Miami Real Estate For Foreign Investors
Investing in Florda's real estate presents a great opportunity and value to foreign investors. The currently weak dollar to euro ratio presents significant savings and makes it very attractive to invest in South Florida's real estate. Without any doubts today South Florida is a leader in real estate investments and luxury residential real estate, including luxury condominiums, waterfront homes and income producing properties.
Our team understands in great detail what it takes to find an investment property to maximize your returns. Whether you're looking to buy, sell or invest in real estate in South Florida we will provide the cutting edge technology, friendly personalized service and unparallel knowledge of the local market.
Our research shows that buying property in the US is a lot less complicated than anywhere else in the world. Here in US there are usually two licensed realtors involved, one for the seller and one for the buyer. Buyers do not pay any real estate commissions, the commissions are paid by the sellers. The US and Florida Property Laws are created to protect the buyer and buyers money which are held in a Trust or Escrow account to further protect the buyer.
We will be happy to arrange a suitable financial institution for your deposit and recommend an attorney who specializes in foreign investments. In addition, if a need be, we will find a licensed building inspector, interior designer, decorator, carpenter and floor installer.
Our team also offers expert mortgage brokers who specialize in obtaining a US financing for foreign buyers. We can assure that you will get the lowest US interest rate possible.
All foreign investors are subject to 10% withholding at closing unless the seller and the Realtor have planned for this ahead of time. Planning ahead of time can save you substantial amount and prevent delays. We will recommend a US tax expert attorney to minimize US taxation.
All foreign investors are required to file a US tax return and pay tax on the gain. The gain is the difference between the selling price and the seller’s cost of property. The seller’s cost basis is the original purchase price plus additional items, including, but not limited to, certain closing costs on the original purchase, commissions and other sale expenses, plus capital improvements to the property. Because the actual gain and corresponding tax is not known at the time of the sale, it was thought that withholding 10% of the sales price would encourage compliance. Sometimes, the 10% amount withheld will exceed the actual tax on gain that will be due when a return is filed.
At the closing, if the Seller provides the Buyer/closing agent with proof that the Seller has applied for a withholding certificate, the Buyer/closing agent is still required to withhold the mandatory 10% of the gross sales price, but these funds can be kept in the trust account of the closing agent pending receipt of the IRS approval or denial of the application. The IRS is supposed to make its determination within ninety (90) days of its receipt of the application. If the IRS approves a lesser amount of withholding, then within 20 days, the closing agent will send the lesser amount to the IRS and refund the balance directly to the Seller. This is a very important and advantageous procedure which should be fully considered and utilized by clients, under the guidance of a certified public accountant or tax attorney, if at all possible.
Non-residents have always been required to obtain a taxpayer identification number (“TIN”) before they can file a tax return. This is similar to a social security number, but begins with “9”, and is used to identify the taxpayer. In order to obtain a TIN, a non-resident has to complete an application (Form W-7) and send the application to Philadelphia, PA., along with proof of identification, such as a passport, birth certificate, and/or drivers license. Original or certified copies of these important documents are required, and it takes on average, 90 days for the IRS to assign a TIN and return the original documents.
Often, foreign owners are unaware of withholding requirements or the requirement to provide a TIN until immediately prior to closing, which does not give the client much opportunity to address the issue. If you represent foreign Buyers, it is a good time to make them aware of FIRPTA so that they may consult with a professional to discuss the advisability of filing for a TIN well in advance of any considerations to sell the property. There is no risk or jeopardy for the seller to obtain a TIN! If the client is a Seller, the earlier you identify these issues, the better – certainly at or before execution of the contract and preferably, upon listing of the property. The more time our clients have to consider the ramifications of FIRPTA, the more options they may have available to them. Remember that withholding under FIRPTA may seriously impact your closing, especially if the proceeds of sale are marginal. We have had incidents where, because of FIRPTA, the Seller was required to bring additional cash to closing just to satisfy the 10% withholding requirement! Please do not make this mistake, because sometimes, the Seller is not going to be able to make up the difference and it will jeopardize the closing!
Foreigners are required to file a tax return to report the sale even if no tax is due. When the sale occurs during the year may influence the seller’s decision whether or not to file an application for reduced withholding. For example, assuming the sale is late in the year, it might not be worth the effort or cost to prepare the application. But this should be a decision made by the seller only after consultation with a professional with expertise in this area!
A final consideration is what happens in the event that a Seller, or foreign Buyer, fails or refuses to provide their TIN as required by these regulations? If a foreign Buyer fails to provide a TIN to the Seller in time to allow the Seller to file for a withholding certificate before closing, the Seller might be damaged. It is conceivable that a Buyer might use the TIN filing requirement as leverage to force concessions from a Seller, especially if the Seller had to come up with extra cash at closing to comply with the FIRPTA withholding requirement. Similarly, the foreign Buyer may have exposure if the Seller fails or refuses to timely provide a TIN following closing to avoid penalties for late remittance of the withheld amount and late filing of Form 8288. The regulations do not provide sanctions for failure to provide a TIN on a timely basis. In such cases, we may have to consider inserting into our contract a clause providing a specific representation by a party to provide a TIN and possible sanctions if a party does not timely provide the TIN. This is for our clients ultimate protection.
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