New York City is a desirable destination for foreign buyers for a variety of reasons, including the city’s position as one of the most important centers of culture, art, commerce, and arts around the globe. However, international buyers may be uncertain about many things, including how New York real estate works and the many options available. Anyone considering buying real estate in New York regardless of whether they are a resident or citizen of another country needs to understand many things surrounding their purchase.
Foreigners are not restricted from owning real estate in the United States. Foreign nationals and corporations make up a large portion of New York’s real estate. Co-ops and other special types of special housing require that buyers present US tax returns. This makes it hard or impossible for non-US taxpayers to purchase certain types of real estate property. However, there are many other kinds of real property, like condominiums or townhouses, that are not subject to restrictions, and these are extremely popular with foreign buyers.
A New York State foreign investment attorney can help you if you are a foreigner and your goal is to purchase real estate properties in New York City. The rules surrounding tenant relations and tax filings can make it difficult. From the first offer through closing, our New York City real estate lawyers at Sishodia PLLC will handle all aspects of your sale or purchase. Call us today at (833) 616 4646 to speak with an experienced real estate lawyer.
Step-by-step Process of Buying Real Estate for Foreigners
Buying real estate properties in New York is a complicated process that involves presenting documentation, conducting research, meeting with brokers, choosing bankers, and selecting the right lawyer. Having an experienced real estate attorney is an important step and should be one of the very first steps a potential buyer should take. A lawyer will help you through every step and make sure you understand your rights in the transaction.
Aside from the aforementioned, the following are the steps you need to know as a foreigner who is interested in buying real estate in New York City:
- Preparing and Organizing
It is important to be prepared before you start your search for New York real property. Before jumping into your search for a property, you should first decide on a few things such as the neighborhood you want to live in, the type of real estate property you want to buy, and the amount you are willing to spend for the property you are looking to buy.
Foreign buyers should meet with a banker or mortgage broker before they begin their search for a home. An experienced attorney can refer you to a local mortgage broker or banker with the right background. Should you need financing, a banker can help you get pre-approval. A pre-approval will improve your odds of meeting with various boards, increase your negotiating power and let you know what the buyer’s spending limits are.
Tax specialists are highly recommended for international buyers. Your tax liability may be significantly different from that of citizens in the United States. Tax liability will vary depending on whether you are buying a property to invest in or live in.
- Property Search and Making an Offer
The selection phase is one of the early stages of any purchase. Once you have viewed the property and selected the one that you like best, you can make an offer to purchase it. This offer does not have to be binding. You can make multiple offers in order to get the best price.
New luxury property developers are less likely to accept a lower price. They usually want to sell the properties for the asking price. After an offer has been accepted by the seller, either the agent of the lawyer or the buyer will provide the contract and building bylaws to you for review.
- Negotiation and Contract Signing
Your lawyer will usually review the contract between you and the seller within 5-10 business days. The seller might choose to keep showing the property or accept a lower offer until the contract has been signed. Contract terms are crucial and will govern all future purchases.
The buyer will need to pay a 10% deposit once all parties have signed the contract. This deposit must be made in the United States or wired to the lawyer of the seller. The money will then be protected in the seller’s lawyer’s escrow account.
Only certain conditions will allow for refunds of deposits. A mortgage contingency is one that allows buyers to receive refunds if they are unable to secure financing. Although this clause must be in the contract they are not always approved by sellers.
- Financing for foreign buyers
Though it is more difficult for a foreign buyer to get financing, it is not impossible. There are banks in New York that will provide loans to foreign investors for the purchase of real estate with 34-40% down and three years of mortgage payment in liquid assets located in US Bank Account. For the foreign investors that are willing to move their assets to US Bank, banks may offer asset-based loans. Experienced financial advisors shall be able to guide on the best asset-based loan available.
Foreign investors purchasing in cash save on the New York mortgage tax, about 2% of the loan amount, and save on various bank fees related to financing.
- Form of Ownership
Foreign investors may purchase real estate in New York in their personal name, company name(LLC, Corporation, or Partnership), or a Trust. It is important to consult with a knowledgeable real estate attorney and a tax professional to understand what type of ownership works best. It is also important to know that company and trust ownership will be suitable for a condo purchase, but not for co-op purchases in NY. Coops normally do not allow purchase into entities.
Though owning real estate in New York in the personal name seems to be the easiest and less expensive form of ownership, it exposes a foreign investor to the Foreign Investment in Real Property Tax Act (“FIRPTA”) withholding tax (15% of the Sale Price) through, New York State withholding tax through IT-2663 form (10.90% on gain) on Sale at Closing and 56% of Market Value Estate Tax on owner’s death.
Knowledgeable foreign investment lawyers shall be able to guide you on the best form of ownership by foreign buyers with less exposure and maximum asset protection.
- ITIN Number. Tax ID for Foreign Buyers
The Individual Tax Identification Number (ITIN) is an important tax processing number assigned by the IRS to the individual resident or non-resident aliens in the US. The number is issued to ensure such individuals are able to comply with U.S. tax laws. ITIN can be obtained through the IRS by submitting an application W-7 along with all necessary identification documents.
- Asset Protection and Estate Taxes
When it comes to foreign investors, it is important to talk about asset protection. Though US residents have Estate Tax Exemptions based on the value cap for the Estate, Foreign owners do not get the same benefit. Thus non-US resident owners may end up paying 56% Estate Tax (between Federal and State Tax due) at the time of their death. This payment can be avoided through estate planning by a knowledgeable real estate attorney and asset protection attorney on your team
- Approval of a Co-Op or Condo Board
You must be approved by the Board of the Building before you can buy an apartment in New York. There will be a lot of requirements including financial and personal information, such as bank statements and tax returns. Interviews are required for co-ops. Co-op boards usually have strict requirements and enforce them. Condos have rules that are similar to those of co-ops but are much easier. Condo approval is less complicated than a co-ops approval process. Most of foreign investors prefer to purchase new development condo units that do not require completion of the purchase application or board approval.
- Preparation for Closing the Transaction
You have extra time after the contract has been signed to obtain financing or do additional research about the legal and physical condition of the property. You will need to conduct the appraisal and survey required for the mortgage. The documents will be reviewed by your lawyer, who will also conduct a title search and look for violations and liens.
If a buyer applies for a mortgage, then the bank will verify his documentation and assets, as well as financial details about the building. After everything is approved by the bank, the entire loan amount will be wired directly to the attorney of the buyer, together with closing costs, down payment, and any other fees.
A buyer should visit the property before closing by scheduling a pre-closing walkthrough through the real estate agent to ensure that it looks the way they expect. Most of the time foreign buyers do not even physically come to the US for the walkthrough and it is conducted by their trusted real estate agents through video conference.
- Closing the Transaction
Closing refers to a sale or purchase transaction. It usually occurs several weeks after the contract has been signed. The closing is when the seller and buyer, their attorneys, as well as the bank and title attorney representatives, sign the final documents. Your attorney will make all payments, including taxes and fees. Title insurance and any other fees are paid at the time of closing. The buyer will be given the new title and title insurance in exchange for the keys to their new apartment. Foreign buyers do not need to physically be in NY to purchase property and can do so overseas. Most of the foreign investment closings are conducted via Power of Attorney and wire transfers.
Foreign investors in New York City can have a difficult time dealing with all the requirements and challenges a real estate transaction may bring. This is where an experienced foreign investment lawyer can help. A lawyer can help the investors ensure they understand their rights and get the most out of the deal. Call Sishodia PLLC today to schedule a consultation.
Types of Real Estate in NY
There are many types of property in New York City’s real estate market. It can be difficult to choose which one is best suited for your needs. Each type of real estate in New York has its own advantages and disadvantages and can have an impact on your final decision. You should know and understand these differences before you start hunting for real estate to purchase.
It can be confusing, especially for a first-time foreign real estate investor to pick which one is best. This is why speaking to an experienced real estate lawyer in New York City is very important. They may be able to provide you with more information about each type of real estate.
The main types of real estate in New York City include:
Co-op
Co-op structures are those in which the company is the owner of the whole building as well as the rights to it. A homeowner, or buyer, is in essence a shareholder of the business. When he or she purchases shares, they enter into a lease agreement. The buyer buys the shares and rights to the property for specific tenants. Cooperative owners can rent their houses under the sublease, second-landlord, or other leases because they are tenants by default.
Co-op properties are cheaper than condominiums and account for over 70% of all real estate properties in New York City. A co-op was the most common type of property in New York City in the past. While most high-end properties were co-op at the time, condos came later. Condos are now the most preferred option for buyers. They have outperformed Co-ops in price and appreciation.
Condominium
Condominiums are considered “real property” under New York City law. This means that the buyer is the owner of the property. Owners of condominiums have a lot more control over how they use their space for sub-letting or renovating.
A condo purchase is much easier than other types of property. Condos allow up to 90% financing and there are no interview requirements. A contract can usually be signed within one to two months. A deed is issued to buyers just like a buyer would for a townhouse. The monthly fees condo owners pay are based on the square footage of their unit, but these charges are not separate from city taxes
Investors and homeowners who want flexibility and freedom are attracted to condominiums. Condominiums are a great option for those who want to remodel a unit or sublet and don’t like the regulations.
New Development
New developments, also known as new construction properties are popular among foreign investors for the easy purchase process with no board approval or formal purchase application process. This type of investment is also very appealing to foreign investors because of distinctive architectural designs and high-end finishing. Purchasing a new development condo project in New York City may be one of the easiest ways to invest in American real estate for a foreign citizen. To learn more about purchasing new investments, call to speak with Natalia Sishodia today (833) 616-4646
Townhouse
Townhouses are typically three or four-story buildings that are attached to other buildings on the block. They can be single-family homes or multiple-apartment dwellings spread over their floors. Townhouses can be narrower than detached houses, but they are more private than apartments. They often come with rooftops or backyards. Townhouses can be expensive, as many are priced at more than $ 1 million (or as high as $88million depending on where they’re located).
Single-Family
This is what most Americans consider when looking at home options. The traditional American Dream is a one-family house. However, foreigners who are seeking to move to the USA are also looking for single-family homes in New York City. The best spots for single-family homes are usually Brooklyn, Queens, and Staten Island all have numerous single-family houses.
In terms of privacy, a single-family home is the best option. This may be the right move for you if you like yard work, don’t mind paying someone else to do it, or don’t travel much.
Multi-family
Multi-family properties are in all boroughs of New York City. Because the property spans multiple floors, it can accommodate more than one family. The purchasers can own the property and they may rent the space out to others. Sometimes, multi-family homes can be made into single-family homes.
Rental Building
A rental building is similar to a multi-family property that is owned and used only as an investment. The landlord or owner of a rental property is usually a corporation. A company manages the whole operation of the building. There is no neighborhood council so you only need to request a lease. This greatly expedites the renting process.
A Property Owner’s Expenses in New York
As a buyer of a real estate property, it is important to remember that there are additional costs associated with New York property ownership, regardless of the type of real estate chosen. Many of these costs can be deducted from an owner’s taxable income.
Real estate taxes in the US will be charged to owners of real estate properties. Monthly common charges are for condos and co-ops. Taxes can vary depending on how large or small the property is. Common charges and maintenance fees are the same. They can range anywhere from several hundred to many thousand dollars per month, depending on how big and what type of property they are. Monthly payments will be higher if the building provides additional services.
The owner can deduct real estate taxes from their taxable income. Co-op owners can deduct a portion of their monthly maintenance, which includes, among others, interest payments on the co-op’s building mortgage. Investors can deduct most expenses in the same year that they are incurred. Common charges, as well as real estate taxes, are deductible business expenses in the same year they were incurred.
If you are a foreigner looking to buy a real estate property in New York City, it is important that you understand what your obligations are as well as the requirements you need to fulfill. Speaking to an experienced foreign investment lawyer may be able to help you secure a better deal and get the most out of your real estate transaction. Call Sishodia PLLC today to speak with a skilled real estate attorney.
Getting the Skilled Advice of an Experienced Foreign Investment Lawyer
At Sishodia PLLC, attorney Natalia Sishodia and our skilled foreign investment lawyers are well-versed when it comes to international real estate law and investments as they concern the foreign investor. We are prepared to protect our clients’ interests each step of the way during a real estate purchase, sale, or litigation. With our attorneys on your side, you have an aggressive and knowledgeable ally working diligently to ensure that your legal and financial interests are protected and that you understand all responsibilities, options, and consequences under our laws. To learn more about how we can help with your investment planning, call us today at (833) 616 4646.
Disclaimer: All information provided is for educational purposes only and is not intended to provide Tax or Legal Advice. It is also not intended to be used, and can not be used, for avoiding tax payments, or tax penalties that may be imposed on a taxpayer.
source https://sishodia.com/step-by-step-guide-for-foreigners-buying-real-estate-in-new-york-city/
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