market rather than wasting time and money to correct mistakes made during an unplanned, rushed real estate investment. Happy Investing!