Q. What are the Federal Government requirements for a foreigner buying a property in the South Florida?
In South Florida there are very few restrictions on international real estate investors, buyers, or sellers. As an international buyer/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. As an international investor (foreign national) you may take title to real estate in various formats, including:
YOUR OWN NAME
A REAL ESTATE INVESTMENT TRUST (REIT)
FOREIGN PENSION PLAN
LIMITED LIABILITY COMPANY (LLC)
The most common structure used for taking title by foreign investors. However, you just need to comply with the following three issues:
VISITORS VISAS AND IMMIGRATION LAWS
REPORTING AND COMPLIANCE
Q. What are the immigration laws and do I need a Visa?
All United States Immigration Laws are detailed in Title 8 of the U.S. Code. Every non-U.S. citizen who wants or needs to enter the United States must have a Visa. There are over 40 different types of non-immigrant visas so you should consult an immigration attorney and/or 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 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 (HALF-MILLION DOLLAR INVESTOR):
This visa is available for non-U.S. citizens who plan to make a capital contribution of $500,000 or more to a U.S. based enterprise that creates jobs.
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.
Q. Do I have to pay taxes?
Yes. You will need to pay State and Federal Taxes on the rental income you earn from your investment property. This means you will need to file a US tax return.
The US government requires that the Foreign National pay US income taxes on any net income (rental revenues less expenses) derived from rental property. If this election is not made in a timely fashion (e.g., US income tax returns not filed), a tax of 30% of the gross rental income will be assessed. Under this scenario, the investor would not be able to deduct any expenses such as depreciation, interest, property taxes, common charges, etc. Even if the Foreign Investor is incurring tax losses in the beginning years of their investment, and, therefore, doesn’t owe any taxes to the government, they still must file their tax returns in a timely manner in order to make the election.
Q. What is an ITIN?
An ITIN is an Individual Tax Identification Number that is used for Federal Tax reporting purposes.
An 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/Sellers
Q. Can I pay in all cash in South Florida?
Yes, you can pay for a purchase all cash. However, some issues may arise concerning the dollar amount, its transfer into the United States, and how it was obtained cash or its equivalent.
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.
Q. As a foreigner, can I receive financing or credit?
Yes, foreign buyers in the (South Florida) United States have the option of taking out a loan to make a real estate purchase.
Although financing is available, every bank has its own regulations. For instance TOTALBANK requires 50% down payment, versus HSBC 40% and you may be required to show one-years worth of liquidity reserves. You may also be required to present a minimum of 3-month bank statement. Depending on the bank a sign up a disclosure agreement will be required.
A Limited Partnership or Limited Liability Company may offer financial protection or indirect asset protection, especially in cases of bankruptcy, lawsuits and taxes. Foreign investors are generally taxed on the property as if they hold the property in direct interest.
Ideally, you should secure the services of a real estate accountant to help you out with the tax ramifications, but it would help if you, at least, know the basics before you actually talk to an accountant. We have worked with various real estate accountants and can introduce you to one if necessary.
Q. Do I need to secure the service of a real estate lawyer?
Although not needed, we recommend the services of a real estate attorney to help you with any legal issues or questions you may encounter along the way. We work with various real estate lawyers and can recommend some to you.
A real estate lawyer can work with you to:
- Review the sales contract for you
- Check on the title and other documents relating to the property
- Revise your mortgage contract and make the necessary changes
- Analyze the legal and tax issues concerning the purchase.
- Adjustments to various expenses and costs involved in the purchase.
- Assess your eligibility for tax refunds; draft the documents and statements relating to this.
Q. Do I have to be present for the closing?
At the closing of the transaction, the new owner does not need to be in the U.S., however you do need to appoint a representative. You can simply provide your representative with “Power of Attorney.” This is the most common and convenient way to do the closing.
Q. What are the additional transaction costs that I may incur at closing?
Here is a list of several expenses that are standard closing cost in the state of Florida home sales, although the exact cost involved in a closing will depend upon the individual transaction:
At The Andre Shambley Group/Keller Williams Coral Gables Realty, we think globally, building and cultivating relationships that allow us to feature South Florida properties internationally. We have developed partnerships in many international markets including Brazil, Argentina, Mexico, Asia, Canada and Europe.
- Title Search
- Title Insurance Policy (Owners and Lenders)
- Closing Fees
- Land Survey (unless it's a condo)
- Public Record Document Recording Fee (Cost is per page)
- Lien Searches
- Transaction Taxes (Documentary Stamps and Intangible taxes)
Contact us via Facebook, Twitter, Skype: miami.best.real.estate.team or visit our website www.MiamiFreeHomeInfo.comto speak with an International Real Estate Consultant today.
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Information presented in this blog post concerning foreign citizen real estate transactions has been gathered from various sources. It is deemed to be reliable but not guaranteed and should be verified by personal due diligence and research with the appropriate government officials, immigration and real estate attorneys (lawyers), and tax accountants (CPA’s).