Experiences with Investing Internationally While Living in the US

3 Replies

I have a couple of opportunities on the horizon to invest internationally, and I was hoping to connect with some people who have been doing this or are getting started. I was thinking of doing a mix of Airbnb type properties as well as just traditional renting with prospects in the Philippines and in Colombia. 

Some questions that I have right off the bat:

  • What do you taxes look like?
  • Do you repatriate your money? Do you have to?
  • How did you get financing?
  • How often have you had to travel to see properties?
  • What kind of team will I need (i.e. lawyers, international banking, accountants)?

I'm not qualified to really answer most of your questions. But in the Philippines a foreign nationals can only own 40% total of a property. Meaning that if you are buying a SFH you need to have Filipino partners that own at least 60%. Or a condo complex 40% of the units can be owned 100% by foreign nationals. There are apparently ways that this can effectively be nullified by having a corporate structure, and then you have a title owner but they don't have any control? So effectively you are paying someone a fee to hold that and they can't really steal it away from you. Definitely specialized lawyer territory. I don't remember how it works because I'm married to one so she can own it.

Hi Justin,

Welcome to Bigger Pockets! While I don't have any experience with property in Colombia or the Philippines, I do have experience with owning international property and managing it as as vacation rentals. First of all, you're going to need a very competent legal and tax advisory team, perhaps only on one end if you find the right team. At the minimum, an accountant that is familiar with international accounting and tax reporting, as well as an attorney that can help you to organize your affairs in those countries you want to work within. US citizens have to file their taxes in the US no matter what, but from my understanding you can write off up to $90k/year ($180k if married) in foreign earned income.

Promotion
Speed To Lead
Buy hot seller leads w/o subscription
Buy daily seller leads that are actually ready to sell
Finally there's a place where you can buy leads that asked for urgent help selling their house
Sign up for free

Hey Justin,

I want to first caveat everything I say by stating that I am neither an attorney nor an accountant and I do not play one on TV. You will have to seek the counsel of these professionals for your personal situation. 

We are investing in the Country of Belize and before I get to answering the questions that you have asked based upon the counsel the we have received, I wanted to bring some points for you to think about on the front end before you invest.

The first is understanding your legal rights to property ownership in the jurisdictions in which you are looking to own. Someone spoke about ownership in the Philippines and as you can see it is not a straight forward process. You would want to find out this same information about Colombia. One of the reasons we are in Belize is because they are a British Common Law country and there are no restrictions on foreign ownership of real property. So the basis of law is very important for protection of your capital. 

The other advice is spot on, as you will need a US based tax adviser familiar with the rules around owning foreign rental property and at a minimum a real estate attorney, and possibly an accountant in the jurisdiction in which you are looking to buy.  

Now to answer your questions based upon the advice for our situation in Belize:

1. Rental income is taxed at the local level (1.75% of gross rental revenue), the income that comes to the US is distributed to investors at their individual tax rates as members of the LLC. You can only depreciate foreign real estate on a 40 year schedule, so there is not as much bang for your buck as U.S. real estate, but the benefit is still available. We will deduct all of the usual expenses otherwise.

2. Our understanding is that all passive real estate income has to be repatriated to the U.S. If we had an active business (i.e. property management) in the foreign country then that money we understand would not have to be repatriated, but if you did taxes would have to be paid at your ordinary income level, but you would be able to take advantage of the foreign income exclusion on that money. (again check with your tax adviser)

3. Financing is a country specific thing, the accountant and attorney in that jurisdiction can point you in the right direction. In Belize, there is no real lending to speak of that makes financial sense for a rental strategy, so we used all equity to purchase.  Once we have stabilized operations we will then look to go to the market and get long term financing very likely from outside of Belize.

4. Travel - that is actually a perk of ownership, we are in a resort area so while we do not NEED to travel there very often because we have a great team on the ground who runs the operations, we like to go as often as we can.  We would not have made the investment if we had to go and oversee the operations of the property. 

5. Yes, Yes, Yes, and property managers. Personally, I would start with the property manager and speak to a few of them as to what property type they say is in high demand and what they would like to have in their management portfolio.  They can also refer you to your real estate professional who will help purchase your property.  They can also refer you to the attorney, accountant and bankers.   

Hope this helps