Part of the reason for the real estate boom in New York City involves the increase in foreign investment with luxury residential high rises. With more of these properties becoming available and more buyers coming from abroad, builders appear poised to oblige them.
With that, it is essential for foreign real estate investors to know about the necessary steps for securing real estate. This post will highlight a few of them.
Create an LLC – A limited liability company (LLC), this is a separate entity that will buy and sell real estate on behalf of the investor. Because it is a separate legal entity, the LLC can also be a shield to protect the investor from liability in the event of a lawsuit.
Obtain an EIN for the LLC – Any LLC must obtain an employer identification number, also known as a tax id number. This number identifies the company for tax purposes and is required for the LLC to open a bank account in the United States. Most importantly, a tax id number is one of the pieces required for the business to pay federal income taxes.
Determine how rental income will be classified – Unlike American real estate investors, foreign investors must choose whether their real estate income will be “effectively connected” or “not effectively connected” to a trade or business based in the United States. This choice will affect which tax form will be needed to properly classify the income and determine the correct withholding rate.
Open a U.S. bank account – This is fairly straightforward, but the preceding steps must be taken.
If you have further questions about the steps foreign real estate investors must take to secure real estate in Manhattan, an experienced attorney can advise you.