Investing in US from abroad. Best place for cashflow?

Member since 2019 · 13 posts · 1 vote

I am strongly considering to invest in the US for buy and hold properties with good cash flowing possibilities, and potential growth.
Which markets should I research?
Are there laws that I should be aware of as a foreign investor?

All info is greatly appreciated!

Krisztian

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Eric Yao
Member since 2019 · 13 posts · 8 votes
6y
Great ideal! Net lease properties will be an excellent fit if you don't have anyone to manage the property. If you know someone you can trust, go for multifamily. Marketwise, you want to look at not only growth, but also supply constraint. The key is location. You want to find a location that will support the use/uses of real estate for a very very long time - hundreds of years.
If you are holding your real estate for a long time and your main goal is cash flow, you can take a a look at smaller markets, or suburbs of a large metro, such as the inland empire in LA metro.
Not much restriction as a foreign investor as far as I know. There is FIRPTA that requires withholding when you sell the property.
If you don't buy in cash, however, it will be more difficult for a foreign person who doesn't have credit and asset in the US to get financing, i.e. little higher interest rate and less loan amount.
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Zeke Liston
Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes
6y
Hi @Krisztian Adorjan, I would look into the midwest!
0 Reply
Jordan Sinclair
Investor · Adelaide, South Australia · Member since 2015 · 136 posts · 78 votes
6y
Originally posted by @Krisztian Adorjan:
I am strongly considering to invest in the US for buy and hold properties with good cash flowing possibilities, and potential growth.
Which markets should I research?
Are there laws that I should be aware of as a foreign investor?

All info is greatly appreciated!

Krisztian

Welcome to BP!

Depending on your US structure, you may need to be mindful of withholding tax. If you opt for a LLC, you need to be aware of IRS 5472 which carries a potential $25,000 annual fine.
The US is a market that can for almost any investor with the right team on the ground.
Good luck on your investing journey!
0 Reply
Krisztian Adorjan
OP
Member since 2019 · 13 posts · 1 vote
6y
Hi Zeke

thank you, I will defintely take a look in the midwest! Do you hold any properties in that area?

Originally posted by @Zeke Liston:
Hi @Krisztian Adorjan, I would look into the midwest!

0 Reply
Krisztian Adorjan
OP
Member since 2019 · 13 posts · 1 vote
6y
Hi Eric

thank you for the great info. I do have a friend whom we used to be collegues with here in Europe but then he moved back to the US and he is someone that I trust and has some property experience under his belt. So he will be helpful too.

yes I have read about the loan “difficulties” as a foreigner. Is that true that I won’t be able to qualify for a conventional mortgage by the bank?
would I be able to use private lenders?

thank you

Originally posted by @Eric Yao:
Great ideal! Net lease properties will be an excellent fit if you don't have anyone to manage the property. If you know someone you can trust, go for multifamily. Marketwise, you want to look at not only growth, but also supply constraint. The key is location. You want to find a location that will support the use/uses of real estate for a very very long time - hundreds of years.
If you are holding your real estate for a long time and your main goal is cash flow, you can take a a look at smaller markets, or suburbs of a large metro, such as the inland empire in LA metro.
Not much restriction as a foreign investor as far as I know. There is FIRPTA that requires withholding when you sell the property.
If you don't buy in cash, however, it will be more difficult for a foreign person who doesn't have credit and asset in the US to get financing, i.e. little higher interest rate and less loan amount.

0 Reply
Krisztian Adorjan
OP
Member since 2019 · 13 posts · 1 vote
6y
Originally posted by @Jordan Sinclair:
Originally posted by @Krisztian Adorjan:
I am strongly considering to invest in the US for buy and hold properties with good cash flowing possibilities, and potential growth.
Which markets should I research?
Are there laws that I should be aware of as a foreign investor?

All info is greatly appreciated!

Krisztian

Welcome to BP!

Depending on your US structure, you may need to be mindful of withholding tax. If you opt for a LLC, you need to be aware of IRS 5472 which carries a potential $25,000 annual fine.
The US is a market that can for almost any investor with the right team on the ground.
Good luck on your investing journey!

Hi Jordan

thank you for the informtion.
Do I have to set up a LLC or is it just an option as a foreign investor?
I will be sure to be mindful of widholding tax. Thank you for the advice.

0 Reply
Jordan Sinclair
Investor · Adelaide, South Australia · Member since 2015 · 136 posts · 78 votes
6y
Originally posted by @Krisztian Adorjan:
Originally posted by @Jordan Sinclair:
Originally posted by @Krisztian Adorjan:
I am strongly considering to invest in the US for buy and hold properties with good cash flowing possibilities, and potential growth.
Which markets should I research?
Are there laws that I should be aware of as a foreign investor?

All info is greatly appreciated!

Krisztian

Welcome to BP!

Depending on your US structure, you may need to be mindful of withholding tax. If you opt for a LLC, you need to be aware of IRS 5472 which carries a potential $25,000 annual fine.
The US is a market that can for almost any investor with the right team on the ground.
Good luck on your investing journey!

Hi Jordan

thank you for the informtion.
Do I have to set up a LLC or is it just an option as a foreign investor?
I will be sure to be mindful of widholding tax. Thank you for the advice.

A LLC is just an option. Best to research if you need one.
0 Reply
Eric Yao
Member since 2019 · 13 posts · 8 votes
6y
Yes, there are banks that make loans to foreign nationals. As far as I know, direct ownership may file income tax differently from a LLC member. You may want to consult a CPA for further clarification. I really think lower interest rates will stay, and negative interest rates may arrive sooner than most think. Most economists are forecasting economic slowdown in the near future due to the uncertainty associated with the trade war and the presidential election. There are very few tools that the government can use to boost the economy. Negative interest rates could be a good solution. Unlike Europe, the US has plenty of land and natural resources. Negative interest rates can wake up the underutilized resources and be an effective tool to encourage investments, with less side effect, i.e. inflation, than west European countries.
0 Reply
Charles Carillo
Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
6y
@Krisztian Adorjan
Welcome to BP! In the US, the population shift has been to the South; away from high tax states. When purchasing rental real estate, the number one indication is job growth. Of course, there are other factors but job growth is the most important since that drives population growth (of people that are renting). We focus on Florida and work with a number of international investors since we are experiencing a ton of growth here. In Florida there are counties that are not seeing much growth, others that are just seeing growth from retirees and others that are seeing job growth and population growth; this is what you should be looking for. PM me if you want to speak further.
0 Reply
Krisztian Adorjan
OP
Member since 2019 · 13 posts · 1 vote
6y
Originally posted by @Jordan Sinclair:
Originally posted by @Krisztian Adorjan:
Originally posted by @Jordan Sinclair:
Originally posted by @Krisztian Adorjan:
I am strongly considering to invest in the US for buy and hold properties with good cash flowing possibilities, and potential growth.
Which markets should I research?
Are there laws that I should be aware of as a foreign investor?

All info is greatly appreciated!

Krisztian

Welcome to BP!

Depending on your US structure, you may need to be mindful of withholding tax. If you opt for a LLC, you need to be aware of IRS 5472 which carries a potential $25,000 annual fine.
The US is a market that can for almost any investor with the right team on the ground.
Good luck on your investing journey!

Hi Jordan

thank you for the informtion.
Do I have to set up a LLC or is it just an option as a foreign investor?
I will be sure to be mindful of widholding tax. Thank you for the advice.

A LLC is just an option. Best to research if you need one.

Thank you Jordan, I will do my research

0 Reply
Krisztian Adorjan
OP
Member since 2019 · 13 posts · 1 vote
6y
Originally posted by @Eric Yao:
Yes, there are banks that make loans to foreign nationals. As far as I know, direct ownership may file income tax differently from a LLC member. You may want to consult a CPA for further clarification. I really think lower interest rates will stay, and negative interest rates may arrive sooner than most think. Most economists are forecasting economic slowdown in the near future due to the uncertainty associated with the trade war and the presidential election. There are very few tools that the government can use to boost the economy. Negative interest rates could be a good solution. Unlike Europe, the US has plenty of land and natural resources. Negative interest rates can wake up the underutilized resources and be an effective tool to encourage investments, with less side effect, i.e. inflation, than west European countries

Yes I will most probably speak to a CPA and also do my research on that.
It’s interesting that you say that because I have also been seeing many posts and videos from accredited investors (Ray Dalio) that the economy is about to slow down. What would you say, how will that effect the prices of the housing market? And when there is an economic slow down, does that mean that there will be less people who rent homes? Or more, beacuse it’s more affordable then buying a home.

0 Reply
Filipe Pereira
Property Manager · Windsor Locks, CT · Member since 2016 · 1k+ posts · 1k+ votes
6y
Rely heavily on referrals, whenever you can. I personally advise against buying a property sight unseen and recommend that clients come out to see the property once it is under contract, and scheduled for an inspection. Don't buy something based just off of photos. Ask your agent to do a video walk through.
To me, the most critical part of your OOS strategy will be a great PM. A great PM will make or break your investment in my opinion. Choose wisely.

Lastly, work with someone who has the heart of a teacher, not that of a salesman. It's important that you learn through the process and develop skills that will make you a better investor, as opposed to just going through the steps but not learning anything!

Talk soon,

Filipe
0 Reply
Eric Yao
Member since 2019 · 13 posts · 8 votes
6y
Hi Krisztian, I think the economy in general is still doing OK： GDP growth is still about 2%, inflation is low, job market is good. There are concerns: US businesses are delaying or cancelling investments due to uncertainties associated with the trade war and the presidential election (new president may propose new taxation on the rich and/or corporate). Take a look at the PMI index (manufacturing) below. Manufacturing is almost in recession.
However, I don't think the slowdown will significantly affect the housing market, for sale or rent. Why? Let's take a look at what happened during the last housing crisis, aka subprime crisis. Prior to 2018, people with bad credit, low income, low downpayment were able to get mortgage and purchase houses. When the economy slowed down, some submprime borrowers may lose jobs and cannot make mortgage payment. Consequently bank foreclosed the houses and had to sell them at lower prices (because banks didn't know how to manage them). When price dropped, some homeowners with low downpayment found their equity negative. Some decided to file bankruptcy and abandoned the house, even they had the money to pay mortgage. In short, the availability of the subprime mortgages created the housing crisis. Market didn't recover until the subprime inventory was absorbed.
Unlike the last housing crisis, this time the sub-prime mortgages are no longer available. Or, simply put it this way, the homeowners are financially much stronger than last around and less sensitive to economic uncertainty.
Historically, rents, especially by-necessity asset type, are very stable. People need a place to live. If they can't afford to buy, they can rent. So apartments are usually considered a recession proof real estate asset type. For investment real estate, besides the quality of real estate itself, such as location, construction, layout etc, liquidity is the key. You want to have your property cash flow, even in the most difficult time. Apartments is such an asset type. Cash flow is stable if you choose the right product and manage well. Single family or condo is also fine. During difficult time, the nominal market value may go down. However, if the property cash flows, then you just hold it. When the market recovers, you can exit if you want.
0 Reply
Rafi Mizrahi
Rental Property Investor · Israel · Member since 2014 · 7 posts · 1 vote
6y
Hey Krisztian
I am from Israel and I have been investing in the US for 10 years.
Until 2018 I invested in Single family and then I shifted to Multifamily.
All my investing I did from Israel by hiring the right team.
You need to decide first what approach are you going with:
1. Do it yourself. Where you build the team, find the properties and manage the process by yourself
2. Invest passive in someone else deal.

When I invested in single family homes I learned by myself from reading, trying and learning from my mistakes.
It took me a long time to perfect the process.
When I decided to syndicate Multifamily I learned and coached by Think Multifamily. Now I am at 655 units.

So my suggestion again decide first the approach you will be using.

Good Luck
Rafi

0 Reply
Krisztian Adorjan
OP
Member since 2019 · 13 posts · 1 vote
6y
Hi Felipe!
Thank you for your great advice. Yeah for sure a property manager can make or break a deal for me that I am investing from far away. I will definitely take my time in choosing the best fit for me.

best regards
krisztian

Originally posted by @Filipe Pereira:
Rely heavily on referrals, whenever you can. I personally advise against buying a property sight unseen and recommend that clients come out to see the property once it is under contract, and scheduled for an inspection. Don't buy something based just off of photos. Ask your agent to do a video walk through.
To me, the most critical part of your OOS strategy will be a great PM. A great PM will make or break your investment in my opinion. Choose wisely.

Lastly, work with someone who has the heart of a teacher, not that of a salesman. It's important that you learn through the process and develop skills that will make you a better investor, as opposed to just going through the steps but not learning anything!

Talk soon,

Filipe

0 Reply
Krisztian Adorjan
OP
Member since 2019 · 13 posts · 1 vote
6y
Hi Rafi!

That sounds amazing. Well done for reaching that number it’s unbelievable 👌
I will send you a private message if you don’t mind because I’d like to ask you some things about your experiences.
thank you for reaching out!

Originally posted by @Rafi Mizrahi:
Hey Krisztian
I am from Israel and I have been investing in the US for 10 years.
Until 2018 I invested in Single family and then I shifted to Multifamily.
All my investing I did from Israel by hiring the right team.
You need to decide first what approach are you going with:
1. Do it yourself. Where you build the team, find the properties and manage the process by yourself
2. Invest passive in someone else deal.

When I invested in single family homes I learned by myself from reading, trying and learning from my mistakes.
It took me a long time to perfect the process.
When I decided to syndicate Multifamily I learned and coached by Think Multifamily. Now I am at 655 units.

So my suggestion again decide first the approach you will be using.

Good Luck
Rafi

0 Reply
Rafi Mizrahi
Rental Property Investor · Israel · Member since 2014 · 7 posts · 1 vote
6y
Sure ... I am here to help :)
0 Reply
Dave H.
Investor · Australia · Member since 2019 · 68 posts · 22 votes
6y
Originally posted by @Jordan Sinclair:
Originally posted by @Krisztian Adorjan:
I am strongly considering to invest in the US for buy and hold properties with good cash flowing possibilities, and potential growth.
Which markets should I research?
Are there laws that I should be aware of as a foreign investor?

All info is greatly appreciated!

Krisztian

Welcome to BP!

Depending on your US structure, you may need to be mindful of withholding tax. If you opt for a LLC, you need to be aware of IRS 5472 which carries a potential $25,000 annual fine.
The US is a market that can for almost any investor with the right team on the ground.
Good luck on your investing journey!

Hi Jordan,
isn't this $25,000 only applicable if you don't complete this form or it's done incorrectly? A good CPA would be able to help with a 5472.
0 Reply
Jordan Sinclair
Investor · Adelaide, South Australia · Member since 2015 · 136 posts · 78 votes
6y
Originally posted by @Dave H.:
Originally posted by @Jordan Sinclair:
Originally posted by @Krisztian Adorjan:
I am strongly considering to invest in the US for buy and hold properties with good cash flowing possibilities, and potential growth.
Which markets should I research?
Are there laws that I should be aware of as a foreign investor?

All info is greatly appreciated!

Krisztian

Welcome to BP!

Depending on your US structure, you may need to be mindful of withholding tax. If you opt for a LLC, you need to be aware of IRS 5472 which carries a potential $25,000 annual fine.
The US is a market that can for almost any investor with the right team on the ground.
Good luck on your investing journey!

Hi Jordan,
isn't this $25,000 only applicable if you don't complete this form or it's done incorrectly? A good CPA would be able to help with a 5472.

That is correct. My CPA has been very thorough to ensure no errors are made.
0 Reply

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