How to Invest in American Real Estate as a French/European Citizen?

Buying or investing in Real Estate in the USA is very popular considering it’s one of the best places to buy property in the world for many reasons. However, Financing, logistics, currency conversion, due diligence, taxation, legal concerns, and language difficulties can all become major obstacles at any time. Before you decide to make this decision, there are a few things you need to know:

To own U.S. real estate in your own name, you do not need to be a U.S. citizen or have a Green Card (LPR status, known as lawful permanent resident). 

To own a U.S. business company, you do not need to be a U.S. citizen or have a Green Card (LPR status, known as lawful permanent resident). 

You are eligible to own real estate in the United States under the name of a foreign corporation.

Firstly, whether you are a foreigner or an American citizen, you will need:

  1. Valid passport, an USA visa, or a driver’s license.
  2. Social security number or ITIN.
  3. Bank statements and, if applicable, financial records from your overseas bank.
  4. Proof of reserves.
  5. Pay stubs.
  6. Proof of reserves.
  7. Credit score
  8. Recent Tax returns 

Due Diligence? 

Regardless of the type of property you’re intending to purchase, you’ll generally always need to conduct due diligence.The due diligence stage allows the buyer to detect any potential flaws or faults with the property that may jeopardize the transaction. It also allows the buyer to pull out of the purchase if specific conditions are not met. This includes: property analysis, information verification, and evidence) before submitting your money and completing the transaction.

Do you have a bank account in the USA? 

It is recommended to open a bank account in the United States, you do not need to be a U.S. citizen or have Legal Permanent Resident (LPR) status. Most American banks, on the other hand, will need you to be at least one of the following: 

1. A person who is currently living in the United States as a foreign national. 

2. A citizen of the United States who lives outside of the country

If you are not a citizen of the United States and you do not have LPR registration and do not live in the United States, opening a bank account in the United States will be complicated. But, it is not impossible.  

If you are a Foreigner living outside the United States, your other alternative would be to conduct transactions through a bank account in your home country. If you follow this path, there may be some additional issues, but the majority of them will come in the form of currency exchange and time delay. Wire transfers to and from a U.S. bank account are usually not a problem for most banks. 

It is legal for non-residents/foreigners to purchase property in the USA. You also can take out a mortgage as a non-citizen in America if you need one. As a non-citizen, however, property owners will encounter more complicated tax regulations.

American Property Tax Rates for Foreigners? 

When foreign individuals buy property in the United States, the IRS (Internal Revenue Service) mandates that 15 % of the sales price be withdrawn for property taxes (on sales above $1,000,000), 15 % or 10 % on sales between $300,001 and $1,000,000, and either 15 percent or $0 on sales of $300,000 and lower.

American Property Tax rates for Residents/Citizens? 

In contrast, for residents and citizens of the USA, the IRS will deduct 15% of the property’s gross purchase price. If a US Tax Return reporting capital gains tax is filed, the money will be paid to the seller if a refund is payable. For residents and businesses in the United States, the federal capital gains tax ranges from 15% to 20%.

Have you considered investing in American REITs?

American REITs (similar to French SCPI’s or SIIC’s) are always a simpler option for both foreigners and citizens of the USA. Due to the recent modifications in the legislation governing the admission of foreign capital into the debt market, international investors can now engage in REITs and InvITs known as an infrastructure investment trust. InvITS are similar to mutual funds, investing in assets such as roads, transmission lines, and power plants. 

Earnings from publicly held REITs can originate from a range of sources, including share price appreciation. 

Dividends are paid out of rental income generated by the REIT’s properties.

There are exceptions to these taxes due to the tax-friendly structure of REITs for foreign investors, which can make an investment in a US REIT a very appealing prospect: 

  1. A foreign investor who sells shares in a nationally controlled REIT (one in which US citizens own 50% or more of the stock) is typically not liable to US taxation on the gain. 
  2. Ordinary dividends from a US REIT are normally subject to a 30% withholding tax in the United States. When an international investor qualifies for U.S. treaty benefits and submits legal and comprehensive U.S. withholding tax documents to the REIT, the withholding tax might be reduced. In most U.S. income tax treaties, the withholding tax on ordinary dividend income is reduced to 15%. Other investors, on the other hand, may be eligible for a 0% withhold rate on ordinary dividend distributions.  To take advantage of the advantages as a foreign investor, you should verify the legality of any treaties your country may have with the United States.
  3. Dividends and profits on sale of REIT shares can be excluded from US tax if the investor is a foreign government or a Sovereign Wealth Fund controlled by a foreign government, and the REIT itself is not subject to US tax. Because this exception overlaps with a few other exceptions, it is evaluated on a particular circumstance approach.

Both domestic and international investors benefit from REITs. In general, income from US investments passes through the REIT to the fund when overseas investors participate in REITs. Real Estate Investment Trusts act as a barrier for non-US investors, prohibiting them from participating in US commerce or business.For more information on how you can invest internationally in properties; and learn about the advantages in USA REITS and French SCPI or SIIC, don’t hesitate to contact us at https://www.rock-n-data.io/

Published in : Commercial Real Estate, Market Studies   By : Rock & DATA   On : June 7, 2022

Share

Tags

© Rock-n-data.io 2022 - All rights reserved