Can Foreigners Buy Property in the USA?

The US housing market offers all kinds of wealth-building opportunities for investors, but can foreigners buy property in the USA? Yes, but there are some crucial details, challenges, and tax obligations to consider. In this guide, you’ll learn the benefits of buying American real estate, the steps for buying a house as a non-resident, and why turnkey properties make life easier for foreign investors!

Summary:

• Foreigners can buy property in the USA, regardless of where they live or their immigration status.

• High appreciation, housing demand, and cash flow potential make US real estate an attractive wealth-building opportunity for foreign investors.

• Non-residents should be aware of the tax rules for foreigners buying property in the USA, which may be significant if they earn a profit.

Can a Foreigner Buy a House in the USA?

Yes, foreigners can purchase property in the US! Whether you’re looking for a vacation home or your first rental property, you can own a piece of the United States housing market, no matter where you’re from. Financing and managing properties are the biggest challenges when buying abroad, but between foreign loan products, turnkey properties, and local agents, there are plenty of resources for non-residents!

Why Invest in the USA?

Why do so many foreign investors flock to the US housing market rather than buying domestically? There are several advantages of buying US real estate:

High Demand for Housing

Population growth has long outpaced residential construction in the United States, creating a shortage of 4.5 million homes as of 2022. If you can get your hands on a US investment property, there’s likely someone who will rent it from you for a profit!

Long-Term, Fixed Debt (Loans)

Many countries, like Canada, have short fixed-rate terms of six months to 10 years. When the term ends, you’ll need to refinance your mortgage, and you could be dealt a higher interest rate. Compare this to the United States, where 30-year fixed-rate mortgages are the norm. This allows you to lock in your interest rate and monthly payment across multiple decades!

Cash Flow Potential 

In many countries, the combination of high home prices and low rent rates makes it difficult for investors to earn a profit. Thanks to more affordable home prices and higher rents, you can still find cash-flowing (and appreciating) real estate in markets across the US.

Check out our list of best states to buy rental property!

6 Steps Foreigners Can Take to Invest in Real Estate in the USA

The process for buying a home in the United States is relatively straightforward, even for a foreign investor! Follow these six steps:

1. Talk to a Turnkey Provider or Real Estate Agent

To find the perfect US property, you’ll need to partner with a knowledgeable real estate agent or, better yet, a turnkey provider!

Turnkey Providers

Turnkey rentals are newly renovated or built-to-rent properties that can be rented out on day one, making them some of the best investment properties for foreign investors. A turnkey provider handles the rehab, places property management, finds renters, and often has lender connections, giving you a near-passive investment.

Real Estate Agent

A real estate agent helps clients buy and sell properties. If you’re buying a rental property, make sure you partner with an investor-friendly real estate agent who understands your investing goals, as they can find deals that fit your criteria and connect you with local contractors, property managers, and other resources.

2. Get Pre-Approved for a Mortgage 

A mortgage pre-approval shows sellers that you are lendable, but it also gives you an idea of the type of property you can afford. You should get pre-approved for a mortgage roughly one to four months before you plan to buy, and there are several products available to foreign buyers:

Foreign National Loans

Foreign national loans are for non-residents who don’t have a social security number, green card, or visa. Much like a conventional loan, you’ll need to provide identification, proof of income, verification of employment, bank statements, proof of funds, and tax returns (depending on the lender).

Keep in mind that these mortgages typically have terms of 15-30 years, with higher interest rates and down payment requirements (at least 15%-20% and up to 50%).

DSCR Loans

Debt service coverage ratio (DSCR) loans allow borrowers to qualify based on a property’s potential rental income. These loans are available to foreign investors, but they often have higher interest rates and down payment requirements (at least 25%).

Or…Buy in Cash! 

If you have enough cash to buy a property outright, you can sidestep the financing process entirely. This allows you to avoid high interest rates and large down payment requirements!

3. Browse Properties

Once you’re pre-approved for a mortgage, you can start looking for properties within your budget. Browse turnkey rental properties for sale or have your real estate agent send you on-market properties from the multiple listings service (MLS).

4. Make an Offer

After finding the property you want to buy, you’ll want to submit an offer letter to the seller. Be sure to include key details, such as the offer amount, your down payment and earnest money deposit amounts, and any contingencies that you wish to be met before closing.

5. Perform Due Diligence

Due diligence is crucial whenever you buy a home, but especially when buying from afar. Make sure you schedule inspections, get repair estimates, and ensure that you’re comfortable with the condition of the property. If you’re inheriting tenants, get lease agreements from the current landlord and estoppel agreements from residents to confirm the lease terms.

6. Close and Set Up Property Management 

Once all conditions are met, you’ll agree to a closing date when all documents are signed and costs are paid. If you’re buying a rental property, you’ll want to hire a property management company and place tenants quickly so that you can start earning rental income. Both things may already be in place if you buy turnkey real estate!

Are Foreigners Taxed on USA Real Estate Profits?

Yes, like US residents, foreign investors are required to pay taxes on US real estate profits.

First, you’ll pay income tax on any rental income earned. If you choose to have the income effectively connected to a US trade or business, you can deduct expenses—such as mortgage interest, property management, maintenance, and repairs—and only pay tax on your net profit. Otherwise, you’ll pay a 30% flat rate on gross rental income.

When you sell your property, 15% of the gross sale price is withheld as a prepayment for any capital gains. If you owned the property for more than 12 months, you’ll be taxed 15%-20% on the capital gains. If you owned the property for fewer than 12 months, the gains will be taxed as ordinary income. The full rate could be as high as 40.8%, depending on your tax bracket.

If your country of residence has a tax treaty with the United States, you can avoid double taxation on your real estate earnings!

Want to Buy Property in the USA? We Can Help!

Are you looking to buy a cash-flowing, appreciating investment property in the United States? Follow the steps for buying US real estate above, or team up with a turnkey provider to streamline the home-buying process and start earning rental income right away.

Rent to Retirement works with foreign investors to find them the best returns on American real estate!

Can Foreigners Buy Property in USA FAQs

Can I Buy a House in the USA If I’m Not a Citizen?

Yes! There are no laws or restrictions preventing non-citizens and non-residents from buying US real estate.

Can I Buy a House in the USA With a Tourist Visa?

Yes, you can buy a house in the US with a tourist visa. Although it will have little effect on the home-buying process, having a tourist visa will make it easy to visit your US home!

Can You Buy Land in the USA Without Citizenship?

Yes, non-citizens can purchase land in the United States. Foreign investors enjoy all of the same property ownership rights as US residents!