NONRESIDENT INVESTOR

Frequently Asked Questions

When clients who want to invest in US Real Estate come to us, they often have many questions. Here are some of the most common ones.

Got Questions About Investing in US Real Estate as a Foreigner?

Here are the questions our clients often ask us to help clear any doubts. If you don’t find what you’re looking for, why not ask us directly? Hop on a free discovery call with our team and find out how your money can start working for you.

General

1. Can Foreigners Buy Real Estate in the US?

Yes. Anyone can buy property in the States, regardless of whether they have US citizenship.

2. Can Foreigners Own a US LLC?

Yes. Foreigners don’t need US citizenship to open a US LLC as long as it’s the right form of business.

3. What Types of Real Estate Can Foreigners Buy in the US?

Foreigners can buy any type of real estate in the US. These include residential properties, commercial properties, or land.

4. Can a Foreigner Invest in a US Company?

Yes. A foreigner or a foreign company can own a business in the US. The American market has been open to foreign investors since before 1914.

5. Which States Allow Foreigners to Buy and Own Real Estate?

All US states allow foreigners to buy and own real estate without limitations.

6. Can a Foreigner Buy Real Estate Under Their Real Name?

Yes. A foreigner can buy real estate in the US under their real name. However, doing that may cause the income from their purchase to be classified as FDAP income and get taxed at a flat 30% rate.

7. Can a Foreigner Buy Real Estate Through Their LLC?

Yes. A foreigner can buy real estate through their own LLC. In fact, this course of action is best for investors looking to earn passive income from their property.

Taxes & Legal

8. What Does It Mean to Be a Nonresident Investor According to US Law?

Foreigners are classified as nonresident aliens according to US law if they:

  • Don’t have a green card
  • Don’t spend more than 186 days in the States throughout one calendar year

Keeping your nonresident alien status is essential for foreign real estate investors since it puts you in a privileged position where you only need to pay taxes on US-sourced income.

9. When Does a Nonresident Pay Taxes in the US?

Nonresident aliens pay income tax only on their US-sourced income once a year.

10. What Is US-Sourced Income?

US-sourced income is income generated from an American LLC (whether you’re engaged in a trade or business depends on the nature of your activities).

11. When Are You Engaged in a Trade or Business in the United States?

You are legally engaged in a trade or business in the States once you have income connected to a US LLC.

12. Does Income from US Real Estate Count as US-Sourced Income for Foreigners?

Yes. Income from US real estate counts as US-sourced income. Foreigners still need to pay taxes for their properties in the states where the properties are located.

13. When Should Nonresidents File Taxes in the US?

Nonresidents should file taxes in the US when they have US-sourced income or are engaged in trade or business in the States.

14. Which Tax Forms Can a Nonresident File?

Nonresidents can file the following tax forms:

  • 1040-NR
  • 5472
  • 1065

 

15. What Is FDAP Income?

Fixed, Determinable, Annual, or Periodical (FDAP) income represents all forms of income except from the sale of real estate or personal property.

16. Why Is It Best for Foreigners to Invest in US Real Estate Through an LLC?

Investing in US real estate through an LLC is the best choice for foreign investors since an LLC is a flexible, hybrid entity suitable for all types of businesses, including real estate. Holding real estate through an LLC allows you to protect your asset better and optimize taxes easier than when buying it under your real name.

17. In Which State Should You Open an LLC for a Real Estate Business?

Foreign investors should open an LLC for their real estate business in the state where they’re planning to operate it.

18. How Do You Open an EIN Number as a Foreigner?

Foreign investors can open an Employer Identification Number (IAN) by filing the SS-4 form with the IRS. Nowadays, you can even do that online.

19. How Do You Open a Bank Account for Your LLC as a Foreigner?

After creating your LLC and opening your EIN, you can open your US bank account. If you plan to do it online, you should go with one of the few banks that specialize in working with foreigners (e.g., Bank of America, HSBC, Capital One). If you want to open it in person, you can do it at any bank in the States.

20. When Does a Foreigner Earn the Right to Open an SSN?

A foreigner can open an SSN only if they have a US visa with a work permit. US visas that also come with a work permit are the following:

  • H1B visa: Person in Specialty Occupation
  • H-1B1 visa: Free Trade Agreement (FTA) Professional
  • H-2A visa: Temporary Agricultural Worker
  • H-2B visa: Temporary Non-agricultural Worker
  • H-3 visa: Trainee or Special Education Visitor
  • I visa: Representatives of Foreign Media
  • L1 visa: Intracompany Transferee
  • P-1 visa: Individual or Team Athlete or Member of an Entertainment Group
  • P-2 visa: Artist or Entertainer
  • P-3 visa: Artist or Entertainer
  • R-1 visa: Temporary Nonimmigrant Religious Workers
  • TN visa: NAFTA Workers
  • O1 visa: Visa for Persons With Extraordinary Abilities

 

21. Who Has the Right to Get an ITIN?

Anyone who doesn’t meet the requirements for an SSN but is engaged in a trade or business in the US is eligible to get an ITIN.

22. How Do You Obtain an ITIN?

Foreigners can obtain an ITIN by filing the W-7 form with the IRS. Nowadays, you can do that online via email or by handing it in at one of the IRS’s walk-in offices.

23. Why Is It Good to Have an SSN or an ITIN?

Foreign real estate investors should have SSN or an ITIN number to make it easier to comply with US tax laws, open a US bank account, provide the means to process and account for tax returns, and much more.

24. How Do You Renew an ITIN?

Nonresident investors can renew an ITIN number by filing the 1040-NR form with the IRS. You must renew your ITIN number once every three years, or you’ll need to file a request for a new one.

Real Estate Business

25. What Is Asset Protection and Why Does It Matter?

Asset protection is the process of safeguarding your property from lawsuits, natural hazards, or other unforeseen circumstances. You should consult a lawyer specializing in this field to ensure you secure your property correctly.

26. Can a Foreigner Buy a House With Credit

Yes. Foreigners can get a mortgage loan in the US, but accessing the American financial system and becoming eligible for that loan is quite difficult. Some of the factors US banks may look at before issuing a mortgage loan to foreigners would be:

  • Whether they have a US bank account
  • Credit score
  • Income documentation
  • Business history in the US
  • Green card or work visa
  • Additional paperwork

 

27. How Much Money Do You Need to Start Investing in US Real Estate?

There is no surefire way to estimate how much money you need to start investing in US real estate, but a good ballpark value would be at least $50,000.

28. How Much ROI Can I Expect as a Nonresident Investor?

It’s impossible to accurately determine the amount of ROI you can expect as a nonresident investor since it depends on many factors. However, most nonresident investors’ average ROI is 5%–15%.

29. In Which States Do Foreigners Most Often Buy Real Estate?

Foreigners most often buy real estate in the following states:

  • Florida
  • California
  • Texas
  • Arizona
  • New Jersey
  • New York

 

30. Can You Manage US Real Estate as a Foreigner?

Yes. You can manage US real estate even as a foreigner, but it has its fair share of challenges. One of the biggest issues is that you won’t be present in the country at all times. That’s why you should find a reliable partner or property management agency to handle everything that needs to be taken care of in person.

31. What Are the Most Common Problems Nonresident Investors Face?

Some of the most common challenges nonresident investors face are the following:

  • Not being familiar with US real estate laws and regulations
  • Lack of business connections and reliable sources in the US market
  • Geographical distance
  • Language and cultural barriers

Luckily, the NRI team can help you overcome these issues and become a nonresident investor while saving you time and money.

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