What Paperwork Do You Need to Buy Property in the U.S.?

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Buying property in the U.S. can provide a tremendous ongoing income or a profit when you sell. Either way, investing in U.S. residential property can significantly increase your wealth and create a diverse investment portfolio by including property in a foreign country. Australian and New Zealand investors have an advantage when selling a property in the U.S. due to the favourable exchange rate, making a profit of $30,000 in USD closer to $45,000 when converted back to local currency.

 

There are a couple of extra steps to complete when you want to buy in the U.S., but it is relatively easy. Like every investment, you will need to complete paperwork. An experienced coach or mentor expert in the U.S. residential property market can help you through buying property in the U.S. The U.S. government does allow foreign investors to purchase property without making it too complicated, so you’ll be able to grow your wealth by buying U.S. property.

 

This blog introduces some of the notable U.S. paperwork and forms you may need to complete when you buy a property in the U.S.

Taxation Requirements

Note that you will be paying tax in two countries: income earned from your U.S. investment will count towards your Australian or New Zealand income tax. Of course, you can also claim the expenses on the property investment for that income tax.

 

Applying for an ITIN as a foreign investor is a simple process. To purchase property in the U.S., you will need to complete income tax statements in the U.S. too. You will need an ITIN equivalent to the U.S. Social Security Number to meet your taxation requirements. It is your unique government identifying number, so you must provide proof of identity and address.

 

People you will likely employ while investing in U.S. property include property lawyers, real estate agents, property managers, and tradespeople who renovate or maintain your property. If you are hiring anyone in the U.S. to undertake any tasks for your investment property, you need an Employer’s Number. It is like an ABN in Australia, and your employees will quote this number when completing personal income tax on the payments you make.

Property Paperwork

You will need to get the prospective property you consider buying inspected before purchasing the house. The property sales documents you need and fees payable include:

  • Title Search (proving the vendor has the legal right to sell and will have no ongoing debts you become responsible for from the property).
  • Title Report (which lists all the deed history and all the covenants or other limitations on the property’s title).
  • Insurance documentation as you will need insurance to protect your investment, and your mortgage lender will insist on seeing such documentation to protect their investment).
  • The buyer pays a recording fee to the government for registering or recording the change of ownership on the deed (usually a tiny amount).
  • Legal Fee (attorney to complete the official sales contracts showing the change of ownership, what money is payable, what condition the property will be in when settlement occurs, and all the conditions of the sale).
  • Sales Contract.
  • Real Property Transfer Tax – a fee payable to the state when a property sells. Some states do not have this tax, but most do.

 

If you rent the house, you’ll need a copy of the rental receipts and the exchange rate documentation for your income tax. The receipts will verify how much rental income you have received in the financial year for tax purposes.

 

If you have a mortgage on the property, you will need to keep records of all the interest payments you make, as you can deduct these against your income tax. Ensure you have copies of all documents concerning any costs for the property, such as a maintenance bill from a tradesperson or the cost of rental collection by a property manager. Each charge is deductible from your total taxable income, reducing the overall costs of your investment.

Mortgage Requirements

To get a mortgage for a U.S. property, you will need to provide all the usual credit documents as you would for local property, such as proof of identity, proof of income to show you can service the loan, and information on your current expenses. However, the mortgage requirements are less because the buy-in price for property in the U.S. is generally lower.

 

Suppose you wish to get a mortgage from a U.S. lender. In that case, you will need to ensure you have a credit rating in the U.S. It can take several months to establish a credit rating acceptable to banks where you want to purchase your property, although it is an option.

 

Many investors who need a mortgage to cover the total costs of the investment will try an international bank or a large bank with international banking options. You are less likely to get approval for a loan from a small Australian credit union to buy property in the U.S.

 

Remember that the mortgage will require international currency exchange between AUD or NZD and USD to purchase the property.

Money Exchange Service

As a foreign investor, you must employ a currency exchange system. You will need to change your Australian or New Zealand dollars into U.S. currency to purchase the property and to pay for all renovations or maintenance. You will need to pay for reports in the pre-purchase property stage, insurance while you own the property, and marketing costs when you are ready to sell the property.

 

You will also need to change the U.S. dollars you receive for rent or when you sell the property back into Australian or New Zealand dollars. Note that the exchange rate is usually favourable for this, so the income you earn in the U.S. will be increased once changed into local currency.

 

You will need a sound exchange system with lower fees and reliable services.

Getting Help from the Experts

While it is relatively easy to complete the paperwork for purchasing property in the U.S., there are enough differences and practicalities to consider that getting some help could be worthwhile. Experts who frequently help others to buy property in the U.S. will know all the steps and the current legislation that may impact your investment decisions.

 

A property coach can ensure you tick all the boxes, have a plan that meets your investment goals, and provide you make wise choices as to what to buy and when to sell. If you have an expert working with you, you will cover every essential step in the process. You’ll be sure to complete all the paperwork necessary to purchase your investment property in the U.S.