4 financing routes for international buyers

Have you been wondering if foreign buyers of U.S. real estate could be your local real estate market niche?

Entrepreneur, investor and founder of RSN Property Group Reed Goossens found that to be the case after immigrating to the United States from Australia, by focusing on closing deals for international buyers.

One of the reasons Goossens has been so successful working with foreign buyers looking for real estate investments is that he personally went through the process of purchasing property in the U.S. as an Australian citizen.

Below are just a few of the useful snippets Goossens shared in his podcast interview, including information on how to guide international buyers through the purchasing process and some potential financing options available.

Regulations and taxes

Purchasing property in the U.S. isn’t as easy for an international investor as it is for an American citizen.

Fortunately, if you’re familiar with the relevant regulations, you can help these clients make the necessary preparations and improve your chances of closing sales.

Contacting a good CPA is the best way to get the ball rolling. A CPA can apply for an Individual Taxpayer Identification Number (ITIN) on behalf of your client and can also set up a Limited Liability Company (LLC).

Your client can then use the Employer Identification Number (EIN) associated with their LLC to open a bank account in the U.S.

Even once your client has an ITIN, an LLC, and a U.S.-based bank account, there’s still an additional hurdle to overcome: transferring money from an international account to fund the purchase of a property.

For this, Goossens recommends using a company that handles foreign-exchange transactions.

However, keep in mind that these companies are required by law to scrutinize large foreign transfers into U.S. accounts. If your client already has an established LLC, they’ll have a much easier time getting their transactions approved in a timely fashion.

4 financing options

In the event that your international buyer client doesn’t intend to pay cash, there are four potential financing options that may be available:

1. Portfolio-based lending
   If your client has a large portfolio ($1 million-plus), some international banks may be willing to finance a portion of their purchase. However, these financing options typically require downpayments in excess of $300,000, so this obviously isn’t a viable option for all international investors.
2. American bank loans
   Some American banks do have lending programs in place for international investors. Unfortunately, these programs require higher downpayments than loans for residents and they also tend to have higher interest rates.
3. Department of Housing and Urban Development (HUD) loans
   A less common, though still viable, option for financing property as a foreign buyer of U.S. real estate is to utilize a private lender through the Department of Housing and Urban Development. Again, higher interest rates are one of the downsides associated with this option.
4. Partnerships
   Partnering with an American-based investor is one way to get better rates when financing properties. When possible, this is often the most appealing option to lower their rates and their downpayment requirements.

Source: Florida Realtors