Are you a non-US citizen looking to invest in New York City real estate? Whether you’re interested in purchasing a pied-a-terre for spending summers in the city, or you simply want to purchase an investment property and rent it out, NYC is an attractive option for many would-be property buyers from overseas. While real estate transactions involving foreign buyers take place in the city everyday, there are a few things to note while navigating the foreign purchase landscape.
Financing Options
Depending on the size of the loan and other circumstances, foreign buyers can normally finance up to seventy-five percent of a real estate purchase in the United States. Most U.S. banks have loan programs that accommodate foreign buyers, but be aware, documentation requirements are stringent. Some banks will allow borrowers to forego providing certain documentation in exchange for higher a higher interest rate. However, at the very least, you’ll need to provide a passport or visa proving you’re legally allowed to be in the United States, credit references, verification of past rent or mortgage payments, and proof of employment.
Condo vs. Co-op
Since co-ops often impose restrictions on pied-a-terre or investment purchases and require proof of substantial assets in U.S. accounts, a history of filing U.S. tax returns, and local character references, condominiums are generally considered the best option for foreign buyers. Condominiums are open to any qualified purchasers, regardless of financial or social ties to the United States, and they do not impose restrictions on renting out the unit or simply keeping it as a pied-a-terre.
Tax Liabilities
There are also certain tax implications for foreign buyers associated with owning and selling real property in the United States. The federal rate on long-term gains on the sale of real property is 30% for foreign nationals. In addition, when a property is sold by a foreign national, state and federal governments require portions of sale proceeds to be withheld for income tax.