What Foreign Investors Need To Know To Buy Phoenix Residential Properties
The key to being a successful property investor is getting the timing right. As far as Phoenix, Arizona is concerned, the time to invest in the real estate market is now. This is because the economy has yet to fully recover and residential property rental inventory is quite low. Most people find it quite challenging to purchase property outside their local area of residence leave alone country. There’s, however, no need to worry. Here’s what foreign investors need to know to buy Phoenix residential properties.
First, it is worth noting that both Americans and non-Americans alike are subject to the same set of rules when it comes to purchasing property in Phoenix. This is however contingent upon foreigners finding a US-based financial institution to fund their real estate acquisition endeavors. The good news is that one does not have to go to a lot of trouble to find such a lender.
It is also important that every foreigner understands the Foreign Investment in Property Tax Act (FIRPTA) before making any purchases. Here are some of the most important guidelines that you need to know.
According to FIRPTA, a foreigner is by definition any alien who does not reside in the US; any corporation that is not classified as domestic; or any foreign estate, trust or partnership. FIRPTA does not consider aliens who reside in the US to be foreign persons.
When selling property, all foreigners must follow all IRS requirements on reporting. A buyer who purchases property from a foreign seller must keep an equivalent of 10% of the buying price, this is the tax levied. In some cases exemptions may apply.
Transactions where a buyer purchases property for the purposes of residing there and the buying price is equal to or less than $300K.
When a seller produces a sworn US affidavit stating that the buyer is not a foreigner.
The 10% that is withheld by the buyer should not go beyond the seller’s maximum tax liability
If a real estate agent for either the seller or the buyer is found to have been aware of the falsity of the sworn affidavit, but failed to reveal the same to the buyer, then they will be held legally responsible. In some cases criminal charges may be filed.
As always consult a qualified loan officer and real estate professional. Real Property Management provides this article for educational purposes and does not guarantee its accuracy.