Foreign Homebuyers: Tax Information, Best Places to Buy and Why
Over $100 billion dollars worth of properties were purchased in the US from April 2015 to March 2016 by international homebuyers, according to Mansion Global. Each year, foreign investors spend a ton of money on obtaining property within the United States. For most, this is a very wise and prudent use of their finances. In comparison to other global cities, properties located within the United States can be snatched up for a relative bargain. In a recent Bloomberg article referencing an AFIRE survey, “China’s economic slowdown, Brazil’s recession and Europe’s immigration crisis underscored for international investors that ‘the U.S., at the moment, really is the safest place for them to go’.” Additionally, it also noted that the US market ranked first for countries with the best opportunity for price appreciation. So, if you’re a foreign homebuyer, here’s the top five places to buy in the year ahead.
The statistics would certainly show that specific nationalities tend to be attracted to different markets for different reasons. If you were to look at total transactions across the states, most the data would indicate that international purchasers favor warm weather states such as Florida and California. However, most purchases are concentrated on specific global cities with mass appeal. California boasts two cities that are consistently in the top three places to invest in the US: San Francisco and Los Angeles. Additionally, they are both within the top five of international cities according to the most recent AFIRE survey. A recent Forbes survey attributed San Francisco as the number one most likely place to receive investment spending from 27% of their respondents. These California cities are prime for investment money for several reasons: warmer climate, geographical proximity and similarity to Mexico, proximity and cultural affinity with Asia, employment opportunities to industries within Silicon Valley, and an overall “melting pot,” region.
Certainly, New York City is one of the most popular choices for foreign homebuyers within the United States and Internationally. Manhattan seems to be the bullseye of investors target when considering this capital city. Manhattan tends to be the most expensive yet most stable and most recognized markets in the US. New York city is attractive to investors because of its longstanding history of stability and appreciation. It offers a great economic environment, political climate, knowledge and quality of life. Globally, Manhattan is a bargain when compared to cities like Hong Kong, London, and Paris.
Over the next few years, Boston will be putting up approximately five new high rise towers. Some with the help of foreign capital. These luxury residences will certainly be changing the skyline of the city but it will also allow for a plethora of opportunities for foreign homebuyers to purchase a piece of property. The city of Boston offers some of the same appeal as New York city but also an abundance of job opportunities within the medical industry.
Lastly, the nation’s capital, Washington D.C., is one of the top five places for international purchasers. Whereas some countries only have one or two favorite cities, DC is an example of just one of the many ideal cities across the US that offers stable economic growth and appreciation. It’s a robust and diverse city that is well protected from market collapse.
As a quick bonus, some other cities to consider are: Chicago, Seattle, Atlanta, Miami, Austin, and Houston!
As you’re considering purchasing a US property it’s very important to familiarize yourself with all possible tax implications. Taxes owed may be impacted by the type of ownership you take the property in, your purpose/use of the property, and what tax treaties are in place within your country. FIRPTA tax withholding will come into play when you sell the property. Technically it’s the buyer’s responsibility to withhold this from the purchase but you’ll definitely want to be aware of the tax. Taxes will also need to be withheld from rental income. Be sure to check with the IRS to investigate some of the tax laws in more detail.
There are wonderful opportunities for foreigners investing in US properties. There are some rules to play by but amazing potential to safely place your wealth into a stable and dependable market. Sticking with the most popular cities as mentioned above will certainly be the safe bet. These robust cities have stood the test of time and have become a haven for cultures across the world. Start your browsing now at Homes.com and when you’re ready, be sure to use a trusted professional to guide you through all the intricacies of the buying process.