Buying a property in the USA as a non-resident can be a rewarding investment, but it requires navigating legal, financial, and tax complexities. Is it possible for a non-resident to buy a property in the USA? The simple answer is yes. But who is considered a non-resident alien in the US?

First, an alien is any individual who is not a U.S. citizen or U.S. national. A nonresident alien is an alien who has not passed the green card test or the substantial presence test. 

Here's a comprehensive guide to help you understand the process:

1. Understanding Your Objectives

Investment or Personal Use: Determine whether the property is for investment (rental income, appreciation) or personal use (vacation home, retirement).

Location: Research locations based on your objectives, considering factors like property value trends, rental market, and proximity to amenities.

2. Legal Considerations

Non-Resident Alien (NRA) Status: Non-US citizens without green cards. A visa holder falls under this category. You can legally buy property in the USA as an NRA.

Ownership Structures

Choose between personal ownership or setting up a legal entity (like an LLC) to own the property. An LLC can offer liability protection and tax benefits.

Visa Implications

Owning property doesn’t grant residency or visa benefits. If you plan to stay in the USA for extended periods, consult an immigration attorney.

3. Financing the Purchase

If you have the full amount to purchase a property, you can do that, but you would have to justify your source of income during the process. This option is called a cash purchase. It simplifies the process but requires full payment upfront.

The second option is to take out a mortgage. Mortgages are offered by regulated financial institutions like banks. Some US banks offer mortgages to non-residents, but with stricter requirements:

• Higher down payments (often 30% or more).
• Higher interest rates.
• Strong credit history and substantial financial documentation.

As a nonresident, foreign exchange should be at the forefront of your preoccupations. Exchange rates can impact the cost, so timing the currency exchange can be crucial.

4. Property Search

Hire a Real Estate Agent: Look for an agent experienced with international buyers.

Research: Use online platforms and local resources to find properties that match your criteria.

Visit the Property: If possible, visit the property before purchasing, or hire a local representative for inspections.

5. Making an Offer

Offer Price: Your agent will help you make a competitive offer based on market analysis.

Earnest Money Deposit: A deposit (usually 1-2% of the purchase price) shows your commitment. It’s held in escrow until closing.

Negotiations: Be prepared for counteroffers and negotiations on terms, price, and contingencies.

6. Due Diligence

Home Inspection: Hire a licensed inspector to evaluate the property’s condition.

Title Search and Insurance: A title search ensures the property is free of liens or disputes. Title insurance protects against future claims.

Appraisal: Required by lenders to assess the property’s value.

Reviewing the Contract: Ensure all terms, contingencies, and timelines are clearly outlined.

7. Closing the Deal

Final Walkthrough: Conduct a final inspection before closing.

Closing Costs: These typically include legal fees, title insurance, taxes, and recording fees, usually ranging from 2-5% of the purchase price.

Sign the Documents: Closing can be done in person or remotely via a power of attorney.

Transfer of Funds: Ensure the funds are transferred securely. The deed is recorded, and ownership is officially transferred.

8. Post-Purchase Considerations

Property Management: If the property is an investment, hire a property management company to handle tenant relations, maintenance, and rent collection.

Taxes: Understand your tax obligations:

 Property Taxes: Paid annually based on the property’s assessed value.

Income Taxes: Rental income is subject to US federal and possibly state taxes. Non-residents can benefit from certain deductions and treaties. Hiring a tax advisor is recommended.

FIRPTA Withholding: When selling the property, a portion of the proceeds (typically 15%) may be withheld under the Foreign Investment in Real Property Tax Act (FIRPTA). This can be reclaimed by filing a tax return.

Insurance: Obtain homeowner’s insurance and any additional coverage (e.g., flood insurance) required by the location.

9. Understanding Exit Strategies

Reselling the Property: Be aware of capital gains taxes. The US taxes capital gains, but treaties may reduce your tax liability.

Renting Out the Property: If you plan to rent it, ensure compliance with local laws, and understand your tax obligations.

10. Consulting Professionals

Real Estate Attorney: To help navigate legal issues.

Tax Advisor: For managing US tax obligations.

Real Estate Agent: Specialized in dealing with non-residents.

Property Manager: If not living locally, a manager can oversee the property.

Conclusion

Buying property in the USA as a non-resident is a complex process, but proper planning and professional guidance can make it a smooth and successful investment. Please always make sure you understand the legal, financial, and tax implications to avoid pitfalls and maximise your investment.