Starting REI in the US not being a US citizen?

28 Replies

I would like to know how to start REI in the US. I've heard that I should contact a lawyer to make the setup. But what is the setup? An account, permissions, forming a LLC etc.? I would love to connect with others who do the same.

By the way I’m from Denmark in Europe and have experience from owning 2 apartments, a bit of rehabing and Selling with profit. I’ve also been in a board of directors in a owners association for 8 year and have great knowledge about PM from working with the PM to manage 11 blocks with about 240 units.

But now looking to do some REI in the US. Does anybody have a direction I could start walking in, so I too can find my financiel freedom? I need knowledge in this besides what I am sucking in here at BP.

Hi Collette, 

Happy to help. I went through the process you're asking. Here's what I did:

First: you need to have an address in the U.S. Fortunately, you can get an address by working with a "registrar address" company. Essentially, they provide you with a virtual address and it is perfectly legitimate (the IRS sends me documents to this address, so it's legit!). You can find many such companies online and the registration process is super easy and the service very efficient.

Second: I recommend you setup an LLC. It's pretty easy there are several companies that do this online for you... PM me if you want the company I worked with (actually this company will steps 1 and 2 for you at the same time, awesome!) It's important you decide where you will setup. Different states have different advantages and disadvantages. We chose Texas. Once you setup an LLC you will get its EIN (or company tax number, similar to VAT number in Europe).

Third: you need to setup a bank account for the LLC. This isn't a must but down the line (loans, rent deposits etc. it's easier/required). This can be tricky as most probably a) you will need to physically visit a branch; b) they might ask you for your personal Tax Identification Number. Best thing to do here is to call banks and ask them. We bank with Chase. I would consider a small bank too, as long as they have an online portal.

Fourth: find your tax person. This is your guy or gal who will handle your tax filing, consult you on how to file etc. This isn't needed to setup your business but, looking back, I wish I had done this exercise when we setup and not wait till 2 months before tax filing date (March/April). 

That's it, really, pretty easy. The only real hurdle is getting your personal tax identifiction number, everything else is pretty easy. 

If you have any specific questions, send me message. 

Good luck! 

Hi Collette, 

@Rabih El-Khoury is right on the money above. I have started about 2 years ago from South Africa.

My tax person actuly assisted me with the EIN numbers. 

Give me a shout for any specific info you require.

Wow I was just about to post write out this post. I’m from South Africa and working in Kuwait, I have a couple rentals in Cape Town but now looking to get into US.

I have 2 colleagues here who has family in the US one in Atlanta and and one in Ohio so how do we go about drawing up the agreement.

@Willem Botha Thanks for your reply. Which States are you REI in, if I May ask? I would also like to know more about the different classifications of places to have rentals. Like A,B,C,D..etc. as I am thinking to seek out apartments or single family houses in towns outside bigger towns. So that tenants can still travel to work in the bigger towns within a resonable timespan. It would also have to have good shopping possibilities, School etc. But still be in a cheaper area, so people can afford to rent. Are these thoughts resonable?

Great posts now have some answers to my many questions ! I am UK based have a rental portfolio in the UK have done some BRRRs and some multi let houses and a new build

Looking to try to do something in the US. It is a different language with terminology but learning

I am wondering if financing is going to be hard being a non US resident ? any ideas ?

I need to focus down on some areas so will hopefully get some inspiration, I am thinking of avoiding expensive areas which will probably have a lower yield (Cap rate), but if anyone can point me in the right direction as I am looking to get things moving before a trip over ...

Vincent

Originally posted by @Colette Albright :

@Willem Botha Thanks for your reply. Which States are you REI in, if I May ask? I would also like to know more about the different classifications of places to have rentals. Like A,B,C,D..etc. as I am thinking to seek out apartments or single family houses in towns outside bigger towns. So that tenants can still travel to work in the bigger towns within a resonable timespan. It would also have to have good shopping possibilities, School etc. But still be in a cheaper area, so people can afford to rent. Are these thoughts resonable?

After about 2 years of podcasts and research I decided that turnkey is the way for me. I have a lot on my plate in South Africa and didn't need another "Job" or partner in the USA to make things harder. After all was said and done I earmarked 3 x providers that suited my personal criteria. We visited all of them during a trip to the US and the provider I decided on was Midsouth Homebuyers in Memphis.

I can honestly say, for me it is the best choice I ever made to go for "full turnkey" - I am buying 1 house a year, trying to speed that up to 2 / year. So currently 2 down, 3rd one is happening soon with many more to follow. -- This is probably not answering your question clearly, but my approach was (after realizing that turnkey was the way for me) - Find the best turnkey provider that sells in my budget, confirm the area / state is OK, confirm that they are a reputable outfit and commit.

Hope some of it helps.

@Willem Botha thank you for sharing your experience. May I ask is that your name of the turnkey provider is Midsouth home buyer? If you don’t mind, how did you go about financing? Did you get any bank or financial institutions financing as non-US? Thank you in advance.

Originally posted by @Rabih El-Khoury :

Hi Collette, 

Happy to help. I went through the process you're asking. Here's what I did:

First: you need to have an address in the U.S. Fortunately, you can get an address by working with a "registrar address" company. Essentially, they provide you with a virtual address and it is perfectly legitimate (the IRS sends me documents to this address, so it's legit!). You can find many such companies online and the registration process is super easy and the service very efficient.

Second: I recommend you setup an LLC. It's pretty easy there are several companies that do this online for you... PM me if you want the company I worked with (actually this company will steps 1 and 2 for you at the same time, awesome!) It's important you decide where you will setup. Different states have different advantages and disadvantages. We chose Texas. Once you setup an LLC you will get its EIN (or company tax number, similar to VAT number in Europe).

Third: you need to setup a bank account for the LLC. This isn't a must but down the line (loans, rent deposits etc. it's easier/required). This can be tricky as most probably a) you will need to physically visit a branch; b) they might ask you for your personal Tax Identification Number. Best thing to do here is to call banks and ask them. We bank with Chase. I would consider a small bank too, as long as they have an online portal.

Fourth: find your tax person. This is your guy or gal who will handle your tax filing, consult you on how to file etc. This isn't needed to setup your business but, looking back, I wish I had done this exercise when we setup and not wait till 2 months before tax filing date (March/April). 

That's it, really, pretty easy. The only real hurdle is getting your personal tax identifiction number, everything else is pretty easy. 

If you have any specific questions, send me message. 

Good luck! 

 Great info @Rabih El-Khoury.

@collete 

I have been through the same path.

I'm from Brazil (still living here) and after 2 years of studying, researching and traveling to the US I start investing in SFH. I got my first property on my own in a Tax Auction in Texas (Wichita Falls) that is currently under rehab.

I had another property that I bought with a group in Memphis that I sold last year.

The bank account was the hardest part for me. I used some contacts and decided to open mine LLC acct in BB&T (As my LLC was originally formed in Florida I used to had an acct in SeaCoast, but as it is local it makes hard to make business in Texas without a branch there). I did that when I was in Dallas (you will have to be there to open an acct. But I suggest to first call the bank of your choice, send the docs that they need so when you get there you have all set - that way you won't waste time or risk have some issue and don't open your acct).

I don't know how easy is to you to go to the US but I would try to set all you need (virtual address, LLC through an Accountant/CPA - I didn't use an attorney, and info from the bank) before get there so you are able to get all done in one trip.

Good luck and if you need any help just let us know.

Regards,

Felipe

Hey guys -- this is developing into a good actionable thread, thank you! A couple of inputs: 

@Willem Botha after 24 months of calls, emails, on-site meetings etc... I too have decided that at least for the first couple of properties, turnkey is the better (and more time-efficient) way of starting. I'm happy you selected Mid South (I have a call meeting with them tonight) to take things forward. We all know BRRR is the ultimate goal, however, with us being so far away, it's just too many things to juggle without having a tried, tested and trustworthy team on the ground. Plus, the financing available, particularly cash-out refinancing for the BRRR is expensive for non-U.S nationals like us (around the 7.1% interest). This kills the cash flow and the ROI. You're just in a better position when you come to a lender, be it a bank or a private lender, and tell them you own 3 or 4 properties. My plan is to get to that stage with turnkey and then hone in one or two states and start building a reliable and trustworthy team (broker, inspector, appraiser, general contractor) to do BRRR.

@Colette Albright , you asked 3 questions: 

1) Do you need an accountant and a lawyer? It depends on how big and complex your investments will be. To-date, I have used neither. I read all the documents shared with me (from brokers, general contractors, syndicators etc.) and I found it isn't rocket science. With up to a few (or even several) properties, if you're organized and file everything and if you can tabulate everything to produce a Profit & Loss statement, that's all you really need to file your taxes. Point is, i'm not at a level yet where I can afford an accountant -- if you're making $700/month from 2-3 rentals and your accountant wants $500 to prep two excel sheet documents, they're wiping out almost a whole month of income. Add to that your tax person is going to charge you not less than $700 to file your individual and LLC taxes, now we're two months down. To setup a company, you need to have a shareholder agreement (if you're partnering with someone) and this again can be downloaded from the internet and filled out. The company I used to setup my LLC even prepped the agreement for us as part of the service. A good tax person will guide you through not just filing but getting your ITIN.

2) A, B, C or D? First, I saw it for myself, a B in Dallas is very different than a B in Baltimore. It gets trickier if you go to Cs and C-s... in some areas of Dallas Fort Worth, you "might" entertain a C or C-, in Chicago, you will find a hard time finding a contractor to go to a C- to work on your property. If you're a flipper, i think Bs and As are a good option. The math speaks for itself. Area is say, seeing properties sell for $300,000, you find a distressed property for $120,000 that needs $70,000 in rehab, you flip it and make a sweet +/- $100,000. If you flip in C or B- areas in, say, Baltimore City, you'll find something at $40,000 that needs $20,000 in rehab to sell it at $30k-$40k... for some that isn't enough for others maybe. I'm a cash-flow investor who wants to buy and hold. I have yet to find anything that makes sense in an area of a "B." The lower I go in zones the better the cash flow (typically) but with that comes the headache of potential tenant problems. At this stage when I don't have a particular market i'm focusing on (i fish around the Midwest for properties) and i don't have reliable and trustworthy property manager i've worked with for years, i'm not willing to take that risk yet.

3) Should you apply for citizenship? If you'r a U.S. citizen/green card holder things can be easier, particularly with funding (actually, i'd dare say maybe only in view of funding). However, the IRS will follow you to moon to tax you on any and all money you make. My wife is American. My son is American. I still have visit visa... get my point :) 

I think we need somehow to share an online sheet with lenders who are/are not foreign national friendly. It's the one thing that will deter or accelerate all our projects and i think it's silly that each one of us has spent/will spend so much time locating and vetting lenders. We should collaborate. 

Just catching up with the thread.

I am happy to contribute as I tend to know about the topic. I live in London, UK and have a USA passport. I have been investing in the USA (35+ times) and UK (25+ years).

I have worked with a number of other investors based in Europe who want to invest or move to the USA. I am not a lawyer or even selling any sort of move services. I do know a fair bit about the logistics to make this work.

You do need to seriously consider why you might want to invest in USD assets and dealing with the IRS plus local laws. What works for a tenant in Germany is very different from what will work in the USA. Each state in the USA can be different.

I was hosting a lunch yesterday in London (high-end Chinese meal high above London's skyline). One of the investors at the table was explaining how they were taken for a ride by a UK company selling USA property. Be very careful when you are an investor in a different country from the USA. There are packagers who will sell something that looks good on paper yet no local investor would even take a look. This guy out at a significant loss by signing the property over to the bank for a net loss.

I only read half the posts, so maybe someone covered this, but you do need a US entity set up before you buy anything, but it may not be an LLC that you need. Which structure you need depends on what country you live in... it varies with different countries. If you set up the wrong one, like an LLC when that's not the one you should get, you may hit massive tax issues.

There are people who specialize in internationals buying US properties. They are the ones who know exactly which entity structure needs to be set up for which country the international buyer is coming in from.

Once you have a US entity set up, then you just need a US bank account set up and you are good to go. The specialist can help with that to.

That's literally all you need. Nothing more fancy than that.

I used to help internationals buy properties here and still have connections to those specialists, but it depends on what kind of properties you're buying as to whether they'd be the right people for you or not.

Do you know what you're wanting to buy or where?

@Colette Albright

50-60% of our clients that we manage for either live out of state or out of country. There are some legal documents and procedures you have to go thru regarding taxes and entity’s but yes it can certainly be done. I have a tax person that works with our out of country Investors all the time

Originally posted by @Han Oo :

@Willem Botha thank you for sharing your experience. May I ask is that your name of the turnkey provider is Midsouth home buyer? If you don’t mind, how did you go about financing? Did you get any bank or financial institutions financing as non-US? Thank you in advance.

YES - Midsouth Home Buyers in Memphis (Contact Liz Nowlin) - They have an excellent team. They also offer finance for foreign investors at 40% Dep, and 7.75% over 10 Years. (Works 100% for me as my goal is to get everything paid off in the next 10-12 years.

Originally posted by @Steve Rozenberg :

@Colette Albright

50-60% of our clients that we manage for either live out of state or out of country. There are some legal documents and procedures you have to go thru regarding taxes and entity’s but yes it can certainly be done. I have a tax person that works with our out of country Investors all the time

 Are you referring to FIRPTA? Its a withholding by the Buyer for real property to remit to IRS on behalf of Seller until they file.

I work directly with many foreign investors as well. I tend to find that its not effective to invest in a foreign country if you are only generating $700/month. There is a "tax" on the compliance and it will be at least $1-3,000 per year.

My clients are purchasing multi-family 1-200 units, commercial office, and other NNN properties. Is there a summary of repeated questions I can help answer?

@Ronald Rohde

I think it depends on the persons goal and what their strategy is. We manage roughly 1,000 SF properties and I speak around the US and other countries with many people that are successful and want to get into this strategy

I don’t think there is a right or wrong because everyone has different goals which means different strategies to achieve those goals.

@Colette Albright

You should also be consulting with a CPA / tax advisor who can consult on cross border tax planning issues etc. There is US estate tax exposure so you should understand proper planning around this exposure. Certainly will also be US income tax exposure for renting the property.

Hi Ali - to be honest. I don't quite know where to begin. I am thinking in the line of small one bedroom apartments which can be bought under the selling price, fixing them up and renting them to students. So I guess it is buy-to-let in areas close to Universities. Both some simple (meaning about four sharing a toilet/bathroom and kitchen and paying less rent) and more advanced (meaning rooms with own toilet/bathroom and sharing kitchen). I need to find areas in non (or not so high risk areas (low crime rate). I don't know if you in the US have social housing obligations by the state councils? Which could be an exit strategy if the university should shut/burn down. I'm also thinking about rehabbing former shops to become student rental rooms. Would I not need the shelter of a LLC to avoid lawsuits from people who have had accidents in or around my property?

@Rabih El-Khoury Thank you for your very deep and thoughtful thoughts and opinions. I appreciate them and your time. 

I have looked up the tax for foreign investor and found the tax percent for rentals is 30 percent and 10-20 percent on capital gains. Also there are other taxes locally determined by the individual state. I'm not quite sure about the deductions that can be made..

So I am wondering how to find out which states have the lowest tax rates, thinking that those states would be good to start in. Am I thinking about this in a wrong way?

@John Corey Hi John - thanks for your input. I would actually like to invest in the UK or US because of less rigid rules about capital gains and tenants rights that apply in Denmark where I live. Ideal would be investing in the UK, because the same basic rules apply. But US is also an option definitely.

Colette,

Happy to continue the discussion. I can compare and contrast the two markets. With Denmark being so close to the UK, it would be a lot easier to monitor, visit and otherwise stay on top of your investments. One guy I know well is from Denmark. He takes on development projects while working in private equity.

@Colette Albright Hi Colette, here is a list of acceptance agents that work for the IRS in the States if you are investing there.  Either way they can help you set up the company and have experience with what you need.  Of course there is a charge to the service but they will set up your company, ie Canada you will want to set up a corp.  There are many tax attorney's that act as the acceptance agents and they will guide and direct you.  Select the country you are in and then look at the listing of available people and their locations.  You should be able to find someone close to the area you are in.

https://www.irs.gov/individuals/international-taxp...

@Colette Albright I searched the net to determine which U.S. state charges what rate of taxes on income. Additionally, I brainstormed with the company I worked with to setup my LLC on which state would best fit our investment plan. My advice, regardless, is to work with a seasoned tax person, who is also experienced with foreign investors. The laws to start with aren't straightforward and they have recently changed under Trump (my sister in law works in a tax office and they're still doing workshops to get their heads around the updates).

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