If you live in another country, and you’re determined to learn how to start buying U.S. real estate as an international investor, you are certainly on the right path. Many foreign investors stop in their tracks when the roadblocks start popping up, or when things start to get a bit intimidating. If you dig a little deeper, you will find that you can actually buy American rental properties as a non-citizen without ever hitting those major walls that prevent so many overseas investors from achieving their dream of financial independence.
This article will reveal the best strategies for buying United States real estate that seasoned international property investors commonly use. So, let’s dive in to find out more on how to buy U.S. rental real estate as a foreign property investor, so you can take advantage of the thriving U.S. housing market, and all it has to offer:
What are the Benefits of Buying U.S. Real Estate When You Live in Another Country?
The United States has one of the best real estate markets in the world. Now is the time to buy because the U.S. economy has been on an upward climb, and with that comes a favorable housing market. Here are a few other reasons why an international investor would want to buy U.S. rental properties.
- The currency exchange can be in the foreign investor’s favor. When an investor earns U.S. capital, it commonly converts to more and becomes a larger return, when converted to their country’s currency.
- The United States provides a stable, high return real estate investment market.
- America can offer many favorable cities to choose from, with lower cost housing markets than most international locations.
- The U.S. tax system rewards investors with incredible tax benefits – deductions/depreciation, that can, in some cases, leave the international investor owing nothing to the government.
- America offers foreign investors a great opportunity to buy off-market properties at great prices. You can learn more about these types of deals by reading our article on How to Find Off-Market Properties.
As an international investor, you may not be familiar with the U.S. tax system. With this in mind, it would be wise to seek the advice of a tax specialist. It can greatly lower your tax burden. We utilize Tom Wheelwright of WealthAblity. He handles all our personal taxes, and is the personal tax advisor to some of the most successful real estate investor’s in the world. You can also learn more about saving on your taxes by simply reading about these top three tax benefits of real estate investing.
What Can Make it Difficult for Oversees Investors to Buy U.S. Properties?
The difficulties that an international real estate investor can come across are sometimes based on their experience level. It can be especially confusing and intimidating for foreign investors who are new to the game. It doesn’t have to be this way though. By learning more about the topic and using the best strategies, you can successfully own an American rental property while living abroad. Let’s go over a few items that can make purchasing U.S. real estate a challenge for some, depending upon what path they take:
1. Dealing with Financing Issues with the Bank as a Foreign Investor
By far, the most difficult aspect for foreign real estate investors when buying U.S. properties is their dealings with the banks when trying to obtain a loan. There can be a lot of red tape for international real estate investors to cut through to make the deal happen. This can lead to some non-resident investors paying cash to skip the headaches. But paying with cash would be the worst thing you could do as a professional or up and coming investor. It can cause you to have your money tied up into one property. Utilizing the bank’s money is a more beneficial way to buy rental real estate in the United States, as well as build your international portfolio. Although easily obtaining funding for your U.S. property purchase can be challenging with traditional loans, there is certainly a way around this; it’s called non-recourse financing. We will be discussing this in detail.
2. Trying to Make a United States Real Estate Deal Happen from Across the World
There are many moving parts to a U.S. real estate deal, and not being physically present in the country can present a host of issues. From not having the ability to judge for yourself if the property is 100 percent acceptable, to not knowing who to contact to form a team of professionals to assist with the process, international investors have to be on top of their game to successfully pull the deal off. Some may not be capable of doing this. But the truth is, there are real estate investment companies out there that can take care of everything for the investor, making it a done deal, and an easy one at that.
The Best Strategies for Buying U.S. Real Estate if You’re a Foreign Investor
When it comes to learning how to buy U.S. real estate as a foreigner, we would like to cover a few points that we feel are huge in making an international property transaction actually easy, as well as straightforward. Let’s find out what they are so you can start purchasing U.S. properties from another country, and look forward to building your global real estate portfolio.
1. Use Non-Recourse Financing to Easily Invest in U.S. Rental Properties
As mentioned, trying to secure a traditional bank loan to fund your U.S. property purchase can involve a lot of red tape that can make the process either unbearable or not happen at all. There is a secret out there that seasoned international buyers know about that we would like to share. It’s called non-recourse financing, and you’re going to think it’s so great that it can’t be true. First, let’s go over, in detail, what traditional financing is so you can compare it to non-recourse financing:
What is Traditional Financing (recourse loans)?
A recourse loan, or what most refer to as a traditional loan, seems to be the most common type of property financing. This could be due to a lack of knowledge of alternative financing strategies, as well as the fact that many banks do not offer alternative options. This type of loan is in the borrower’s name and is secured by collateral. Let’s take a look at a few more details, along with why traditional recourse loans are not popular with international investors:
You could be at risk of the lender coming after your personal assets when utilizing a recourse loan
If the loan borrower defaults on their payment, the loan provider has the right to take the asset they borrowed against, and then sell it to recoup their losses. If the sale does not produce the full amount owed, the lender has the right to go after the borrower’s personal assets, as well as garnish their wages, to make up for the difference.
Foreign investors are subjected to more documentation, roadblocks and red tape when trying to get approved
Traditional loan providers take into account your income, spending habits, credit scores, and more. International borrowers will be required to provide a lot more documentation to pass the lender’s tight approval process. It can be a challenge due to the fact that foreign investors typically don’t have the usual documentation that a citizen of the United States readily has at their fingertips, such as American tax returns and a U.S. credit history. Plus, it’s simple to verify the identity of a U.S. citizen, but a lot more needs to be done to verify the identity of someone who lives on the other side of the world. Because of all the additional verifications and documentation, the loan can take much longer to get approved.
What is a Non-Recourse Loan?
A non-recourse loan is a whole different ball game. It makes obtaining a property loan simple, with a greater chance of being approved. Plus, there is no risk of the lender taking your personal assets. This holds true even if you were to default on your loan payments. How it works is that the bank is not looking at your personal credit history or verifying your income, like a traditional lender would. They are only looking at the property you are trying to finance. This is because if you were to default on the loan, the property is the only asset they can take. Your personal assets, wages, and so on, can not be touched by the lender.
The lender would be basing the loan approval on the following type of criteria:
- Was the property built well?
- Is the property is in an area that is appreciating?
- Does the area have a high demand for renters?
- Is there a cash-flowing tenant already in place?
- Does the property currently have a reputable property management company in place?
As you can see, their focus is on the property, not you. In fact, the loan is not even in your name. Instead, it’s tied to the property. Because of this, you will not need to deal with the hassle of the requirements of a traditional loan.
Here’s a summary of what you will NOT have to do with non-recourse loans:
- No U.S. credit check.
- You will not need to supply a SS#.
- You will not need to set-up a domestic bank account.
- No need to verify your income.
What are some typical terms of non-recourse financing:
- Non-recourse loans usually have a 5.5 to 7% interest rate. This may be slightly higher than a traditional loan, but the benefits far outweigh this.
- This type of loan is not available for foreign investors who want to buy a U.S. home to live in. It’s for rental property purchases.
- Typical loan types are 30-year amortized loans, as well as 10-year balloon notes.
International real estate investors would be wise to choose a non-recourse loan over a traditional one. It’s worth mentioning though that there are not a lot of lenders who offer this type of loan. They are out there; you just have to do your research. It would be worth the time spent since non-recourse loans are what can make buying U.S. real estate happen! Rental Real Estate Quick Tip: Use the 1% rule to determine if the property you are evaluating will actually produce the monthly cash flow you are hoping for. You can learn more about how to apply this strategy by reading our latest post: The 1% Rule for Real Estate Investors.
2. Utilize a Full-Service Real Estate Investing Company that Works with International Buyers
The best strategy for buying U.S. real estate as a non-citizen is to utilize a full-service real estate company that works with international investors. Better yet, there are real estate companies out there that have non-recourse financing built right into their properties. This provides the best of both worlds. One such company is Morris Invest. They have worked with many investors from across the globe, making their U.S. property purchase a reality. Let’s find out more:
How Can Morris Invest Make it Easy for International Investors to Own an Income-Generating Performing Asset?
Since Morris Invest is a full-service real estate investment company, they are capable of taking care of all the details, big and small. This means that it won’t be a confusing, stressful situation, but instead, an easy, streamlined, professional, transaction. The opposite situation would be the international investor trying to chase down a team of people to attempt to make the purchase happen. This can be difficult, and sometimes impossible when doing so from another country. It’s so much easier to just contact one company and let them do everything for you. A U.S. full-service real estate investment company can set you up with a cash-flowing rental property, no matter where you are located.
Take a look at a few things that Morris Invest can do for international property Investors:
- Non-recourse financing is already built into every deal.
- We research the market to ensure your property is in an area that can provide a maximum cash flow.
- Can provide the international investor with several U.S. location choices.
- We take care of all the confusing paperwork for you on every level.
- Investors are advised on incorporating to lower their overall tax burden and avoid liabilities.
- Can provide existing renovated properties, or new construction properties – single-family housing and multi-family duplexes.
- If interested in a new construction project, Morris Invest can offer a full cost segregation study that’s built into the deal, which can save the international investor thousands of dollars in taxes.
- Can assign a reputable property management company that will take care of all the property and tenant needs, so you don’t have to.
- Provides information on the most reliable way to transfer money abroad using TransferWise.
- We place quality tenants in the investor’s U.S. rental property.
This strategy for making it easy for international investors who are looking into buying U.S. real estate, is a sure-fire way to remove the confusion and headaches, avoid costly mistakes, speed up the process, and build up a great global portfolio.
Additional Resources for International Investors
We recommend that as a foreign investor, that you look over our real estate vocabulary page to familiarize yourself with essential terminology and definitions commonly used in the United States. You can also increase your knowledge base by checkout the following pages on various real estate topics.
- Take a look at this Fund&Grow review pertaining to investment funds.
- Find out about how investing in real estate vs stocks is a wise strategy.
- Check out the top 5 real estate podcasts.
- You can recession proof your real estate investments, find out how.
- Find out how to buy an investment property before the end of the year.
- See if any of these property investment tools and resources are right for you.
Become Financially Independent with these Proven International Investor Strategies for Buying Real Estate in America!
You can jump on the path to building great wealth, simply by utilizing non-recourse financing, or a full-service real estate company that builds non-recourse financing right into their properties. With the financing issues out of the way, and a reliable investment company taking care of every detail, there is really nothing stopping you from moving forward with buying U.S. real estate! Book a quick call with a Morris Invest team member to get the ball rolling with buying rental property in the United States. Check out this video to hear all the details regarding buying rental properties in America as a foreign investor:
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