Single Family Investing without Borders
Investing in the United States residential real estate market is no longer just for locals. Over the last decade, the US real estate market has seen a meaningful influx of foreign investment across all real estate asset classes. The relative strength and stability of the US real estate market continues to entice investors—foreign and domestic. Facilitated by “open economy” legislation, foreign individuals and corporations are free to purchase residential and commercial real estate within the United States.
This growing trend in foreign investment is changing the way investors transact. For example, the single family rental model was once considered to be a “local’s industry,” largely dictated by proximity and geography. Now, the pool of potential single family rental investors has grown outside the physical borders of the US and extends across the globe. As access, infrastructure, and opportunity continue to grow, so does the appeal of foreign investment in the US residential real estate space. Investors are becoming more strategic and sophisticated in an effort to remain competitive in a burgeoning industry ripe with opportunity.
America’s friendly approach and accommodating legislation has made it a popular choice for investors looking for international diversification in their portfolios, but the freedom and flexibility to invest foreign dollars domestically comes at a cost. Foreign investment within the US is carefully regulated by both the US Internal Revenue Service and State Department. To invest in the US, foreign investors must complete a registration and qualification process with the IRS and seek the assignment of an International Tax Identification Number (or I-TIN via IRS Form W-8). In most circumstances, the US government benefits from tax revenue generated from the acquisition and disposition of investment properties and portfolios.
Before delving into international real estate investment, it is important to have a firm grasp on the practical, operational, and managerial implications of investing abroad. The high yields and relative returns generated by the US real estate market have attracted a great deal of international investment interest. Often, the most successful are those with a keen eye for opportunity and a complete understanding of the regulatory environment. Foreign investment isn’t something to be taken lightly and requires a great deal of practice and planning to ensure skillful execution and a meaningful return on investment. Before considering direct investment in the US, one should consult tax and legal professionals to fully understand the implications and requirements.
Success investing across borders, oceans, and/or time zones is largely reliant on the skillful assembly and management of investment partners and resources. Single family investing requires the careful curation of a US-based team to facilitate things like entity formation and structure; acquisition/disposition; property management and construction; and financing. The strength of this team will ultimately determine the profitability and sustainability of an investment portfolio.
CoreVest is a leading provider of financing solutions to residential real estate investors. We provide attractive long-term debt products for stabilized rental portfolios as well as credit lines for new acquisitions. For more information about how CoreVest can help grow your rental and rehab business, please call 844.223.2231 or submit our contact form.