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Mitigating Risks of Foreign Investments in US Real Estate

Posted by Ann Irons, CPA

Nov 20, 2014 12:51:00 PM

foreign-real-estateForeign investment in United States real estate is not for faint of heart. Volatile exchange rates and a less than ideal housing market make for risky business. If you are new to real estate investing, a basic understanding of the risks and benefits can mitigate these risks.

The Allure of US Real Estate

A January 2014 survey of members of the Association of Foreign Investors in Real Estate revealed that London is currently the most attractive city for foreign investment in real estate. Don’t let that deter you from investing in the United States. The second through fifth spots on the list are all major cities on American soil: New York City, San Francisco, Houston, and Los Angeles, respectively. Respondents indicated that stability and security are the primary reasons for ranking the United States so highly, and by a very wide margin.

Type of Investment Properties

Newly minted investors have a tendency to invest in any property available within a reasonable price range. This may work well for seasoned investors who wish to diversify, but it can cause problems for novices. Consider focusing on only one or two categories of real estate. Examples include industrial properties, which were most popular in 2013, along with retail spaces and office buildings. This changed in 2014, when multi-family residential properties topped the list. The more you understand about your chosen categories, the more likely you are to make a wise investment.

Taxation of Foreign Investments in US Real Estate

Filing your tax return is essential. You may not live in the United States, but you are still obligated to report your income to the Internal Revenue Services. Several factors determine whether certain credits or deductions are allowed, including your country of origin and whether that country has a tax treaty in place. If you are investing as an individual, the requirements may be different than those for, say, a corporation or partnership. For this reason we encourage you to save all tax documents and receipts in preparation for the annual filing date.

Topics: International Tax

About Ann M. Irons, CPA LLC

ann_irons_head_shotAnn spent over 25 years in the financial service industry, gaining knowledge and experience that allows her to provide an array of tax, bookkeeping, and accounting services for her clients. Relying on a stringent code of ethics and a dedication to maintaining the highest industry standards, Ann works hard to ensure her clients receive the quality service they’ve come to expect. A member of AICPA and MSCPA, Ann has also had an article featured in the renowned publication, Banker and Tradesman. 

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