Complete Guide to US Real Estate Investment for Foreign Nationals

International investors are increasingly buying US real estate. Here’s everything you need to know.

Legal Right to Purchase

Good news: non-US citizens CAN buy US real estate without visa or green card.

Requirements by State

• Most states: No restrictions. Foreign purchase allowed freely.
• Agricultural land: Some states have restrictions (Texas, Iowa, Minnesota)
• Foreign Investment Real Property Tax Act (FIRPTA): Applies to sales (not purchases)

Documentation Required

1. ITIN (Individual Tax ID Number) – Apply before purchase
2. Proof of funds: Bank statements, proof of asset
3. Passport/ID for identity verification
4. Foreign entity documentation: If buying via LLC/corporate entity
5. Tax documentation: Form W-8BEN (tax treaty benefits)

Ownership Structures

Option 1: Direct Personal Ownership

Buy property in your name.

Pros: Simple, low cost

Cons: Personal liability, tax inefficiency, probate issues

Option 2: LLC (Recommended)

Buy through Limited Liability Company.

Pros: Asset protection, tax benefits, holds title, easier financing

Cons: Setup cost ($500-2000), annual compliance

Option 3: Trust

Revocable living trust for estate planning.

Pros: Avoids probate, privacy

Cons: Limited financing options

Financing Options

Traditional Mortgage

• Down payment: 20-30% required (vs 15% for US citizens)
• Documentation: ITIN + proof of assets + international credit history
• Interest rate: 1-2% higher than US citizens
• Lenders: Bank of America, Citi, Wells Fargo accommodate foreign buyers

Cash Purchase

• Fastest approach (closing 7-10 days)
• Competitive advantage in offers
• Eliminates financing contingency

International Loans

• Some home country banks finance US properties
• Exchange rate risk (loan in foreign currency)
• Often complex and expensive

Tax Implications

Federal Income Tax

• Rental income: Taxed as ordinary income (10-37% brackets)
• Depreciation: 39-year write-off for residential (reduces taxable income)
• Capital gains: 15-20% federal tax on long-term gains (1+ years)
• Tax treaty benefits: May reduce rates (Form W-8BEN)

State Taxes

• Property tax: 0.3-1.5% property value annually (varies by state)
• State income tax: 0-13.3% (depends on state)
• Sales tax: Not applicable to real estate purchase

FIRPTA (Foreign Investment in Real Property Tax Act)

• Applies when you SELL property (not when you buy)
• Buyer must withhold 15% of sale price
• Can be reduced with proper documentation

EB-5 Visa & Real Estate

Investment visa available for US real estate:

• Requirement: $1,050,000 investment (or $787,500 rural area)
• Job creation: Must create 10+ jobs
• Green card path: Leads to permanent residency
• Real estate syndicates: Common vehicle for EB-5

Closing & Title Insurance

Escrow Process (US Standard)

1. Offer acceptance
2. Inspection period (7-10 days)
3. Appraisal
4. Financing approval
5. Final walk-through
6. Closing (sign documents, transfer funds)

Timeline: 30-45 days typical

Title Insurance (Essential)

• One-time cost: 0.5-1% purchase price
• Coverage: Protects against title defects
• Mandatory: For mortgaged properties
• Recommended: Even for cash purchases

Common Mistakes Foreign Buyers Make

1. Not getting ITIN before purchase – Delays closing
2. Buying without LLC structure – Tax/liability issues
3. Underestimating closing costs – 2-5% additional
4. Not understanding property taxes – Can be shock annually
5. Ignoring home inspection – Old US homes have issues
6. Poor contractor selection – Rehab overruns common

Recommended Timeline

Month	Action
0	Consult tax/legal advisor, plan financing
1	Apply for ITIN, establish US bank account
2-3	Property search, make offers
3-4	Offer accepted, inspections, appraisal
4-5	Closing, property transfer, tenant management begins

Get Professional Help

Highly recommended: real estate attorney + accountant familiar with foreign investors.

Free consultation with our team: Schedule today