Florida continues to rank as the top U.S. state for real estate investing by foreign investors, often by foreign nationals seeking higher profits, diversity, and more safety than is available in their home nation.
As a real estate wholesaler in one of the top U.S. cities for real estate investing, we have a great deal of experience helping foreign investors buy investment properties in Florida.
So, here is a brief overview of investing in Florida real estate as a foreign national.
U.S. Real Estate Market Basics
If you’re a foreign national interested in investing in U.S. real estate, it’s important to understand the basics of the real estate market. Although regulations vary from state to state, there are certain aspects of the market that hold true everywhere in the country.
Here are a few things to know:
- Listings: While real estate is a fragmented industry in many parts of the world, it’s easy to navigate in the United States. Real estate agents publish information about properties on websites such as the MLS.
- Off-market properties: Some of the hottest investment properties are sold off-market, and are never listed on public websites. Many investors, therefore, work with real estate wholesalers to get the best deals.
- Real estate agent commissions: In many countries, the buyer is expected to pay a fee or commission to the real estate agent, but in the U.S. the sales commission is paid by the seller.
- Real estate agent licensing: In the U.S., each state has different requirements for the licensing of real estate agents. This ensures that agents have met minimum education requirements and are qualified as a real estate agent.
Foreign nationals should also understand currency exchange rates, wire transfers, international banking laws, as well as U.S. federal and state taxes relating to the purchase of real estate by foreign nationals.
Basics of Investing in Florida by Foreign Nationals
Although we can’t cover every topic you need to understand, or give you an in-depth review of just the basics, here are some important things foreign nationals should know about investing in Florida real estate.
First, and most importantly, we recommend using an attorney and accountant that are experienced with assisting foreign nationals in the purchase investment property in Florida. And, we suggest setting up an LLC, with help from an attorney, for the purchase of the investment property. If you do these two things, it is our experience that you will not encounter any trouble.
Before purchasing your first property, work with your attorney and accountant to fully understand federal and state regulations relating to foreign nationals and Florida investment properties.
Your attorney and accountant should explain your reporting and taxation requirements, and ways to minimize your tax liability. Equally important, they should explain regulations and tax implications related to certain properties that may be taxed at a higher rate, and may have additional reporting requirements.
For example, foreign nationals who own rental properties have an option regarding taxes paid on rental income. They may choose to pay 30% of gross rental receipts, or regular U.S. income tax on the net income.
Also, foreign nationals have options relating to the sale of investment properties. In an article by Romy Jurado, founder of Jurado & Farshchian, P.L., she states that:
Under FIRPTA, any profits made from the sale of U.S. property by a foreign national are subject to taxation. There are three exceptions that would exempt the sale from taxation:
- If the seller is a resident alien and has a tax identification number;
- If the sale price is less than $300,000 and the buyer will use the property as a personal residence at least 50% of the time for the next two years after closing; or
- If the seller has obtained a withholding certificate from the IRS.
If none of these exemptions apply, the buyer (or buyer’s closing agent) must withhold 10% of the sale price to pay to the IRS.
Foreign nationals have several options regarding financing of real estate investments in Florida. Non-U.S. borrowers can get financing from lenders, banks, and other financing organizations.
Foreign nationals can also defer capital gains taxes with a 1031 exchange in the U.S., and harvest profits from their rental properties tax free.
According to Michael Anderson, with Park West Capital, many foreign nationals opt to borrow from foreign national mortgage lenders in Florida, due to the extremely low rate of interest.
Graystone Investment Group
Graystone Investment Group is an experienced real estate wholesaler in Tampa Bay. We serve clients who flip homes in as little as 30 days, as well as clients who hold high cash flowing rental properties.
Unlike other wholesaling groups, we provide clients with a turnkey process at no extra charge. We find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years.