@Dave Sandford, you'll want to form the LLC in the state where you are buying property and doing business. You'll then get an EIN from the IRS.
Since you don't have an SSN or ITIN, you can still get an EIN for your LLC. You'll just need to use Form SS-4 and mail or fax to the IRS (instead of getting the EIN online). Faxing has a much faster approval time. On line 7b where it asks for your "SSN, ITIN, EIN", just enter "Foreign".
Since you'll likely have a US tax obligations, that's where the ITIN comes in. You'll obtain this via Form W-7.
The ITIN is not needed right away, so I'd say the order would be LLC, EIN, then ITIN. You should be able to do everything yourself remotely just using an e-fax and/or regular mail. If you decide on a state for your property/LLC, let me know. I'll send over the detailed steps if you'd like.
First, congrats on getting started with investing! :)
I'm a half kiwi/ half American, living in Dubai and buying properties in FL. We operate our business using LLCs to hold our personal portfolio and legalize our partnerships (with non-US citizens) for joint investing ventures.
You certainly need to make sure that you are sorted for taxes and accounting so that you can remain compliant and take full advantage of the legal loopholes that are afforded to property owners in the US. You should also be sure to understand the requirements of federal taxes and state taxes (which will vary depending on where you want to open your LLC).
I would highly recommend finding a good CPA and attorney who specialize in working with foreign real estate investors. (Especially as you are getting started.) I have a good one in FL that I can refer you to. A good CPA and attorney will consider your specific situation, investment strategy, and goals - and then advise you on the best course of actions for you. A good attorney can also help you understand the legal aspects of the LLC and how they can protect you from litigation. (Americans are much more litigious than kiwis!)
Have you also considered connecting with lenders who work with foreign investors?
If you would like to chat further, I'd be very happy to connect. Just send me a PM and we can arrange a skype call.
Welcome to BP @Dave Sandford, Samantha is right with suggesting that you seek some professional advise on this.
I also hold duel citizenship US and NZ,
The ideal situation is to get have you qualify for conventional loans....
Sound like you have good starting point by already having bank account with Wells Fargo in the US. if you don't already have a credit card, i suggest you issue one asap so you can start build your credit record and credit score. you may be able to get a secured credit card against a cash deposit. then you need to set up a monthly automatic payment for something, at minimal cost like $15 per month. (but better be not more then 30% of the credit) that would help to build credit.
Following to that you need to file Tax returns in the US, (you will have to have at list 2 for conventional loans).
Seek CPA advise for ITIN, EIN and LLC probably a lawyer can do that too. A professional could probably do all of that for just under $1000USD.
Very good advice Sam! I am Bulgarian/French living in London UK and I bought 2 properties in FL via a LLC (I own 50% and my Mum 50%, she lives in France). I registered using Legalzoom. Later I found a CPA. I started with a legal firm supposedly catering to foreigners and it was a disaster. I later found a CPA here on BP and I am quite happy. I am not happy with my bank BBVA Compass - bad internet banking and limited services. I would like to find a new bank for our LLC account with good internet banking. We bough one house with cash and the other one with a very expensive ARM loan. It was really hard to get a loan as non resident.
Regarding credit rating. Most agencies use Social Security Number (SSN). But as a non resident you only get ITIN. Anybody knows how to build credit rating with an ITIN only?
@Dave Sandford, you'll want to form the LLC in the state where you are buying property and doing business. You'll then get an EIN from the IRS.
Since you don't have an SSN or ITIN, you can still get an EIN for your LLC. You'll just need to use Form SS-4 and mail or fax to the IRS (instead of getting the EIN online). Faxing has a much faster approval time. On line 7b where it asks for your "SSN, ITIN, EIN", just enter "Foreign".
Since you'll likely have a US tax obligations, that's where the ITIN comes in. You'll obtain this via Form W-7.
The ITIN is not needed right away, so I'd say the order would be LLC, EIN, then ITIN. You should be able to do everything yourself remotely just using an e-fax and/or regular mail. If you decide on a state for your property/LLC, let me know. I'll send over the detailed steps if you'd like.
Obtaining an ITIN is difficult and can take months if not property done right. Obtaining an EIN and forming an LLC are not as difficult. If you want to message me we can set up a call. I usually answer questions directly but this isn't something you want to DIY.
Obtaining an ITIN is difficult and can take months if not property done right. Obtaining an EIN and forming an LLC are not as difficult. If you want to message me we can set up a call. I usually answer questions directly but this isn't something you want to DIY.
Hi, this is something i am interested in also. From the homework i've been doing i was under the impression i needed to get a ITIN first then the LLC can follow after. Also do you need to have a employer in the US in order to obtain a EIN? I'm planning on doing a trip early in 2018 and i would like to be in a position that i can be prepared to look at the markets while i'm there.
Agreed @Hadar Orkibi, conventional loans are the long term aim here. I've recently funded my US account for the sole purpose of a secured credit card (with a small monthly auto expense / repay) thank you for that. I am wondering if they'll still allow it without my having an ITIN, yet. I guess that the point to get a score anyway. I'll find this out tomorrow.. On this topic, once my ITIN is all go, I'll swap my NZ or Australian AMEX over for a USA one (they allow this) and that might give me a decent score to start with too... If I find a friend that allows me to piggyback off their credit too then I could have a decent score in no time :)
@Hadar Orkibi what do you mean by two tax returns for conventional loans, just confirming, do you mean two 'years' worth before banks will look at me?
Thanks @Samantha Miles, yes I guess we do need the expense and expertise of a good CPA too don't we.
I've recently purchased my first Australian property where I learnt we need to bring an attorney into the picture too.. I know these two must seem so obvious to any experienced investor right, haha.
I'm hoping to utilise the skills of those that have gone before me and assist us foreign aliens in most aspects of this journey, especially at the beginning of my journey. Turnkey or similar.
Hopefully this way I'll be able to dodge some of the issues you mention @Chris Popov and be able to work with successful vendors from the beginning. I've heard and read mixed reviews about using an ITIN to get a credit score but I imagine once set up it's the same process as a SSN - Time will tell.
Also, I hadn't realised yet the importance of having the LLC in the same state as my property, thanks for that's heads up @Matt Horwitz and all the other detailed information. Does this mean I'm be to source a property beforehand? Or does applying for the LLC & EIN take so long I'm best to have these ready first?
@Raymond O. it appears you don't need your ITIN first, but rather this can be left to last in the process. Someone else told me it'll be easier to get your ITIN if you have an EIN too (I guess it shows your previous involvement). Don't think you need an employer for and EIN either.. I don't plan on having one. Make sure you set up a bunch of things on your trip: Bank account, forwarding postal address, phone number (IP phone number might be best), secured credit card..
You would file a W-7 with your Form 1040NR. Look at the W-7 small letter b - NRA filing a US tax return.
You do not need an employer to have an EIN.
I think a 30 minute call with a CPA could clear up all these issues and save a lot of headaches.
@Dave Sandford, I wouldn't worry about the order much... but if you're certain you're going to take property in the LLC, might want to get that going at least 1-2 months before you're ready to close on a property. The LLC approval shouldn't be long at all. Same states have a 1-3 day approval time. Slower states will be 2-4 weeks. The EIN approval process could take 4-6 weeks on the slow end.
dave some of the info here is not quite right. We have set up hundreds of kiwis and other foreigners it is pretty simple. ITIN takes 6 weeks on average. EIN and LLC takes a day.
You build credit with ITIN exactly the same as SSN. My credit score is 840. The key is get a bank account open, get a secured credit card. NEVER draw more than 20% of the available limit and always pay it every month. I use my BP subscription to do this. Then get a loan on a property that reports to the credit agencies.
@Raymond O., check out my first reply. No, you don't need an ITIN in order to form an LLC (or get an EIN). You'll need the ITIN eventually, but do the LLC first, then EIN. Although EIN stands for Employer Identification Number, you do not need to be an employer. You certainly do not need to be an employee. If you're going to fly to the states, form the LLC from home in the state where you're going to invest, then open the bank account on your trip. The bank account is the part that causes a lot of friction for foreigners. Simple to knock out in person though.
You can still open a bank account from New Zealand it's just a bit involved.
Also regarding LLC's make sure you incorporate in a state that makes what Americans call "piercing the veil", (looking through the LLC to the individual owners) difficult, does not have high sales and franchise taxes and has low annual operating costs to keep it legal.
Does it always make sense to form a LLC to hold property as a foreign investor? I have gotten mixed feedback in this regard; some argue that it is better to hold it personally for tax purposes.
Hi @Dave Sandford, i just heard from a lender i work with Ridge Lending Group, that they offer Foreigner National Loans.
I reviewed the requirement and they are rather reasonable. feel free to PM if you wish to receive the documents. Personally i didn't use the product been a US citizen but it looks like good option. I'm sure few people in New Zealand would be happy to hear that!
Never own in your own name. It makes you personally liable, not something you want in the USA. Use a single member LLC, Arizona is the best state to set that up in. (Single member LLC's are disregarded int he USA for tax so give you the most flexibility whilst still providing asset protection.) You will need some structuring on the New Zealand end to tidy it up but it's pretty simple.
Hello everyone,
This is a fascinating and informative thread. Thanks for all the detailed replies.
This might highjack the thread a bit but what are the tax implications for non-resident foreign nationals owning property through an LLC in the statutes?
Are you only taxed on the net results of the activities of the LLC? Do any of your other income or activities outside the states get sucked into US taxation?
Reason for asking is in a US citizen who has lived abroad for years and has been grappling with the US worldwide taxation scheme - very expensive and not fun!
@Dave Sandford Nowadays you can do everything right online... You don't even need to get out of the house to do it, other than to make the account at the bank for the LLC. It costs about 126$ to make the LLC and then register it with the IRS. You always want to make an LLC for every property that you purchase, this is what I do and IMO because it makes everything x10 easier . In addition to this . make sure that you have your own LLC that you can use a the parent LLC so that way you can build reputability with banks with that LLC. "ABCD LLC doing business as Main st 123 LLC" This would the be proper way to do it IMO, as most banks don't want you to open and close multiple accounts because it doesn't create a good track record. So the best way to do it is to make a father LLC and then "sister" property LLCS.