Foreign Investment in Florida Real Estate: What You Need to Know

By: Romy B. Jurado, Esq., Partner at Jurado & Farshchian, PL., and a Member of The Fund

The Sunshine State has long been home to a large number of immigrants. Immigrants altogether make up more than a quarter of Florida’s labor force, and one in five residents in the state was born abroad. Additionally, one in eight residents is a native-born U.S. citizen with at least one immigrant parent. It is no surprise that Florida is one of the favorite destinations for foreigners who want to invest in real estate. As a Realtor® in Florida, it is crucial to understand foreign investment in Florida real estate and how to do it properly.

Buying a Property in Florida Will Not Automatically Get You a Visa

U.S. Law does not preclude foreign nationals from buying real estate in the country. Instead, any foreign national can buy real estate without any involvement of a government agency, as long as they abide by the law.

However, buying real estate in America does not provide foreign nationals with any rights or privileges when it comes to acquiring legal status. Many people think that immigrating to the US legally is just as simple as acquiring real estate in the country, which could not be falser. Any individual interested in acquiring a Visa must consult an immigration attorney to understand what the requirements are. While a foreign national does not need a green card, they do however require an Individual Taxpayer Identification Number (ITIN) that is available for nonresidents, resident aliens, their spouses, and dependents who cannot receive a Social Security Number.

Selling US Real Estate as a Foreigner – FIRPTA

Non-US citizens intending to sell real estate must adhere to rules under the FIRPTA legislation. FIRPTA is an acronym for Foreign Investment in Real Property Act. The legislation was passed in 1980 and applies to both non-U.S. Citizens and foreign entities. It allows the United States Federal Government to withhold income tax that is owed at the point in time when a property is transferred. Usually, the withheld amount ranges between 10%-15% of the gross purchase price depending on the transaction, regardless of any profit was made.

There are a few exemptions to this withholding, including, but not limited to:

  • The personal residence purchased is valued at $300,000 or less;
  • The transaction is categorized as a non-recognition transfer; or
  • The realization of the transaction amounts to zero.

Buying US Real Estate as a Foreigner – An Overview

When it comes to taxes and regulations, non-US citizens buying real estate in Florida must be careful. Should a client purchase a property for leasing purposes, the real estate will be subject to taxation on rental incomes.

In this sense, foreign buyers need to be aware of the guidelines provided by the IRS (Internal Revenue Service) for determining what constitutes a US-resident for tax purposes. The IRS utilizes a method called “Substantial Presence Test” to determine how many days an individual has been physically present in the country for tax purposes. Plus, foreign property buyers may be affected by tax liability in their native country, depending on which country the buyer comes from and if the country has a tax treaty with the U.S.

Commonly, buyers are responsible for paying the costs associated with:

  • Title search;
  • Legal fees; and
  • Recording costs.

When summed up, these costs tend to fall in the 1%-2% range of the property purchase price. In case the buyer cannot attend the closing in person or remotely, it is possible to execute a Power of Attorney authorizing a trustworthy third-party to represent the buyer at the transaction closing.

Financing a Property in Florida

When applying for credit, lenders determine credit risk by examining credit scores. This way, before applying for a US mortgage as a foreigner, the buyer must first establish credit and earn a good credit score. Any buyer interested in mortgage options for financing a property in Florida should consider banks with global operations. These well-established financial entities will have the necessary expertise to verify credit established abroad and to provide the process’ guidelines.

Commonly, qualified foreign buyers with a 30%-40% down payment will be able to obtain financing for a property in Florida. Many banks require foreigners to give a minimum amount of money on deposit, so be aware.

Paying All Cash for a Property in Florida

Non-US citizens can purchase real estate in Florida paying all cash. Nonetheless, U.S. law provides that all-cash real estate transactions over USD $10,000 must be reported to the Federal Government.

Typically, the largest number of cash buyers in Florida are concentrated in the luxury market in the Southern portion of the state. However, there are also cash buyers in all price levels of the condo market. While most tend to be individual investors or groups of investors, some non-investor individuals are paying all cash for properties intended for personal use.

Buying US Real Estate as a Foreigner – Attention to Detail

Non-US citizens interested in buying real estate in Florida can do it in their own names or through a legal entity. In this case, the term legal entity includes limited partnerships, corporations, joint ventures, trusts, or limited liability companies.

It is important to note that the structure by which a foreign buyer purchases a real estate property may affect taxes. Housing cooperatives are not considered real property and often have rules prohibiting foreign ownership.

 

 

Romy B. Jurado, Esq.
Originally from Peru, Romy moved to the United States with the entrepreneurial dream of becoming an attorney and starting her own business. And today, she is living proof that dreams really do come true. As a founder of Jurado & Farshchian, P.L., a reputable business, real estate, and immigration law firm, Romy’s practice is centered primarily around domestic and international business transactions – with a strong emphasis on corporate formation, stock and asset sales, contract drafting, and business immigration. Romy frequently counsels the Peruvian Consulate General in Miami with a variety of U.S. related legal matters.  You can learn more about Ms. Jurado at https://jflawfirm.com/.  

The opinions of any particular author are not necessarily the opinions of Attorneys' Real Estate Councils of Florida, Inc., any of the local Real Estate Councils or Attorneys’ Title Fund Services, LLC.