Advice needed on purchasing multiple properties in Florida as European investors

Tampa, Florida
General Real Estate Investing
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Advice needed on purchasing multiple properties in Florida as European investors

Petronella Kerssens
Member since 2023 · 21 posts · 16 votes

We are seeking advice and guidance as we embark on our journey to invest in real estate in Florida. Our goal is to purchase a new construction home as our first investment, with plans to acquire four more properties in the next three years (4/2 around 400k with 25% down dscr loan) . We have carefully studied our options and are considering the best ways to structure our investments.

One option is to purchase the properties through a LLC for liability protection. However, we have discovered that this may result in unfavorable tax implications for us in Europe. As such, we are considering owning the properties in our own names to minimize tax burdens.

Our primary motivation for investing in real estate is appreciation, as current projections show neutral cash flow. We are now seeking advice on how to protect our assets while owning the properties in our own names, without incurring excessive costs that could lead to negative cash flow.

We are open to exploring creative solutions that strike a balance between asset protection and financial stability. Any insights, advice, or suggestions on how we can achieve our investment goals while safeguarding our assets would be greatly appreciated. We are eager to learn and make informed decisions that will set us up for success in our real estate ventures.

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Bernard Joseph S.
Investor · NJ · Member since 2022 · 155 posts · 224 votes
2y
Quote from @Petronella Kerssens:

We are seeking advice and guidance as we embark on our journey to invest in real estate in Florida. Our goal is to purchase a new construction home as our first investment, with plans to acquire four more properties in the next three years (4/2 around 400k with 25% down dscr loan) . We have carefully studied our options and are considering the best ways to structure our investments.

One option is to purchase the properties through a LLC for liability protection. However, we have discovered that this may result in unfavorable tax implications for us in Europe. As such, we are considering owning the properties in our own names to minimize tax burdens.

Our primary motivation for investing in real estate is appreciation, as current projections show neutral cash flow. We are now seeking advice on how to protect our assets while owning the properties in our own names, without incurring excessive costs that could lead to negative cash flow.

We are open to exploring creative solutions that strike a balance between asset protection and financial stability. Any insights, advice, or suggestions on how we can achieve our investment goals while safeguarding our assets would be greatly appreciated. We are eager to learn and make informed decisions that will set us up for success in our real estate ventures.

Hey Petronella,
If you need advice on a turnkey provider in Florida or want to deal directly with a builder let me know. I purchased several new construction rentals in Florida and I have made some good connections. Feel free to message me.
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  • Tim Baldwin
    Attorney · Pensacola, FL · Member since 2023 · 178 posts · 106 votes
    2y

    It appears that the advice you are seeking should be coming from, in part, a real estate attorney who can navigate the issues you are dealing with (especially in light of the consequences across the ocean). You may also need to consult with a CPA regarding tax implications. From a liability perspective in Florida, it's advantageous to have a limited liability company own the property, especially considering that you are getting into the real estate business and intend to acquire numerous properties. Best wishes. 

    1Reply
  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    2y

    @Petronella Kerssens- thanks   1) consider reviewing options with a  real estate attorney and also an insurance  agent  2) Will you need financing ? if so - I recommend getting a loan approval in place before beginning to look at properties 3) Watch the  insurance  costs as these are incresing in FLA ...Good luck 

    1Reply
  • Bernard Joseph S.
    Investor · NJ · Member since 2022 · 155 posts · 224 votes
    2y
    Quote from @Petronella Kerssens:

    We are seeking advice and guidance as we embark on our journey to invest in real estate in Florida. Our goal is to purchase a new construction home as our first investment, with plans to acquire four more properties in the next three years (4/2 around 400k with 25% down dscr loan) . We have carefully studied our options and are considering the best ways to structure our investments.

    One option is to purchase the properties through a LLC for liability protection. However, we have discovered that this may result in unfavorable tax implications for us in Europe. As such, we are considering owning the properties in our own names to minimize tax burdens.

    Our primary motivation for investing in real estate is appreciation, as current projections show neutral cash flow. We are now seeking advice on how to protect our assets while owning the properties in our own names, without incurring excessive costs that could lead to negative cash flow.

    We are open to exploring creative solutions that strike a balance between asset protection and financial stability. Any insights, advice, or suggestions on how we can achieve our investment goals while safeguarding our assets would be greatly appreciated. We are eager to learn and make informed decisions that will set us up for success in our real estate ventures.

    Hey Petronella,
    If you need advice on a turnkey provider in Florida or want to deal directly with a builder let me know. I purchased several new construction rentals in Florida and I have made some good connections. Feel free to message me.
    2Reply
  • Petronella Kerssens
    OP
    Member since 2023 · 21 posts · 16 votes
    2y

    In order to make informed decisions, we are taking the proactive step of seeking advice from a CPA and Real Estate attorney. However, before consulting with these professionals, we are taking the initiative to educate ourselves so that we can ask higher quality questions and ensure we are making the best choices for our future.

    2Reply
  • Fulton Abraham Sanchez
    Accountant · CPA Miami, FL · Member since 2022 · 192 posts · 43 votes
    2y
    Quote from @Petronella Kerssens:

    In order to make informed decisions, we are taking the proactive step of seeking advice from a CPA and Real Estate attorney. However, before consulting with these professionals, we are taking the initiative to educate ourselves so that we can ask higher quality questions and ensure we are making the best choices for our future.


    Patronella, hi. You've come to the right place. When ready please feel free to reach out to an investor savvy CPA. Most of us work with foreign and local RE investors across multiple States. 

    1Reply
  • Alex Hunt
    Lender · Member since 2022 · 441 posts · 134 votes
    2y

    LLC's & US based bank account are typically needed for foreign investors with most DSCR lenders.

    Happy to chat further!

    1Reply
  • Raymond J. RodriguesBusiness Member
    Lender · Miami, FL · Member since 2017 · 1k+ posts · 797 votes
    2y

    @Petronella Kerssens, I'm not sure if you have investor friendly representation already, but if you do not, reach out to @Josh Green! He is a local investor and investor focused agent. I hope this helps! 

    [email protected]619-456-8311
    Helm Mortgage Corp.5126 Reviews
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  • Paul Sofia
    Lender · Charlotte, NC · Member since 2016 · 376 posts · 172 votes
    2y

    We're in the biggest bubble ever produced.....I'd be patient and wait.

    1Reply
  • Bhargav Hirapara
    Real Estate Agent · Tampa Bay Area · Member since 2020 · 39 posts · 35 votes
    2y
    1. Asset Protection:
      While owning properties in your own names may have tax advantages, it does expose you to personal liability. To mitigate this risk without using an LLC, consider:
    • Umbrella Insurance: This provides additional liability coverage beyond your standard homeowners insurance.
    • Equity Stripping: This involves placing a lien on the property to make it less attractive to potential creditors.
    • Land Trusts: These can provide some anonymity and protection while allowing you to maintain personal ownership.
    1. Insurance:
      Ensure you have comprehensive insurance coverage, including:
    • Property insurance
    • Liability insurance
    • Flood insurance (especially important in Florida)
    • Loss of income insurance
    1. Legal Structures:
      While you've decided against using an LLC, consider consulting with a local attorney specializing in real estate investments to explore other potential legal structures that might offer protection without the tax implications you're trying to avoid.
    2. Property Management:
      Given that you're based in Europe, consider hiring a professional property management company to handle day-to-day operations, tenant screening, and maintenance issues.
    3. Market Research:
      Thoroughly research the specific areas in Florida where you plan to invest. Look at factors like:
    • Historical appreciation rates
    • Rental demand
    • Local economic indicators
    • Upcoming development projects
    1. Financing:
      Your plan to use DSCR loans with 25% down is a solid approach for investment properties. However, be prepared for potentially higher interest rates on investment properties compared to primary residences.
    2. Cash Flow Considerations:
      While your primary goal is appreciation, aim for at least neutral cash flow to cover your expenses. Factor in costs such as:
    • Property taxes
    • Insurance
    • Maintenance and repairs
    • Property management fees
    • Vacancy periods
    1. Long-Term Strategy:
      With plans to acquire multiple properties, develop a clear long-term strategy. Consider:
    • How long you plan to hold each property
    • Your exit strategy (sell or refinance?)
    • How you'll manage multiple properties from abroad
    1. Tax Implications:
      Consult with a tax professional who understands both U.S. and European tax laws to ensure you're structuring your investments in the most tax-efficient manner possible.
    2. Diversification:
      While focusing on new construction 4/2 homes is a good start, consider diversifying your portfolio as you acquire more properties. This could include different property types or locations within Florida.
    1Reply
  • Stephen Dispensa
    Real Estate Professional · Tampa, FL · Member since 2015 · 176 posts · 252 votes
    2y

    There are a couple of options here. Let's start with the tax implications in Europe:

    I believe you may have gotten some incorrect advice here regarding taxes, or at least that the person telling you not to set up an LLC may have been confused.

    Typically speaking, an LLC is a "pass through entity". Meaning whatever profit the LLC makes is passed on to it's owner(s). The forms vary depending on whether it's a single-member or multi-member LLC, but at the end of the day that income will come in on whatever profit you make. The LLC cannot hold cash or "retained earnings" and any income must be passed on to the owners at the end of the year. There's not any real difference tax-wise from owning the house in an LLC vs owning the property as an individual.

    In the case of a neutral cash-flowing property, frankly there's no income. In the early years, your mortgage is mostly interest which is all an expense on the property. If the property is not generating a profit, you won't have any tax liability. You will need to pay income tax in the US and your home country based on any profit you make. But that's the same whether you're in an LLC or an individual. You'll have to deal with the FIRPTA tax withholding, but that would only come into play when you sell the property.

    The advantage of having the LLC, is it offers you another layer of protection should anything go wrong. If there's a fire in one of your properties and a tenant is hurt, they can sue your LLC but so long as you haven't done anything personally to pierce the corporate shield, it's much more difficult for them to sue you personally.

     

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    From a tax perspective

    1. research if there is a treaty between the US and the country you live in
    2. FIRPTA may require withholding upon the sale of the property. Filing the tax return may result in getting a refund of over-withholding(if applicable)
    3. You may need to apply for an ITIN which is an identifying number when filing a US tax return
    4. Florida does not have a state income tax, therefore, you would only be required to file a federal tax return.

    Best of luck.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.880 Reviews
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