INVESTMENT GUIDE FOR FOREIGNERS
Today’s real estate market provides valuable opportunities to investors from all over the world. Being one of the most exceptional property markets within the United States, the Miami real estate market is definitely among the top options for foreign investors to consider within the country.
Miami receives a diverse range of nationalities which include foreign investors from Brazil, Colombia, Argentina, Venezuela, Canada, Russia, France, and many others. Over the last couple of months, we have seen foreign investors accounting for a large percentage of purchases made on the Miami real estate market which includes a large number of buyers who have been paying for their options in cash.
Foreigners who are interested in being able to purchase real estate within the United States will find that the process is not as complicated as it is in other parts of the world. Our team of real estate experts has put together an investment guide that is specifically for foreigners who would like basic information on what to expect when investing within the region.
Generally, there are two licensed realtors involved in real estate purchase transactions — one represents the seller, and the other represents the buyer. Property buyers do not have to pay for any real estate commissions as those commissions are settled by sellers. We provide our services for both buyers and sellers.
Property buyers are protected by Florida Property Laws which have been created in order to protect the property buyers and their money which is placed into an escrow trust which will also be provided to you once you decide to invest in Miami.
We make it a point to provide our foreign clients with all of their needs, including appropriate financial institution options for the purpose of the deposit and financing options that offer the lowest interest rates. Financing options are available to foreign investors; however, a longer closing period is to be expected under those circumstances.
We also provide our clients with commendable attorney options to serve as legal representation for the actual investment since there will be issues that will need to be addressed. One issue that will most likely be addressed is whether to place the property under one’s personal name or to form a corporation or trust which will hold the property as an asset.
Foreign investors within Miami are subject to 10 percent withholding at closing and are required to adhere to those terms unless the sellers have already made plans in order to prevent possible delays.
Also, foreign investors must file tax returns within the United States and are required to pay tax on their gains which can be determined by calculating the difference between the cost of the property and the actual selling price. The cost is determined based on the initial purchase price as well as any other items which may include any closing costs, commissions, sale expenses, and any capital improvements.
Since the potential gains and corresponding taxes can not be determined during the time of the purchase, the 10 percent withholding of the price sees to the compliance of returns. In some situations, the 10 percent withholding may go beyond the actual tax which will then be due when the tax returns are filed with the government.
At the point of closing, if the seller decides to provide evidence to the buyer and closing agent that the seller has secured application for a withholding certificate, the buyer and closing agent will still need to withhold 10 percent of the gross sales price. However, buyer will have the option to keep the funds in a trust account prior to the approval or denial of application with the IRS which usually takes 90 days upon receipt of the application.
In the event that the IRS approves of a smaller withholding percentage, the closing agent will be allowed to send the smaller withholding percentage to the IRS and get a refund from the seller. It is important to consider such a procedure and we make it a point to ensure that our foreign clients are given the opportunity to fully utilize such a procedure.
Foreign investors who are non-residents of the United States will need to acquire a taxpayer identification number (TIN) in order to be able to file a tax return. The TIN is necessary in order to properly identify the taxpayer.
The TIN can easily be acquired by completing the Form W-7 application along with original or certified proof of identification which will be processed by the IRS over the next ninety days. Once the TIN has been secured, all of the documents will be returned to their respective owners.
It is important for foreign investors to be aware of these requirements in order to set aside enough time to prepare the necessary documents and we see to it that our clients have everything ahead of time in order to avoid any delays with the purchase.
Foreign investors will also be required to file tax returns even when there is no due tax and the sellers will determine whether or not to apply for reduced withholding on the property.
Foreign investors who fail to acquire a TIN may damage the seller. Buyers may have the option of filing their TIN application as leverage in order to manipulate seller’s concession, especially in cases wherein the seller needs to come up with more cash during the closing process.
Also, foreign investors may gain more exposure in the event that the seller is unable to provide a TIN after the closing to avoid penalties on the late remittance of withheld funds as there are no sanctions for not being able to provide the TIN in a timely manner.
Nevertheless, foreign investors who decide to select our team of real estate experts for the purpose of their property purchase can expect a smooth process which we will aid in from start to end. Call us today to find out how you can make the most of the grand opportunities that await you on the Miami real estate market.