As an International investor, it is simple to purchase a property here. If your dream is to have a home in Orlando, don’t wait and start your search today. The process can be taken care of in a blink of an eye! These are the steps that should be taken:
- The most important thing is to hire a Realtor with experience, so he or she can give you the professional advice required in the process of purchasing the property.
- After hiring a Realtor, tell him or her if you want to buy the property in cash or if you wish to finance it. If you opt to finance, the Realtor will introduce you to the bank, which you will apply to be qualified for finance as a foreigner. An entry is required between 30% and 40% of the value of the property. With the approval letter, the Realtor is ready to find your dream property. If you are buying in cash you will need proof that you have the money. It can be a bank statement, a letter from a financial institution or proof of an application.
- Within the specifications and price compatible with your budget, we will register you in the real estate system where each day you will receive by email properties available in the market for evaluation.
- Once the right property is selected, the next step is to send an offer to purchase the property. With the offer, it is necessary to have an initial deposit, what we call escrow deposit, and proof to be sent along with the offer. We advise our customers to open a bank account here in the U.S., which can be opened with just $100.00, a valid passport and identity card of the country of origin.
- After the offer is accepted, a Realtor will proceed with the closing process that can take between 20 to 45 days.
- If you cannot come to the U.S. to make the purchase, you can sign all documentation at the American Consulate in your country of origin. Whether you are buying the property in cash or through financing, it is necessary that all documentation is notarized. This whole process is done through a title company designated by the seller.
- After the closing, we offer the client all necessary assistance, such as contacting the power and water companies, registration with the homeowners association, maintenance of your property, helping to purchase furniture, etc. In summary, everything that might be difficult due to a language barrier becomes enjoyable and easy instead.
A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens’ full amounts, whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans unless specifically agreed between the parties.
A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the creditor and borrower. However, both will often result in a negative credit report against the property owner.
The foreclosure process, as applied to residential mortgage loans, is a bank or other secured creditor selling or repossessing a parcel of real property after the owner has failed to comply with an agreement between the lender and borrower called a “mortgage” or “deed of trust”. Commonly, the violation of the mortgage is a default in the payment of a promissory note. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its mortgage or lien.” If the promissory note was made with a recourse clause and the sale does not pay the existing balance of principal and fees the mortgagee can file a claim for a deficiency judgment.
Property under a foreclosure order or short sale and is advertised for sale by its mortgagee. Distressed property usually fetches a price that is much below its market value.
Individual-Direct Ownership:
This ownership structure is usually acceptable for foreign persons who purchase a second residence in Florida. If the foreign buyers are a husband and wife, the deed should be structured so that title is taken in their names, as joint tenants with right of survivorship, so as to avoid probate problems at a later time.
- This is the easiest and most direct way to purchase real estate in Florida
- Purchase in both the name of the husband and wife could avoid probate
- Easier to obtain insurance indirect ownership
Corporate Ownership (C-Corp. “S” Corp.)
- Avoid branch profit tax
- Confidentiality
- Possible avoidance of a substantial US estate tax
Limited Liability Company
- Florida Statute 608 governs the establishment of limited liability companies. It is comparable to a limited partnership except it does not have a general partner and it is managed and operated usually by as few as one individual. The Florida Legislature has exempted the limited liability company from corporate income tax. Such a limited liability company is treated the same way as a subchapter S Corporation, therefore, having the advantage of no corporate tax for its members or shareholders.
- Limited liability may have non-resident aliens as owners or members. It does not have the same requirements as a subchapter S that all members or shareholders be US Residents.
- Limited Liability Companies may have centralized management by one member.
- The additional advantage of a Limited Liability Company is limited to the investment amount.
Many foreigners desire to place their US holdings in a corporation, which is then owned by an offshore trust. This can present various estate and tax planning issues. Consideration must be given to United States income and the state tax law, as well as estate and tax treaties between the United States and the foreign country.
A Land Trust is a preferred form of ownership for many foreign investors. Investors from the United Kingdom are generally familiar with this. Other investors from Europe are also familiar with Land Trust. Land Trusts are governed by Florida Statute Chapter 689.071; the chapter creates two types of land Trust.
General Partnership
A General partnership is between two or more persons. All partners are equally liable for any claims against the partnership.
Limited Liability Partnership
In a Limited Liability Partnership, the general partner has full authority to exercise partnership powers and to manage the business of the partnership. The limited partners have an interest as capital contributors and may not manage or exercise partnership powers without exposing themselves to unlimited liability. Unlike a General Partnership, the limited partner does not have a right to participate in management.
Limited Liability Partnership is a preferred method of ownership for foreign investors.
The Foreigner Investments in Real Property Tax Act (FIRPTA) was designed to ensure that all owners of US property pay taxes, including resident and nonresident aliens.
The gain or loss from the sale or transfer of a U.S. real property interest by a nonresident alien is taxed as if the nonresident alien were engaged in a U.S. trade or business during the taxable year pursuant to Internal Revenue Section. The sale of Florida rental property by a nonresident alien will be taxed like that of a U.S. resident since it is considered effectively connected income or loss. The net gain on the sale will be subjected to U.S. income tax.
When a nonresident alien sells a U.S. real estate property, Internal Revenue Code section 1445 requires that the buyer or transfer agent withhold 15% of the sales price. The price includes the sum of cash paid, the fair market value of other property transferred, and any liability assumed by the buyer or to which the real estate was subjected. The amount must be paid over to the IRS by the 20th day after the date of transfer.
The application for a withholding certificate should be prepared prior to the closing. The timing of the filing of this certificate is critical. Allow 90 days for this.
If the actual tax due on the property sale is less than 10% withholding tax, the closing agent, attorney or title agent will retain the withholding tax in his possession pending IRS approval of the application. If the IRS approves the application, the appropriate amount of withholding tax will be returned and the remainder paid over to the IRS within 30 days. A withholding certificate obtained before closing notifies the buyer that a reduced or no withholding amount is required.
Exemption
- There is an exemption on residential property from a capital gains tax for residences under $300,000.
- Otherwise, under FIRPTA, the professional handler of the closing or broker involved may be liable for withholding 15% of the sales amount, as required under FIRPTA.
Most foreign investors will not have a social security number but may be able to obtain a taxpayer identification number.
INCOME TAX
- Resident pays U.S. taxes on worldwide income
- The non-resident investor pays taxes on income in America
- Non-residents must pay/declare income tax when receiving rent from the property.
- Profit on sale of the property will be subject to fees / Income Tax
- 15% of the sale of the property will be retained by the title company at the time of sale for accountability to the IRS
- Withholding tax is allowed as a credit
- When placing the home for sale, it is advisable to apply for the certificate from the Internal Revenue Service – IRS