The Miami Association of Realtors ranked Brazilians as the “top foreign consumer searching Miami properties in May 2013”.   Source:  Miami Association of Realtors, The Miami Herald  Sunday, July 7, 2013. Next in line were Canada, Colombia and Venezuela.  What this equates to is a large number of foreigners investing in Miami Real Estate and depleting inventory of homes in South Florida.

While the majority of foreigners are smart enough to hire real estate lawyers to assist them with their purchases, far too many fail to do so and this failure to plan can result in costly mistakes.  So how do foreigners avoid the pitfalls of foreign investing in the United States?  First, it is important to understand who is considered a foreigner.  A foreigner is any person that is neither a citizen nor a green card holder in the United States.

For a foreign buyer, there are no special rules or regulations that must be carried out to purchase property.  They simply put in a contract, produce the funds and close.   If rent is collected, they must file income tax returns, a 1040NR, to declare the income and expenses as well a pay any applicable income tax.

The implications arrive at the time the foreigner is ready to sell!  Foreign nationals that sell real estate in the United States face heavy tax implications and are subject to FIRPTA.  If there was no legal guidance prior to buying, then there is little that a lawyer or tax professional can do to safeguard the foreigner.  The damage is done.

However, with the assistance of a real estate lawyer and accountant, and a little planning, many of the taxes can be avoided entirely.  As a real estate and business lawyer, as well as an accountant, I see it far too often. The closing takes place and a year later, when its time to sell, the damage is done.  At this point, shock takes over when these foreign sellers are told what they will have to pay the Internal Revenue Service.”  -Jacqueline A. Salcines, Esq., Attorney at Law, Accountant.  Therefore, the smart and savvy investor will hire an attorney to lay the foundation to structure the investment so as to avoid taxes and penalties.

The following are just a few of the items we can provide advice on that foreigners should consider prior to investing:

  1. How to take title –   As a foreign investor without either U.S. Citizenship status or residency status, foreign property buyers face quite a hefty tax upon the sale of their property. This can be avoided by either purchasing in the name of an LLC or structuring the purchase in a different manner.  While the capital gain is may only be taxed at 15%, if the foreigner dies while owning the real estate, the entire value in excess of $60,000 may be taxed at rates as high as  45%.
  2. FIRPTA Considerations.  The Foreign Investment Real Property Tax Act also requires settlement and closing agents to withhold 10% of the gross sale proceeds of foreigner, held at the time of closing,  and send to the Internal Revenue Service.  This insures that the IRS collects an amount if the foreign property owner fails to file an income tax return.  Properties under $300,000 may be exempt altogether if certain conditions are met
  3. EB-5 Visa.  The EB-5 category was created by Congress in the Immigration Act of 1990 to encourage the flow of foreign capitalStacks of One Hundred Dollar Bills with Small House. into the United States in order to create jobs for U.S. workers.  Under this Visa, the foreigner that invests a minimum of $500,000.00 can immediately obtain green cards for himself and his immediate qualifying family members.  This is also a consideration that foreigners can consider.

Although there are many rules and regulations to consider when purchasing and disposing of real property by foreigners in the United States, they do not have to be confusing.  Whether you are buying or selling, consult with a real estate lawyer and tax professional to ensure that you do not make any mistakes, and your investment is a sound one.

At the Law Offices of Jacqueline A. Salcines, PA, attorney Jacqueline A. Salcines is both a real estate lawyer, investment consultant, as well as an Accountant.  We stand able to assist foreigners to navigate the maze of foreign investing.  Call us today for a free consultation, or email us with any questions you may have.

Jacqueline A. Salcines, Esq.

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Stacks of One Hundred Dollar Bills with Small House.Many things need to be considered when buying a property, regardless of whether your plans are to live in it or whether it is an investment. 2013 marked a year of many changes in the tax code by the Internal Revenue Service, including changes as to how mortgage interest income can be deducted and reported on tax returns, as well as Capital Gains taxes and limits, and numerous others are planned and will take effect upon property purchased in 2013.

If  the property you are considering purchasing is distressed, you will have a wide array  of considerations.  For instance, if the seller purchased in a foreclosure auction or as an REO, was the foreclosure accurately handled and/or dismissed.  As a buyer, you will need to make sure that the title is clean and that no other interest holders have rights, that may haunt you after you have signed on the dotted line.  This is the important, often overlooked role of the real estate attorney/title agent who will make sure that all this is reviewed prior to closing.  Moreover, whether the property and the loans associated with it are being audited by the Department of Justice is also a huge impacting consideration, as it may force titles that were issued to property owners and bona fide purchasers to be reversed, causing siginificant economic damages.

Real estate taxes also have a huge impact on whether a property should be considered or not.  In the advent of another real estate bubble, and with home values increasing by dramatic amounts, October may cause us to witness increased assessed values by the Property Appraiser causing once lower valued property taxes to double.

Return on Investment is also a big consideration.  If the property you are purchasing will be improved for rental,  the rental values permitted in the particular market need to be assessed.  What amounts will you be paying yearly in maintenance, insurance, taxes versus what the market will allow you to charge in rent.  Attorney Jacqueline A. Salcines states:  “At my firm, we use state of the art realty programs and tools that allow us to calculate up to the minute rental values for the most accurate assessment of what our client can rent the properties they are considering purchasing for.  This allows our investors to calculate their return on investment and make a sound decision as to whether to embark on the investment or walk away.”  There are countless other considerations that must be evaluated before you sign on the dotted line.

For many, buying a home is the single most costliest investment ever made.  It makes sense to have the right professionals by your side to guide you every step of the way.

At The Law Offices of Jacqueline A. Salcines, P.A., attorney Jacqueline A. Salcines is not only a real estate attorney and title agent with Attorney’s Title Insurance Fund, Inc. and Old Republic National Title Insurance,  but also an Accountant and Realtor.  Of equal importance, our firm has partnered up with  Tax Accountants and real estate professionals to provide the best guidance and advice to make sure your decision is a sound one.

Dont got it alone.  Hire the services of a professional to assist in making that one decision that may affect the rest of your life.

We are located in Coral Gables and the first consultation is always at no charge.