Buying Property in the USA as a Non-resident (clear guide!)

Everything you need to know about buying property in the US as a non-resident

Navigating the intricacies of the US property market as a non-resident can be daunting as many of the laws and requirements are different.

In this guide, we will briefly walk you through the process, and requirements, for buying a property in the United States as a non-resident.

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Table of Contents:

Can a non-resident buy property in the US?

Yes! Non-residents can buy property in the United States.

With no US citizenship or residency requirements for purchasing real estate, non-residents - including foreign nationals - can buy residential and commercial properties, vacation homes, investment properties, and even land!

However, buying a property in the United States, as someone who doesn’t live there, involves several additional steps and considerations, including tax implications, property taxes, income taxes on rental income, and any potential withholding taxes on sale proceeds.

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Understanding the US property market (average house prices and other considerations)

Before you start the process of buying a property in the US, it is crucial to familiarise yourself with the dynamics of the real estate market in your target location.

Each state will have its market dynamics, including varying property values, affordability levels, and investment potential - if that is part of your criteria.

By comparing property prices across different states, you will be able to align your criteria and preferences with the market options.

To give you an idea of how the market options differ state-to-state, here is a list of the average property prices in the following states:

Alabama: $275,000 (£218,900)
Arizona: $435,000 (£346,260)
California: $787,000 (£626,452)
Florida: $402,000 (£319,992)
Hawaii: $750,000 (£597,000)
Louisiana: $243,000 (£193,428)
Massachusetts: $601,000 (£478,396)
Texas: $348,000 (£277,008)
Utah: $566,000 (£450,536)
Wisconsin: $298,000 (£237,208)

As you can see, the average property prices vary a lot depending on the state you are looking to buy in.

To refine your search consider the following factors such as:

Cost of Living: This includes the cost of groceries, utilities, and healthcare. These will vary significantly from state to state due to differences in tax rates and local economic conditions.

Taxes: State laws differ regarding income tax rates, sales tax rates, property tax rates, and inheritance taxes. These will all impact your overall tax burden.

Climate and Geography: Each state has its own climate and geographical features, ranging from tropical beach climates in Hawaii and Florida, to arid deserts in Arizona and mountains in Colorado and Montana. Research the annual weather in the states you are considering, as this may influence your final decision.

Local Economy: In a similar way to cities in the UK, each state in the US has diverse economies driven by different industries. In California, the dominant industry is tech, finance in New York, energy in Texas, and agriculture in Iowa. Again this may influence your final decision, especially if you are considering a career in the US, so take your time doing your research.

Healthcare Systems: Healthcare systems vary by state in terms of access to healthcare facilities, insurance coverage, Medicaid eligibility, and healthcare outcomes. These factors may impact your access to quality healthcare services, so be sure to familiarise yourself with the healthcare options before coming to a decision.

Legal and Regulatory Frameworks: State laws and regulations differ across various domains, including employment laws, environmental regulations, gun laws, and voting rights. The political ideologies and priorities are sometimes heavily reflected in local communities, so you may want to consider this in your decision process.

Infrastructure and Transportation: Each state in the US differs in terms of transportation infrastructure. This includes roads, bridges, public transport options, airports, and ports, all impacting accessibility and mobility for residents and businesses. Consider this when deciding on where to buy a property as it may impact the overall value.

Last, but by no means least, take quality of life factors such as crime rates, air and water quality, access to recreational amenities, and overall livability into account before choosing a state to buy a property in. These factors will give you the best insight into what it’s like to live locally.

If you are new to the US property market you may want to consider getting in touch with a local real estate agent, or consultant, who will be able to provide valuable insights and guidance based on their expertise in the area.

Does buying property in the US immediately grant residency?

The simple answer is no, buying property in the US does not automatically grant residency or citizenship to non-residents.

Simply owning a property in the US does not confer immigration status, or the right to reside in the country.

However, purchasing property in the US can be a step towards obtaining residency through certain visa programmes.

These include the EB-5 Immigrant Investor Program, which requires a substantial investment in a US business that creates jobs for US workers.

As a non-resident, you may be eligible for temporary visas, such as the B-1/B-2 tourist visa or the E-2 Treaty Investor visa, which allow for temporary stays in the US but do not provide permanent residency.

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Finance options for non-residents purchasing property in the USA

As a non-resident, securing financing for a property purchase in the United States may pose a few challenges due to stricter lending requirements and fewer options compared to residents.

As a result, many people are under the impression that it is virtually impossible to buy a property in the US as a non-resident. However, there are still several financing options available including:

Foreign National Loans/Mortgages

Some US lenders offer mortgage options specifically tailored for non-residents. These loans allow you to finance a percentage of the property’s purchase price.

The eligibility criteria for a foreign national loan include; being a non-resident in the US, a valid passport, a valid Visa, and meeting any income and credit requirements.

Some of the benefits of a foreign national loan are tailored financing options, lower down payment requirements (deposits), and in some cases the opportunity to build equity and establish credit.

Before choosing this option, be aware that some foreign national loans could come with higher down payments, higher interest rates compared to US citizens, stricter lending requirements, or less time to pay back the loan.

Private Lenders

You might want to explore alternative financing options through private lenders, or international banks, who will cater to investors that reside outside of the United States.

If you are unsure where to look, try researching banks in the state you are looking to buy a property, or mortgage brokers who specialise in non-resident loans.

One of the potential cons, if you choose to go through a private lender, is they may have their rates, or terms and conditions. Be aware of this before finalising your choice.

Cash Purchase

If it’s possible for you, you should consider buying your chosen property with cash. This will streamline the process and avoid the complexities of obtaining financing.

Legal and tax considerations for non-residents purchasing property in America

Navigating the legal and tax implications of buying property in the United States as a non-resident is crucial to ensure compliance with local regulations and potentially optimize your investment returns in the future.

Here is a list of some key factors you should take into account:

IRS Publication 515: This publication summarises the rules for non-residents looking to buy property in the United States. In 1980 the Foreign Investment in Real Property Tax Act (or FIRPTA), was put in place by Congress to impose tax on foreigners when they sell or receive income from a US property. The IRS publication 515 will guide you and help you understand how this law could apply to you.

Legal Structure: Determine the most suitable legal structure for property ownership. For example, are you purchasing as an individual or purchasing through a foreign corporation or limited liability company (LLC)? Each structure has distinct legal and tax implications, so consult with a legal advisor to make an informed decision.

Tax Obligations: in the US, income from real estate owned by non-residents is taxed at a 30% rate - if it's not connected with a US trade or business. Before going forward, make sure you understand your tax obligations and any potential withholding taxes on property sales. Consider seeking tax advice from a professional with expertise in international tax law to navigate these complexities.

Visa Requirements: Depending on your residency status and duration of stay in the US, you may need to obtain a specific visa e.g. an investor visa or non-immigrant visa. Be sure to check the visa requirements to facilitate your property ownership and residency rights.

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US property due diligence and selection as a non-resident

We advise you to conduct thorough due diligence on prospective properties to asses their investment potential and mitigate risk.

Consider factors such as;

Location
Property condition
Rental demand
Neighborhood amenities
Potential for capital appreciation

It is also advisable to visit the properties in person or enlist the services of a trusted local representative to conduct inspections and verify details on your behalf.

American flag in alleyway in Boston, America with Autumn leaves on the ground

Closing process and costs of buying a US property

Once you’ve identified the property you’d like, and negotiated the terms of sale, the closing process begins.

As a non-resident buyer, you may encounter additional documentation requirements and administrative procedures compared to domestic buyers.

Work alongside a qualified real estate attorney or closing agent to oversee the transaction and make sure you’re complying with the necessary legal formalities.

Be prepared to allocate funds for closing costs for your US property purchase. These typically include attorney fees, title insurance, escrow fees, and recording fees.

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*Note: This guide provides general information and guidance on buying property in the US as a non-resident and should not be construed as legal, financial, or tax advice.

Always consult with qualified professionals, including real estate attorneys, tax advisors, and financial experts to address your specific circumstances and ensure compliance with applicable laws and regulations.

Buying property in the US as a non-resident: A summary

Buying property in the US as a non-resident offers a rewarding experience and opportunities, but it requires careful planning, research, and adherence to legal and tax regulations.

By understanding the market dynamics, exploring financing options, addressing legal and tax considerations, conducting thorough due diligence, navigating the closing process, and enlisting professional property management services, you will successfully explore the US real estate market and achieve your investment objectives.

If you’re not sure where to start, or would just like some guidance, our expert team can help you get to grips with the process of buying property overseas.

Get in touch with one of our team today, for more information and a free money transfer quote.

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