Foreign Investors in US Real Estate: How to Break into Real Estate Syndications As a Foreign Investor

I’ve lived and traveled all over the place, from France to Vietnam and everywhere in between - so it’s close to my heart to help foreign investors in US real estate. I’ve met people all over the world, and they tend to have many questions for me in regards to how to invest in the US. For most foreign investors, the US is seen as a safe haven. There are many reasons why. I’d like to take this opportunity to explore the US real estate landscape for foreign investors, focusing on multifamily and apartment syndication.

As always, it’s important that you speak with your attorney or professional accountant as to the particulars as far as taxes and legal matters go as they change depending on the borders you’re crossing and the country you hail from.

Foreign Investors in US Real Estate - it’s not as Hard as You Think!

First off, the US real estate market is very attractive to foreign investors. Foreign investors in US real estate view the US as a stable economy, one that isn’t tied to a particular commodity such as the Middle East or South America may be tied to oil. Many of these investors want to invest their money in the US market because there is an understanding that the law here goes. In fact, back at home the laws may change - often without rhyme or reason - leaving their investments vulnerable to the somewhat unpredictable scruples of their leaders or politics.

The US Market is HUGE

The US is the biggest economy in the world, yep. Plus, many of the US states have enormous economies in and of themselves. Take California and Texas for example. If California was a sovereign nation, it would be ranked the world’s 6th largest economy - larger than the U.K. and right on the heels behind India. Likewise, Texas is ranked as the world’s 10th largest economy. Neither California nor Texas are gonna sink into the ocean anytime soon.

Real Estate Opportunities are Aplenty

There are so many real estate opportunities here in the US, often unlike anything elsewhere in the world. From single family residences to multifamily syndications to major ground-up developments, the US is basically a Disneyland for foreign investors in US real estate.

Means to Diversify

Thanks to friendly-to-business US regulations, it’s relatively straightforward for foreign investors to diversify their global portfolios by adding US real estate. In addition, as US real estate is seen as a safe asset, more foreign investors are eager to shield their money in the US economy.

US Real Estate is a Top Performer

Particularly with real estate value add, US real estate is a consistent top performer. Multifamily value add syndications are highly sought after as they have been proven time and again to generate stellar cash flow and help build one’s wealth over the long haul. We love the challenge and potential for great rewards with value add multifamily real estate. As a budget cautious design-lover, I like to see how to fit all the pieces together to make renovation improvements that the local market will respond to.

A Few Things for Foreign Investors in US Real Estate to Think About...

As always, the positives must be tempered with sound discussion and caution. I recommend US real estate and multifamily syndications to my foreign investor friends, however I always urge them to consider THREE POINTS before moving forward on a multifamily syndication deal:

1. Capital Restrictions

Countries generally have what is called a “capital control” that can restrict how much money an investor can move from their home country. Of course these rules and restrictions vary by country - and can change on a dime. I suggest any foreign investor considering moving their money to US real estate first research the most recent regulations regarding capital control for their country.

2. Currency Risk

While the US dollar is seen as a safe and stable currency, I recommend foreign investors to weigh potential currency risks when moving their money from their home currency into the US dollar and real estate market. Do your research so you are confident you know what you’re getting into.

3. Legal and Tax

Taxes can make or break your cash flow for foreign investors investing in US real estate. As I’m not a tax professional here at my home in the US nor abroad, I cannot provide any tax advice. All I can do is urge any foreign investor interested in US real estate to first understand their tax law and how their cash flows and capital are impacted. As well, it behooves foreign investors to hire an attorney and translator (if English fluency has not been achieved) to review and translate all communications and contracts with a multifamily sponsor. This is imperative, especially before signing any documents.

How to Break into the US Real Estate Market

It’s relatively straightforward to participate in US real estate. 

• The journey usually begins with incorporating a US-based Limited Liability Corporation (LLC). The LLC prevents double taxation for the foreign investor.

• Next, foreign investors would apply for an Employer Identification Number (EIN) and register the LLC. This is something their tax professional or CPA can assist with. 

• With the EIN in hand, one can open a US-bank account. Be sure to choose one with global branches and online access.

• In the US, the LLC must file tax returns to Federal, State, and City. In addition, all partners of the LLC must file personal tax returns. We send out a Schedule K-1 to our limited investors in multifamily syndications. The K-1 dilenates tax deductions in the form of paper losses before the sale that can be included when you file your taxes to minimize your tax bill.

Conclusion

US real estate is a highly sought-after asset among foreign investors. Thanks to our stable economy and wide variety of real estate offerings, foreign investors have many options to break into the market while diversifying their global portfolio and shielding their capital from potential political or regulatory disruption at home. 

​However, as with anything money-related and real estate-related investment, I recommend potential foreign investors in US real estate to research their laws and regulations regarding capital restrictions as well as other legal matters that may impact their investment. For that, I refer to their tax advisor or a professional CPA that has experience and knowledge to make sure their capital is protected.