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| The US citizen has a 100% allowance on bequests and gifts to their spouse and very generous limits on transfers to other parties. |
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| Services to Non-US Citizen Investors |
| As we have found the non -US Citizen buyers may find that real estate buying practices and customs differ in Florida from their own country. |
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| Multiple Listing Service |
| Real estate brokers in the Florida area pool their property listings into the Multiple Listing Services (MLS). The MLS system can then be accessed by all real estate brokers and their agents. The brokers will then split the commission earned from the seller based on pre-arranged agreements. Through this system, sellers get the greatest amount of exposure for their property, to a very large number of buyers. A great service for both sellers and buyers. |
| Buyers working with me have access to all the properties listed by brokers in Florida. My job is finding those properties that are the best fit for my buyers. |
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| Compensation for Services |
| Unless otherwise arranged, sellers compensate the broker for their service. Buyers can take advantage of a wide range of services offered by me to help identify properties, negotiate price and terms, and write offers and agreements. I can show buyers any listed property in the area, and upon a sale will be compensated through the sellers' broker. |
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| Basic Steps |
The following are the basic steps related to buying real estate. As your Realtor, I will be coordinating the process throughout the search offer and closing:
1. If planning to purchase with a mortgage, then preliminary contact and discussions with a local mortgage broker would be very helpful (see section on Financing and Mortgage below).
2. When a property is found, an offer will then be made to the seller (prepared by me).
At the time of offer, cash needs to be put into the real estate broker's escrow, so the seller knows it is a good faith offer. If the offer is not accepted, then the funds are immediately returned. Foreign buyers should have access to at least $3,000 US through checks, travelers checks or other means for an offer to be submitted.
If an offer is accepted, then the closing is typically scheduled for 30 to 60 days from date of acceptance.
Shortly after acceptance, an additional deposit of approximately 10% of the purchase price is to be made to an escrow account to secure the offer.
A local bank account should be established, and if using mortgage financing, amounts equal to the total down payment plus amounts equal to several months of mortgage payments and expenses need to be on deposit before closing. A local bank account is also useful for paying monthly expenses (electricity, fees, mortgage payments, etc.).
Traditionally, a closing company will coordinate all the legal documents and signatures needed to transfer the property deed and legal notices.
Buyers do not need to be present at closing, all activities can be accomplished through the mail.
Transfer of services such as electric, phone and cable can all be done through phone and mail. |
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| Financing and Mortgage |
| If you prefer not to pay cash, then mortgage programs would be available. The majority of mortgage loans are done through licensed mortgage brokers. Mortgage brokers in Naples work with many sources of lending funds and banks, to get the best possible rates. Mortgage rates for properties in the Naples area are always very competitive. |
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| Information for Non-US Citizen Real Estate Investors |
Special Notes for overseas investors in USA real estate
The tax laws on overseas investors in US real estate are sophisticated and draconian. Make sure you get competent professional advice before even make a simple investment such as a vacation home. The following is a brief overview. |
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| 5 Rules every Non-US Citizen should know: |
Foreign Investor Rule #1: A foreign partner must obtain an Individual Taxpayer Identification Number from the Internal Revenue Service. More: info
Foreign Investor Rule # 2: Save taxes by electing to treat U.S. property as effectively connected to a trade or business; attach the appropriate statement to a timely filled income tax return that reports income from U.S. real property. More: info
Foreign Investor Rule #3: In order to take advantage of a potential tax refund, foreign individuals must file Form 1040NR. More: info
Foreign Investor Rule #4: A foreign person who receives U.S. income subject to withholding must provide IRS Form W-8BEN to the withholding agent. More: info
COPYRIGHT 2001 Hagedorn Publication
COPYRIGHT 2001 Gale Group
Taxes Defined for Non-US Citizens
The tax laws on overseas investors in US real estate are sophisticated and draconian. Make sure you get competent professional advice before even make a simple investment such as a vacation home. The following is a brief overview. |
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| Income taxes |
If you rent our your real estate investment your income will be taxed.
You can elect to have the gross income taxed at a flat rate or file a tax return. The flat rate will be at 30% (but you may get some help from tax treaties to prevent taxation twice on the same income). The flat rate option will not allow you to deduct expenses such as maintenance, mortgage interest, electricity or water. The US person who withholds the tax must file an annual Form 1042 and 1042S.
Under US tax law, you can depreciate the property, there are different rates for residential and commercial properties. This annual depreciation is deducted from your income as an expense on your tax return. But it will be recaptured when you sell. See below.
If you invest in mortgages secured on US properties, your income will also be subject to tax. This would be subject to tax treaties that are intended to avoid double taxation. If the lender is from a country that does not have a tax treaty with the United States, withholding tax should be deducted at the appropriate rate, usually 30%. However it is possible for mortgage income to be characterized as portfolio income that is not subject to withholding tax. See page 14 of IRS publication 519 (see below) and a GOOD international tax attorney. |
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| Capital gains taxes |
Unlike many countries, such as the UK, the US government also wants it's share, or more than its share, when you sell the real estate.
There is an especially nasty law called FIRPTA. (Foreign investors real property tax act.) The US government is very worried you will sell the property and skip the country with the money. Under FIRPTA, the US persons handling the transaction is required to withhold 10% of the GROSS price, even if you have not made a profit. It is possible to get an advance clearance from the IRS, but allow several months.
There is an exclusion to this, which the closing agent may not be aware of. That is if the property is sold for less that $300,000 AND the buyer (or family member) is going to use it as a personal residence. See the Act for the exact requirements. Then no withholding tax need be deducted. But you will still have to pay capital gains tax if it is owing.
The rate of capital gains tax is is slightly higher on the re-captured depreciation element of your gain.
If FIRPTA applies you can reclaim any excess deducted by making application to the IRS. Again allow several months. |
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| Estate taxes |
Variously known as death duty, inheritance, capital transfer taxes. Here the non-resident gets far worse treatment than the US citizen or permanent resident.
The US citizen has a 100% allowance on bequests and gifts to their spouse and very generous limits on transfers to other parties.
But this drops to just $10,000 if you are foolish enough to be a foreigner who dies while owning US situs real estate. There may be some sort of relief through double tax treaties.
The estate taxes also apply to mortgages secured on US properties.
Copyright Mortgage-investments.com is our US Federally registered service mark no. 2,647,595. |
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 How to Buy Home  How to Sell Home |
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