In 2011, according to the U.S. Department of Commerce, foreign direct investment in U.S. businesses and real estate totaled $234 billion. Immigration and foreign direct investment in the U.S. real estate market by foreign nationals is benefiting the U.S. economy by: (1) stimulating and strengthening the U.S. real estate market, (2) spurring economic growth and development, and (3) promoting job creation. Foreign direct investment by investors in the U.S. real estate market is helping to stabilize local economies and the U.S. real estate market. As international trade and finance specialist, James K. Jackson, asserts in his research entitled Foreign Direct Investment in the United States: An Economic Analysis “foreign direct investments are highly sought after by many state and local governments that are struggling to create additional jobs in their localities.” The influx of capital into local economies by foreign investors is positively affecting local businesses, local governments, and the U.S. economy.
Foreign investors are not prohibited nor restricted from purchasing real estate in the United States. However, foreign investors must obtain the proper documentation required for financing to enable them to hold title as well as fulfill other obligations of owning real estate such as paying taxes. Certain banking institutions require a tax identification number (TIN). Other financial institutions may require a social security number, which is issued only when one is authorized to work in the United States. If keeping the property as a primary residence is a condition to the property purchase, the foreign investor must have the appropriate visa to remain legally in the United States. Common visas used for the purpose of foreign direct investment in real estate are the E-2 treaty trader visa and the EB-5 investor visa.
If you are a foreign investor considering investing in the U.S. real estate market, below are frequently asked questions and answers in regard to visas, restrictions, and other information foreign investors should consider when contemplating investing in U.S. real estate.
What are the legal issues for a foreign investor?
First, owning a property in the US may be considered “intent” to permanently live in the U.S. This potentially could pose a problem for foreign investors seeking to enter the U.S. with a tourist visa. If the US Citizenship and Immigration Services suspects that a person is “living” in the US with a tourist visa, the tourist visa can be revoked.
We recommend foreign investors define their strategic objectives for investing in the U.S. If the purchase is for investment purposes only, and not for the sole use of the owner, the foreign investor should be permitted a tourist visa. However, if the foreign investor plans to spend more time in the US, we suggest considering longer term visas like the E-2 treaty trader visa or EB-5 investor visa.
What types of visas are available for the foreign investor?
You may be eligible for an E-2 treaty trader visa if you invest a substantial amount of money in a new or existing U.S. business. You must be from a country that has a treaty with the United States. For a list of treaty countries, visit the U.S. Department of State. The E-2 treaty trader visa allows a foreign investor to form a small business and to reside in the U.S. to oversee the operation of the business.
Foreign investors in U.S. real estate can also pursue the EB-5 investor visa. The EB-5 investor visa offers foreign national investors the opportunity to use foreign direct investment in a U.S. commercial enterprise to obtain permanent residency, sometimes referred to as permanent residency through investment. Foreign investors must invest $500,000 or $1,000,000 depending on specific criteria. The EB-5 visa leads to permanent residency or a green card within the U.S.
Foreign investors may also have the option of applying for an H-1B visa for self-employed startup owners. The foreign investor may be able to self-petition in this case and not need a sponsoring employer.
Are there any restrictions on foreign investors buying US property?
There are no restrictions on foreign investors purchasing residential and or commercial properties within the U.S.
What legal entities allow a foreign investor to purchase real estate?
The foreign investor needs to determine how he or she plans on investing in the U.S. real estate market. Do you plan on investing as an individual? If so, you must first apply for a tax identification number. Do you plan on being an investor pursuant to an E-2 treaty investor visa; if so, you will be able to apply for a social security number. If you would prefer to form a corporation to purchase the investment property, you will need to apply for a corporate federal employer identification number which can be used for purposes of purchasing the investment property.
There are a number of legal entities that a foreign investor may form to purchase real estate in the U.S. Most foreign investors will use an LLC to invest in real estate. If the investor chooses to form a LLC, there is no requirement to obtain a social security number. Taxation will vary from country to country. US citizens are taxed on their worldwide income unlike other visa holders. We will advise and counsel you on the most appropriate legal entity for your real estate and visa objectives.
Any other legal issues?
We recommend that a foreign investor always consider long term visa strategies in case you decide to spend more time in the U.S. Also, foreign investors need to have a exit strategy in place in case they are not allowed to enter the US for any reason. Foreign investors should plan for who will sell the property for them, as well as decide on the issue of the power of attorney.
How Subhan Law Office, LLC, Can Help You
Subhan Law Office, LLC, is dedicated to advising and counseling foreign investors on visa strategies and solutions for investing in the U.S. real estate market including residential and commercial properties. Contact us today for a free consultation on we can help you invest in the U.S. real estate market and obtain a visa at 414-232-8704 or toll free at 1-855-946-6848.