Preparing to purchase US Real Estate with foreign internationals made up 7% of Real Estate transactions in 2013 according to the National Association of Realtors. With much of our clientele international as well as domestic, we have prepared this guide to help prepare your Real Estate purchases specifically for the state of Arizona in the United States. We advise a professional tax & international attorney to help guide you through this process.
More than Just Lines on a Map: Best Practices for U.S Bike Routes
Kathy Smith, My Home Group, LLC- AZ Smith Properties Home Buyer's Guide to Phoenix, Arizona Real Estate
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AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
8360 E Raintree Dr. #210
Scottsdale, AZ 85260
INTERNATIONAL HOME BUYERS GUIDE TO
PHOENIX, ARIZONA REAL ESTATE
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AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
INTERNATIONAL HOME BUYERS GUIDE
TO PHOENIX, ARIZONA REAL ESTATE
TABLE OF CONTENTS
Introduction 3
Common Real Estate Practices in the US & Phoenix, Arizona 4
The MLS
Commissions
Buying Your Home 5-7
Identity
Match Making to the Perfect Home
Financing & Mortgages
All Cash Purchases
Verification Documents Checklist
Insurance
Taxes 8-10
Consult a Tax Specialist in Your Home Country
Rental Income 101
Get the Most for Your Deductions
Establishing a LLC 10
Work with a Professional Realtor 11
Conclusion 12
References 13
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AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
INTRODUCTION
The US & Phoenix, Arizona welcome our international home buyers! International real estate
investing continues to be on the rise in prime markets such as Phoenix, Arizona. According to the
National Association of Realtors, non-full time residents purchased an estimated $68.2 billion dollar
of US real estate between March 2012 to March 2013. Thanks to buyers abroad recognizing the
real estate opportunities in the US, they have made up 6.3% of the US’s total home sale transactions.
[1]
This information process to purchase a home is similar in nature to that of US home buyers. There
are some methods & understandings foreign buyers will want to understand to prepare. Tax
policies, credit verification & financing will run a slightly different process for international buyers.
The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona.
Although the information is deemed reliable, it’s highly advised to enlist professional real estate/tax attorney services from your
country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.
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AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
COMMON REAL ESTATE PRACTICES IN THE US &
PHOENIX, ARIZONA
The MLS
New real estate listings in the Multiple Listing
Service (MLS) is an important part of the process
providing an opportunity to actively market &
present homes to each agent & their perspective
clients both internationally abroad & domestic.
This business practice varies in many other
countries, where buyers go from agent to agent to
find a property. However, the advantage of
working with one chosen professional in the US &
Phoenix, Arizona real estate market, in particular, is
the benefit of experience agents with access
to“pocket” or “quiet” listings just as much. Therefore, it is important to have strong, experienced
real estate agents working for you. The Agents know both; MLS listings & have proven experience
networking resources providing home buyer’s quality selections in real estate inventory options.
The Commissions
The seller pays the sales commission in the US.
The compensation between the buying &
selling representative brokers & agents are
often divided. Fees vary in percentage points
depending on the market & the type of real
estate transaction on hand. Buyers do not pay
upfront for buyer agent representation,
therefore working with an experienced buyer’s
broker agent committed to your best interests first & foremost is crucial when investing your hard
earned money into your next home. Our experienced team thrives in achieving the home buyers
providing the long-term sustainable rate of return results catered to each & every one of our client's
unique residential lifestyle goals surrounded by modern day conveniences.
The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona.
Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/real estate/tax attorney services
from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.
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AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
BUYING YOUR HOME
Identity
You don’t need to be a US citizen to purchase a home. However, you do need an individual
Taxpayer Identification Number. This process takes place through the Internal Revenue Services.
The identification number is issued & recorded with the foreign national to file income tax returns.
For more information visit: http://www.irs.gov/Tax-Professionals/Frequently-Asked-Questions:-Do-I-
Need-a-PTIN%3F & Reference: Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for
United States Tax Withholding.[2] This matter is mandated when purchasing US real estate. To
obtain your taxpayer identification number, you will need a valid foreign passport, two additional
photo forms of identification (such as driver’s license) to verify who you are & your country of origin.
Matchmaking to the Perfect Home
With a broad range of choices in the US Real Estate & the Phoenix, Arizona markets, we will want to
help begin with your research & preparation. Assisting international home buyers in locating the
best investment home best suited for your unique lifestyle needs & wants is our top priority. For
example; do you plan to use the property for strict investment, education, business or pleasure
(both), enjoy pools &
barbecuing year round, golf
properties, the vicinity to
museums or dining & shopping,
horseback riding, hiking &
biking &, etc. The type of home
we can help also search
necessary. Do you prefer a
single detached residential
home that offers endless
entertainment & hosting events
or a vacation style "lock &
leave," property the includes
maintenance services offered in
such properties as town homes,
condominiums or patio type
homes? We will cater to your
choice as we strive to search for homes to reflect your lifestyle & needs. Talk to your dedicated
agent about your needs to help matchmake the perfect home to suit your needs.
The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona.
Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services
from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.
6. 6
AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
BUYING YOUR HOME
Financing & Mortgages
In recent years, banks have begun
lending again to international home
buyers. However, banks do often
require an additional business
relationship going further than just the
mortgage. HSBC offer international
lending programs. To begin your
research visit:https://www.us.hsbc.com/
1/2/home/personal-banking/
mortgages/international.[3]
When seeking a loan, the banks will need a statement showing the home borrower has a minimum
of 12 months of reserves to cover the mortgage payment, maintenance & taxes. Request from your
dedicated agent lists of various major mortgage brokers & banks to help offer you possible
lending/mortgage terms suited to best suit your needs.
All Cash Purchases
In 2013 NAR reported 63% of Real Estate
transactions purchased by foreign buyers
were all-cash [3]. If this is the case, please
note proof of funds (copy of recent bank
statement) will need to be accompanied
with home offers.
The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona.
Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/real estate/tax attorney services
from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.
7. 7
AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
BUYING YOUR HOME
Verification Documents
Checklist
‣ Credit References
Four credit source references
adequately
documenting credit history
directly from either
your accountants, bankers, or
insurance officials will
suffice.
‣ Current Visa or Foreign Passport Copy
Verify these documents are not
expired or expiring
any time soon.
‣ Verification of Mortgage/Rent Payment History
Documentation with a one year minimum before the placement of the mortgage application.
‣ Proof of Employment
Employment verification when applying for a mortgage can be obtained via paycheck stubs
or documentation of employment on corporate letterhead.
‣ Adequate Closing Funds
Showing the lender you can afford the purchase is great, however the lending institution will
want to confirm the reserve funds on hand to ensure the full first year of payment, insurance,
costs & taxes, etc are obtainable.
Insurance
Lenders in the us requires borrowers to purchase homeowners insurance. This helps in protecting
your asset from potential damages & in some cases natural disasters. State to state the home
owners insurance will vary & the costs are based on the size of the property just as well. Please
note: certain states prone to natural disasters typically run higher.
The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona.
Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services
from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.
8. 8
AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
TAXES
Tax liability for
foreign nationals
differs from US
residents
‣To verify the Federal tax on
long term investments visit:
http://www.irs.gov/
Individuals/International-
Taxpayers/Foreign-Persons-
Receiving-Rental-Income-
From-U.S.-Real-Property.
‣Under the Foreign
Investment in Real Property Tax (FIRPTA), income tax is withheld immediately following the sale
or transfer of property for a non US-residential owned property. The rate varies per state. To
confirm the federal rate [5] Visit: http://www.irs.gov/Individuals/International-Taxpayers/FIRPTA-
Withholding. [6]
‣ “Statement of Withholding on Dispositions by Foreign Person of US Real Property Interests” is
required by the IRS Visit: http://www.irs.gov/publications/p544/ar01.html. Many states also
request a “Nonresident Real Property Estimated Income Tax Payment Form” Visit: http://
www.irs.gov/pub/irs-pdf/f1040nr.pdf.
We recommend & advise seeking the expertise of an international tax accountant
professional to provide assistance in facilitating these forms.
Consult a Tax Specialist in Your Home Country
International home buyer’s tax liability will vary from country to country & is referenced to the
specific country’s tax treaty with the US. It’s best to consult a tax advisor in your country to review
the tax treaty details & provisions. Please check with your local tax specialist before your buy.
The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona.
Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services
from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.
9. 9
AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
MORE ABOUT TAXES
Get the Most from Your Deductions
International buyers who finance their property purchases with 40 to 40% down payments typically
do not pay income taxes on their rental revenue for the first 10 to 15 years of ownership, since the
US is generous when it comes to expenses eligible to be deducted from rental income. Claiming
some of the following deductions against income; mortgage interest, standard charges,
depreciation, property taxes, insurance, & amortization of closing costs, resulting in negative taxable
income & not tax liability especially in the early years of property ownership.
Rental
Income 101
The US law requires
foreign nationals
“elect” to pay US
income taxes on net
profits earned from
rental properties.
Failure to make the
election or file the
proper form with the
IRS in a time
sensitive fashion
could result in 30%
of the gross income
withheld.
Circumstances such
as these could also
apply even in the event the property owner is incurring tax losses & does not own any taxes to the
government. The filing of their tax returns must take place to make the “election” required by law.
Visit: http://www.irs.gov/pub/irs-pdf/p54.pdf.
Please Note: You Do Not Have To Be in the US to Close on Your Property
Talking to your realtor about the processes in place to close on your property is a common practice
& can be convenient. The buyer does not need to be present in the US. The owner can pre-sign
with the preferred title company before your return or have your representative with “Power of
Attorney,” assigned to close on the property on behalf of you as the new owner.
The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona.
Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services
from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.
10. 10
AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
ESTABLISH AN LLC
Buying a home under the name of a domestic US company or Limited Liability
Corporation/Company (LLC), both have various tax advantages. We recommend seeking
the help of your tax advisor who specializes in international law, to help prepare. The
benefits vary between purchasing via an LLC, such as tax incentives involving treaties
between foreign countries & the US & may sometimes detract from those advantages.
When forming an LLC in the US, it takes a minimum of one to week. Establish the LLC in
the same state as the property purchase. The LLC requires by law to file local, state &
federal tax returns, an LLC can include foresight nationals & US residents, at the time of
sale property owners can sell or transfer shares of the LLC to a buyer, a Foreign
Corporation can own a US based LLC for additional benefits.
Tips on avoiding US Estate Tax upon the passing of a non-US resident, the estate will be
taxed by the US government at an estimated 45%. To prevent this if the international
buyer establishes a Limited Liability Corporation (LLC) in which owns the property & a
Foreign Corporation to own the LLC, the US would not be able to tax the property upon
the passing of the owner. Save considerably & have this completed with minimal expense
& non-time consuming inconveniences when enlisting professional assistance.
The information prepared here within, are resources to help begin your research to US international home buying in
Phoenix, Arizona. Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/
real estate/tax attorney services from your country of origin to ensure correct procedures are customary & tailored to
each country’s agreement with the US.
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AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
WORK WITH A PROFESSIONAL
By working with US professional real estate agents such as our trusted agents, their expertise &
experience in helping international buyers is to the greatest advantage. Knowledgeable real estate
agents such as ours will protect your interests while guiding you to property searches with an
international purchase process providing you with a seamless US home property purchase as
possible. Our agents cater to our clients’ lifestyle needs & are ready to help in every aspect of
finding the perfect home or investment property for you.
The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona.
Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services
from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.
12. 12
AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
CONCLUSION
Finding the right real estate agent is the first step to buying in the US. The next step now is prior
preparation in aligning the necessary paperwork to purchase. Investing in the US real estate is a
great way for many international buyers to keep their money safe in a politically stable country.
According to 53% of Realtors® surveyed by NAR, the international buyer's purchases in the US are
based on the profitability & security.[7]
Please contact us today to make contact with your agent to begin receiving the perfect investment
property or vacation home options.
The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona.
Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services
from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.
13. 13
AZSmithProperties.com | My Home Group, LLC International Buyers Guide to US Real Estate
REFERENCES
1. ^ “National Association of Realtors®"2013 of Profile of International Home Buying Activity
online Retrieved January 30, 2014. http://www.realtor.org/reports/profile-of-international-home-
buying-activity
2. ^ “IRS”: Frequently Asked Questions: Do I Need a PTIN? Retrieved January 30, 2013. http://
www.irs.gov/Tax-Professionals/Frequently-Asked-Questions:-Do-I-Need-a-PTIN%3F.
3. ^ “National Association of Realtors®": 2013 of Profile of International Home Buying Activity
online Retrieved January 30, 2014. http://www.realtor.org/reports/profile-of-international-home-
buying-activity.
4. ^ “IRS”: Foreign Persons Receiving Rental Income from US Real Property: Retrieved January 30,
2014. http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Persons-Receiving-Rental-
Income-From-U.S.-Real-Property.
5. ^ “IRS”: FIRPTA Withholding of Tax on Dispositions of United States Real Property Interests.
Retrieved January 30, 2014. http://www.irs.gov/Individuals/International-Taxpayers/FIRPTA-
Withholding.
6. ^ “IRS”: FIRPTA Withholding of Tax on Dispositions of United States Real Property Interests.
Retrieved January 30, 2014. http://www.irs.gov/Individuals/International-Taxpayers/FIRPTA-
Withholding.
7. ^ “National Association of Realtors®": 2013 of Profile of International Home Buying Activity
online Retrieved January 30, 2014. http://www.realtor.org/reports/profile-of-international-home-
buying-activity.
The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona.
Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services
from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.