Invest with YFiRE
For Investors from Overseas
The very first item of business for those investing in real estate is to obtain funds for the purchase even before searching for a property. The quickest and easiest source is your personal funds. If you already have the required funds in a US bank account, you are ready to purchase. If your funds are in an account elsewhere, you will need to transfer them to a US bank. You will need to determine how this can be done as most countries have specific requirements, rules, or restrictions when large sums are being transferred. Individual details are beyond the scope of this discussion.
If you do not personally have all the funds required, you may be able to obtain a loan from a source outside of the US and transfer the funds. Another idea is to assemble several investors in your home country and pool your resources. Still another idea is to obtain a mortgage loan from a US lender to finance the purchase. This can be facilitated if you have some or all of the following:
- Evidence of financial stability
- A 25 to 40% down payment in a U.S. bank account
- A US Credit report showing at least 2 lines of credit
- A Social Security number or other Tax Identification Number
- A passport from your home country
- A Green Card.
Mortgage loans in the US are customarily amortized (and repaid in monthly installments) over 15 or 30 years. If possible you should obtain a non-recourse mortgage. This means that in the event of your default, the mortgage lender cannot encumber your other personal assets. Be sure to ask the right questions and understand the answers. For a list of questions for your mortgage lender click here. The decisions you make could affect you for a long time.
You may want to avoid exposure to US income taxes. Sometimes this is possible by limiting the amount of time you spend in the US each year. If you find you cannot avoid US tax exposure, you will need to report your rental income and then you can deduct expenses such as repairs, maintenance, utilities, mortgage interest, real estate tax, condo fees etc. However, the exact provisions for US taxes as they pertain to any specific case are beyond the scope of this discussion. If find that you do owe US (Federal) income taxes, you are likely to owe income taxes to the State in which your real estate is located. Again, a somewhat complex but manageable situation.
Form of Ownership
If you will own the home individually, you might want the deed prepared in the name of a Cross Border Revocable Living Trust (CBRLT). Other forms of ownership include a partnership, a corporation, or a Limited Liability Company (LLC). These forms can offer some degree of financial protection, especially in cases of bankruptcy, law suits, and taxes. In most cases investors can arrange to be taxed on the property as if they hold it individually, which is generally preferable.
You likely will need the help of various specialists at some point. Possibilities are listed below, roughly in the order in which you might need them.
- A local Real Estate agent to help you buy a home and to find tenants if necessary
- A Mortgage loan officer
You might try Eddie Jackson of Draper & Kramer Mortgage
at 202 596 4710 or by email.
- A Real Estate (tax) accountant in the US and in your home country
- A Real Estate lawyer
- A Property management company.
Contact YFiRE now for further assistance.
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Your Friend in Real Estate, LLC
Arlington, Virginia, USA
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