Investment Property in the USA: Complete Guide for Foreign Buyers

The United States offers international investors access to one of the world’s largest and most diverse real estate markets.

Foreign buyers can evaluate single-family homes, condominiums, townhouses, small multifamily properties, vacation rentals, furnished rentals, and other income-producing real estate across markets with very different prices, tenant demand, taxes, insurance conditions, and investment profiles.

However, buying an investment property in the United States involves more than selecting a city and transferring money.

The investor must define the strategy, calculate the complete capital requirement, review ownership structures, understand financing, investigate the property, evaluate rental permission, organize insurance and management, comply with US tax rules, and plan for the future sale.

This complete guide explains how to purchase an investment property in the USA as a foreign buyer, from the initial investment plan through ownership, rental operations, tax reporting, and exit.

Quick answer: A foreign buyer can generally acquire US investment property by selecting an appropriate market and rental strategy, documenting the source of funds, choosing an ownership structure with qualified legal and tax advice, obtaining financing or preparing a cash purchase, completing inspection and title due diligence, arranging insurance and management, and complying with applicable federal, state, local, and home-country rules.

Property ownership does not guarantee rental income, appreciation, financing approval, immigration status, tax savings, or investment success.

International Participation in US Real Estate

International buyers are an established part of the US residential real estate market.

The National Association of Realtors reported that foreign buyers purchased approximately 78,100 US existing residential properties between April 2024 and March 2025.

The estimated dollar volume of those purchases reached approximately $56 billion.

The report identified two principal international buyer categories:

• Nonresident foreign buyers: individuals with permanent residences outside the United States who purchase property for investment, vacation, or other purposes;
• Resident foreign buyers: recent immigrants or international residents who have lived in the United States for a qualifying period.

International buyers represented approximately 1.9% of existing-home purchases and 2.5% of the total dollar volume during the report period.

Review the current National Association of Realtors International Transactions report.

Can a Foreign Buyer Purchase US Investment Property?

Foreign nationals commonly purchase residential and investment property in the United States.

There is no single federal rule prohibiting all non-US citizens from acquiring ordinary residential property.

However, eligibility should not be described as completely unrestricted because a transaction may be affected by:

• Federal sanctions;
• Anti-money-laundering and source-of-funds reviews;
• State laws involving certain foreign persons or entities;
• Restrictions involving agricultural property;
• Property located near military installations, airports, or maritime ports;
• Committee on Foreign Investment in the United States jurisdiction;
• Lender and insurer requirements;
• Home-country capital-transfer rules.

The US Department of the Treasury explains that the Committee on Foreign Investment in the United States, commonly called CFIUS, may review certain real estate transactions by foreign persons when the property is located in or near specified military installations, airports, or maritime ports.

Review the official CFIUS Real Estate Instructions.

Before purchasing, a foreign investor should have qualified counsel confirm that no federal, state, sanctions-related, or location-specific restriction affects the proposed transaction.

Buying Property Does Not Provide Immigration Status

Real estate ownership and immigration status are separate legal matters.

Purchasing property does not automatically provide:

• A US visa;
• Permanent residency;
• Employment authorization;
• Citizenship;
• The right to remain in the United States;
• The right to work personally in the property-management business.

Investors seeking immigration benefits should obtain advice from a qualified US immigration attorney.

Step 1: Define the Investment Objective

The investment objective should be established before the investor selects a city or property.

Common objectives include:

• Recurring rental income;
• Long-term property appreciation;
• Dollar-denominated asset exposure;
• Portfolio diversification;
• Capital preservation;
• Personal or family use;
• A future residence;
• A combination of income and personal use.

The objective determines the appropriate:

• Market;
• Property type;
• Rental strategy;
• Financing structure;
• Management system;
• Holding period;
• Exit strategy.

A property purchased mainly for personal vacations may not produce the strongest investment return. A high-income property may not be located in the market with the greatest international recognition or expected appreciation.

Step 2: Select the Investment Strategy

Long-Term Rental

A long-term rental is generally leased for six months, one year, or longer.

Potential advantages include:

• More predictable monthly income;
• Lower turnover than short-term rentals;
• Reduced dependence on tourism;
• Fewer cleaning and guest-service expenses;
• Less intensive daily management.

Potential risks include:

• Tenant nonpayment;
• Vacancy between leases;
• Property damage;
• Legal procedures involving lease enforcement;
• Rent remaining fixed during the lease term;
• Maintenance and capital replacements.

Short-Term or Vacation Rental

A short-term rental is generally furnished and rented by the night, week, or for another short period.

Potential advantages include:

• Ability to adjust nightly prices frequently;
• Potentially higher gross revenue in strong tourism markets;
• Possible personal use during selected periods;
• Access to multiple reservation channels.

Potential risks and expenses include:

• Seasonality;
• Variable occupancy;
• Property-management commissions;
• Cleaning and laundry;
• Utilities paid by the owner;
• Furniture and equipment replacement;
• Platform fees;
• Guest damage;
• Licensing and lodging taxes;
• City, county, zoning, condominium, and association restrictions.

A property located near a beach, theme park, convention center, or tourist attraction is not automatically approved for short-term rental use.

Medium-Term Furnished Rental

Medium-term rentals may serve:

• Traveling professionals;
• Corporate employees;
• Relocating families;
• Seasonal residents;
• Students;
• People receiving medical treatment;
• Residents displaced by an insurance claim.

This strategy may offer longer occupancy than nightly rentals but usually requires furniture, utilities, internet, flexible leases, and active management.

Buy-and-Hold

A buy-and-hold investor purchases a property with the intention of owning it for several years.

The return may come from:

• Rental income;
• Potential appreciation;
• Mortgage principal reduction;
• Potential tax deductions and depreciation.

Property appreciation is not guaranteed, and a long holding period may be required to recover acquisition, financing, and future sale expenses.

Value-Add Property

A value-add investor attempts to increase the property’s value or income through:

• Renovation;
• Repairs;
• Improved management;
• Better tenant placement;
• Higher occupancy;
• Expense reduction;
• Property repositioning.

This strategy involves additional risks, including construction delays, permit issues, cost overruns, contractor disputes, and extended vacancy.

Step 3: Choose the Property Type

Single-Family Home

Potential advantages:

• Broad demand from families;
• No shared walls;
• Potentially stronger resale appeal to owner-occupants;
• Greater control over the property.

Potential risks:

• One vacancy can eliminate all rental income;
• Owner is responsible for the complete structure;
• Roof, landscaping, plumbing, and major systems can create significant expenses.

Condominium

Potential advantages:

• Common-area maintenance handled by the association;
• Potential access to amenities;
• Inventory in urban, waterfront, and tourism markets;
• Less exterior maintenance performed directly by the owner.

Potential risks:

• Monthly association fees;
• Special assessments;
• Rental restrictions;
• Association approval procedures;
• Building insurance and reserve concerns;
• Reduced control over major building decisions.

Townhouse

A townhouse can combine characteristics of a condominium and a single-family home.

Investors should confirm:

• Which parts of the property the owner must insure;
• Which exterior items the association maintains;
• Monthly fees;
• Rental restrictions;
• Roof and structural responsibilities.

Small Multifamily Property

A duplex, triplex, or four-unit property can provide multiple sources of rental income.

Potential advantages include:

• Income from more than one tenant;
• Reduced dependence on one occupied unit;
• Potential operating efficiencies.

Potential risks include:

• Greater management requirements;
• Higher repair and utility expenses;
• More complex insurance;
• Financing and appraisal differences;
• Local zoning and licensing requirements.

New Construction

New-construction property may offer:

• Modern systems;
• Builder warranties;
• Lower initial maintenance;
• Energy-efficient features;
• Possible lender or builder incentives.

Investors should also evaluate:

• Construction delays;
• Deposit requirements;
• Competition from future new properties;
• Association and community-development fees;
• Property taxes after completion;
• Rental history in the community;
• Whether incentives affect the true purchase-price comparison.

Step 4: Calculate the Complete Capital Requirement

The capital required is greater than the purchase price or down payment.

A complete acquisition budget may include:

• Down payment or complete cash purchase price;
• Earnest money deposit;
• Lender fees;
• Appraisal;
• Inspection;
• Survey;
• Title search and title insurance;
• Attorney and accounting fees;
• Entity formation;
• Insurance premiums;
• Tax and insurance prepayments;
• Association fees;
• Repairs;
• Furniture and equipment;
• Rental licenses and registrations;
• Currency-conversion expenses;
• Operating reserves.

Illustrative Financed Purchase

Assume a foreign investor is evaluating a $500,000 rental property and receives a financing scenario requiring a 30% down payment.

Category	Illustrative Amount
Purchase price	$500,000
30% down payment	$150,000
Illustrative closing and financing costs	$20,000
Inspection, appraisal, legal, and setup	$6,000
Initial repairs or furniture	$18,000
Operating reserve	$24,000
Illustrative capital required	$218,000

This example is educational. It does not represent standard lender terms or guaranteed closing costs.

Actual capital requirements vary according to the property, state, loan, lender, insurance, title services, repairs, rental strategy, and exchange rate.

Maintain Liquidity After Closing

An investor should not use every available dollar to complete the purchase.

Reserves may be required for:

• Vacancy;
• Lower-than-expected bookings;
• Mortgage payments;
• Insurance deductibles;
• Roof or air-conditioning replacement;
• Plumbing and electrical repairs;
• Association assessments;
• Property-tax increases;
• Legal and accounting expenses;
• Storm preparation and recovery;
• Currency movements.

Step 5: Decide Between Cash and Financing

Cash Purchase

Potential advantages include:

• No mortgage qualification;
• No monthly debt payment;
• No mortgage interest;
• Fewer lender-required documents;
• Potentially faster closing;
• Potentially stronger negotiating position.

Potential disadvantages include:

• Greater concentration of capital;
• Reduced liquidity;
• Less capital available for diversification;
• Opportunity cost of the invested funds.

Financed Purchase

Potential advantages include:

• Preservation of part of the investor’s liquidity;
• Lower amount of cash committed to the purchase price;
• Potential ability to acquire multiple investments;
• Potentially greater return on invested cash when performance is strong.

Potential disadvantages include:

• Interest and lender fees;
• Monthly payments regardless of vacancy;
• Required financial reserves;
• Prepayment penalties;
• Balloon-payment provisions;
• Refinancing risk;
• Greater losses when the property underperforms.

Leverage can increase both gains and losses.

Foreign National and Investment-Property Loans

International investors may encounter financing described as:

• Foreign national mortgages;
• DSCR loans;
• Business-purpose loans;
• Portfolio loans;
• Asset-based loans;
• Bank-statement programs.

There is no single universal foreign national mortgage program.

Requirements may depend on:

• The investor’s country of citizenship and residence;
• Property type;
• Rental strategy;
• Loan amount;
• Down payment;
• Financial reserves;
• Credit history;
• Property rental income;
• Ownership structure;
• Source-of-funds documentation;
• Lender guidelines.

Compare More Than the Interest Rate

Review:

• Interest rate;
• Annual percentage rate when applicable;
• Loan term;
• Fixed or adjustable rate;
• Origination points;
• Processing and underwriting fees;
• Estimated monthly payment;
• Required reserves;
• Prepayment penalty;
• Balloon payment;
• Recourse or personal-guarantee provisions;
• Total cash required at closing.

Loan Estimate and Closing Disclosure

For covered consumer mortgage transactions, the Consumer Financial Protection Bureau provides standardized tools for reviewing mortgage terms.

A Loan Estimate provides information about:

• Loan amount;
• Interest rate;
• Estimated monthly payment;
• Mortgage insurance when applicable;
• Estimated closing costs;
• Estimated cash required to close;
• Prepayment penalties;
• Balloon payments;
• Fixed or adjustable interest features.

Review the official CFPB Loan Estimate Explainer.

The Closing Disclosure provides the final loan terms and closing costs.

For covered mortgages, the lender must generally provide the Closing Disclosure at least three business days before the scheduled closing.

This allows the buyer to compare the final terms with the earlier Loan Estimate.

Review the official CFPB Closing Disclosure Explainer.

Business-purpose and certain investment loans may not use the same disclosure forms. The investor should request a complete written term sheet and fee schedule.

What Is a DSCR Loan?

DSCR means debt-service coverage ratio.

A DSCR loan generally evaluates whether the property’s qualifying rental income can support the required debt payment.

A simplified calculation is:

DSCR = Qualifying Property Income ÷ Qualifying Debt Obligation

For example, if the lender recognizes $3,000 in qualifying monthly income and a qualifying monthly debt obligation of $2,500:

$3,000 ÷ $2,500 = 1.20 DSCR

Lenders may calculate qualifying income and debt differently. Some may use market rent, existing lease income, appraisal rent schedules, taxes, insurance, and association fees.

Investors should not assume that the lender’s qualifying DSCR calculation represents the property’s real cash flow.

What Is an ITIN?

An Individual Taxpayer Identification Number is a federal tax-processing number issued by the Internal Revenue Service to qualifying individuals who need a taxpayer identification number but are not eligible for a Social Security number.

An ITIN may be relevant for:

• Filing a federal tax return;
• Reporting rental income;
• Claiming eligible deductions or refunds;
• Certain mortgage programs;
• FIRPTA procedures;
• Other federal tax matters.

An ITIN does not provide:

• Immigration status;
• Work authorization;
• A visa;
• Mortgage approval;
• Eligibility for Social Security benefits.

An ITIN is not an automatic requirement for every cash purchase, but it may become necessary for tax filing and other investment procedures.

Review the current IRS ITIN application guidance.

Step 6: Select an Ownership Structure

Potential structures include:

• Individual ownership;
• Single-member limited liability company;
• Multimember limited liability company;
• Partnership;
• Corporation;
• Trust;
• Another legal or estate-planning structure.

No structure is automatically correct for every foreign investor.

The decision may affect:

• Liability;
• Financing eligibility;
• Federal tax classification;
• Annual tax returns and information reports;
• Administrative expenses;
• Estate planning;
• Succession;
• FIRPTA;
• Home-country reporting.

Individual Ownership

Potential advantages:

• Simpler ownership documentation;
• Potentially easier financing with certain lenders;
• No separate entity formation.

Potential concerns:

• Direct exposure to property-related claims;
• Estate and succession considerations;
• Possible probate requirements;
• Limited separation between personal and property activity.

Limited Liability Company

Potential advantages may include:

• Separation of property activities from personal activities;
• Liability-management benefits when correctly formed and operated;
• Flexible management and ownership provisions;
• Potential succession and administrative benefits.

Potential concerns include:

• Formation and annual fees;
• Separate banking and accounting;
• Federal tax reporting;
• Possible Form 5472 requirements;
• Financing restrictions;
• Personal guarantees;
• Home-country entity reporting.

An LLC does not automatically reduce taxes, eliminate liability, avoid FIRPTA, prevent estate-tax exposure, or guarantee financing.

Foreign-Owned Disregarded Entity Reporting

A US disregarded entity wholly owned by a foreign person may have Form 5472 and pro forma Form 1120 reporting obligations when reportable transactions occur.

Reportable transactions may potentially include:

• Capital contributions;
• Distributions;
• Loans;
• Payments between the entity and foreign owner;
• Other transactions with related foreign parties.

Review the official IRS Form 5472 resource.

Step 7: Build the Professional Team

A foreign buyer should not rely on one professional for every area of the transaction.

Real Estate Professional

May assist with:

• Property search;
• Comparable sales and rentals;
• Property tours;
• Offer preparation;
• Contract deadlines;
• Transaction coordination.

The investor should understand the professional’s representation, duties, experience, and compensation before signing an agreement.

Real Estate Attorney

May assist with:

• Ownership structure;
• Contract review;
• Entity documents;
• Title and closing issues;
• Leases and management agreements;
• State foreign ownership rules;
• Estate and succession planning.

International Tax Professional

May advise on:

• US tax residency;
• Rental-income taxation;
• Section 871(d) elections;
• ITIN and EIN requirements;
• Depreciation;
• Entity filings;
• FIRPTA;
• Estate and gift tax;
• Coordination with home-country taxation.

Lender or Mortgage Broker

Should provide clear information regarding:

• Eligibility;
• Documentation;
• Loan terms;
• Fees;
• Prepayment penalties;
• Reserve requirements;
• Property eligibility;
• Closing timeline.

Home Inspector

May identify visible problems involving:

• Roof;
• Foundation;
• Electrical system;
• Plumbing;
• Heating and air conditioning;
• Water intrusion;
• Appliances;
• Safety conditions.

Insurance Professional

Should confirm whether the proposed property and rental use are insurable.

The review may involve:

• Landlord coverage;
• Short-term rental use;
• Liability;
• Flood;
• Windstorm;
• Hurricane or named-storm deductibles;
• Loss of rental income;
• Roof and property-age requirements.

Property Manager

May coordinate:

• Advertising;
• Tenant or guest screening;
• Rent collection;
• Maintenance;
• Inspections;
• Lease administration;
• Financial statements;
• Emergency response.

Step 8: Select the Market

The market should be selected using data rather than familiarity or popularity.

Important factors include:

• Population and household growth;
• Employment sectors;
• Household income;
• Rental vacancy;
• Market rent;
• Housing supply;
• Construction activity;
• Property taxes;
• Insurance conditions;
• Rental regulations;
• Property-management availability;
• Resale demand.

Popular International Markets

International investors frequently consider markets in:

• Florida;
• Texas;
• California;
• New York;
• Arizona;
• Georgia;
• North Carolina;
• Other population and employment growth regions.

Popularity does not guarantee strong cash flow or appreciation.

Every city should be analyzed by neighborhood, property type, rent, expenses, insurance, local regulation, and purchase price.

Step 9: Analyze Net Investment Performance

Gross rental income is not profit.

Potential expenses include:

• Vacancy;
• Property management;
• Property taxes;
• Insurance;
• Association fees;
• Utilities;
• Cleaning;
• Maintenance;
• Repairs;
• Landscaping or pool service;
• Leasing and renewal fees;
• Furniture replacement;
• Licenses and lodging taxes;
• Accounting and legal expenses;
• Mortgage payments;
• Capital reserves.

Illustrative Long-Term Rental Analysis

Category	Illustrative Annual Amount
Gross rental income	$42,000
Vacancy allowance	-$2,100
Property management	-$4,200
Property taxes	-$6,000
Insurance	-$4,500
Association fees	-$2,400
Maintenance and reserves	-$4,000
Illustrative net operating income	$18,800

Mortgage payments and investor-specific taxes would then need to be considered.

This example does not represent projected performance for a particular property.

Investment Metrics

Gross Rental Yield

Gross Rental Yield = Annual Gross Rent ÷ Purchase Price × 100

This metric excludes all operating expenses.

Net Operating Income

Net Operating Income = Gross Operating Income − Operating Expenses

NOI is generally calculated before mortgage principal and interest, income taxes, and certain capital expenditures.

Capitalization Rate

Capitalization Rate = Net Operating Income ÷ Property Value × 100

Pre-Tax Cash Flow

Pre-Tax Cash Flow = Net Operating Income − Financing Payments

Cash-on-Cash Return

Cash-on-Cash Return = Annual Pre-Tax Cash Flow ÷ Total Cash Invested × 100

Stress-Test the Investment

The investor should calculate more than one scenario.

Base Scenario

• Supported market rent;
• Normal vacancy;
• Expected insurance and taxes;
• Routine maintenance;
• Current loan terms.

Conservative Scenario

• Rent 5% below projection;
• Higher vacancy;
• Insurance 15% higher;
• Additional maintenance;
• No appreciation.

Downside Scenario

• Rent 10% below projection;
• Several months of vacancy;
• Major repair;
• Higher property taxes;
• Unfavorable currency movement;
• Lower resale value.

A property that works only under optimistic assumptions may expose the investor to excessive risk.

Step 10: Submit the Offer

A purchase offer may address:

• Purchase price;
• Earnest money deposit;
• Financing terms;
• Inspection period;
• Appraisal conditions;
• Closing date;
• Title requirements;
• Association approval;
• Seller credits;
• Furniture or personal property;
• Assignment rights;
• Other contingencies.

The buyer should understand:

• Whether the deposit is refundable;
• The exact inspection deadline;
• The financing deadline;
• The consequences of missing a deadline;
• Which conditions permit cancellation;
• Which documents require immediate signature.

Step 11: Complete Due Diligence

Independent Home Inspection

A home inspection may identify visible issues involving the property’s structure and systems.

Depending on the property, specialist inspections may be required for:

• Roof;
• Foundation;
• Pool;
• Electrical system;
• Plumbing or sewer line;
• Septic system;
• Water intrusion or mold;
• Pests;
• Environmental concerns.

Review the official CFPB home-inspection guidance.

Title Search

A title search examines public records for matters such as:

• Legal ownership;
• Mortgages;
• Liens;
• Judgments;
• Easements;
• Restrictions;
• Other recorded claims.

Title Insurance

Lender’s title insurance protects the lender.

Owner’s title insurance may protect the buyer against certain covered ownership claims or defects that existed before the purchase.

Review the official CFPB explanation of owner’s title insurance.

Association Review

For a condominium, townhouse, or homeowners association, review:

• Fees;
• Budget;
• Financial reserves;
• Pending and approved assessments;
• Rental restrictions;
• Minimum lease periods;
• Tenant and guest approval;
• Insurance;
• Pending litigation;
• Meeting minutes;
• Rules affecting property use.

Insurance Review

Obtain a written insurance quote before the inspection or due-diligence period ends.

Confirm:

• Coverage type;
• Annual premium;
• Deductibles;
• Flood requirements;
• Windstorm or named-storm coverage;
• Rental-use eligibility;
• Roof requirements;
• Liability coverage;
• Loss-of-rent coverage.

Flood and Environmental Review

Flood-zone information can be reviewed through the official FEMA Flood Map Service Center.

A flood-zone designation should not be the only analysis. Investors should also review elevation, prior claims, drainage, insurance availability, and the history of the specific property.

Property-Tax Review

Do not assume that the seller’s current tax bill will remain unchanged.

The taxable value may change after transfer, and exemptions available to the seller may not be available to the investor.

Rental Review

Confirm:

• Realistic long-term market rent;
• Short-term rental permission;
• Existing leases;
• Tenant payment history;
• Security deposits;
• State and local licenses;
• Association restrictions;
• Management fees;
• Comparable rental supply.

Step 12: Prepare for Closing

Before closing, the buyer should:

• Review the deed and ownership name;
• Confirm the final loan terms;
• Review the closing statement or Closing Disclosure;
• Confirm insurance coverage;
• Complete the final walkthrough;
• Confirm required cash to close;
• Verify wiring instructions independently;
• Sign all required documents;
• Confirm how the deed will be recorded.

Prevent Real Estate Wire Fraud

Real estate closings are frequent targets of fraudulent emails and false banking instructions.

Before sending funds:

• Call the title or closing company using a previously verified number;
• Confirm the recipient’s legal name;
• Confirm the bank and account number;
• Do not rely only on an email containing new instructions;
• Be suspicious of last-minute changes;
• Confirm receipt immediately after sending the transfer.

Can a Foreign Buyer Close Remotely?

Many transactions can be coordinated remotely through:

• Virtual property tours;
• Electronic purchase contracts;
• Remote lender applications;
• Independent inspections;
• Electronic document review;
• International wire transfers;
• Remote notarization when accepted;
• Consular notarization;
• Courier delivery of original documents.

The exact process depends on:

• State law;
• Title or closing company procedures;
• Lender requirements;
• Document type;
• The investor’s physical location;
• Notarization and apostille requirements.

The remote-closing procedure should be confirmed before the purchase contract is signed.

Step 13: Organize Rental Management

A foreign investor needs a local system for operating the property.

Management responsibilities may include:

• Advertising;
• Tenant or guest communication;
• Rent and reservation collection;
• Screening;
• Lease administration;
• Cleaning;
• Maintenance;
• Inspections;
• Legal notices;
• Security deposits;
• Emergency response;
• Monthly financial statements.

Property-Management Agreement

The agreement should define:

• Monthly management fees;
• Leasing or reservation fees;
• Maintenance coordination fees;
• Contractor markups;
• Inspection fees;
• Manager spending authority;
• Emergency procedures;
• Reserve requirements;
• Accounting and reporting;
• Contract duration;
• Termination procedure.

Owner Reporting

The manager should provide reports showing:

• Rental income received;
• Management fees;
• Maintenance expenses;
• Outstanding tenant balances;
• Security-deposit activity;
• Reserve balance;
• Owner distributions;
• Copies of significant invoices.

Federal Tax on Rental Income

Rental income from property located in the United States is generally US-source income.

The IRS states that US real property income received by a nonresident alien is generally taxed at 30%, or a lower treaty rate, when it is not effectively connected with a US trade or business.

This treatment may apply to gross income without deductions.

A qualifying nonresident owner may elect under Internal Revenue Code Section 871(d) to treat the real property income as effectively connected income.

When a valid and timely election applies, eligible expenses attributable to the rental property may generally be deducted, and net taxable income is subject to applicable graduated rates.

Review the official IRS guidance for nonresident owners of US real property.

Potential Rental Expenses

Depending on the applicable tax rules and documentation, potential expenses may include:

• Property management;
• Mortgage interest;
• Property taxes;
• Insurance;
• Association fees;
• Repairs;
• Utilities paid by the owner;
• Advertising;
• Professional services;
• Depreciation.

IRS Publication 527 explains residential rental income, expenses, personal use, and depreciation.

Review the official IRS Publication 527, Residential Rental Property.

Depreciation

Residential rental buildings are generally depreciated under the federal Modified Accelerated Cost Recovery System using the straight-line method and mid-month convention over a 27.5-year recovery period.

Land is not depreciated.

The investor may need to allocate the purchase price among:

• Land;
• Building;
• Furniture;
• Appliances;
• Improvements;
• Other eligible property components.

Depreciation may reduce current taxable income but can also affect the tax calculation when the property is sold.

Short-Term Rental Taxes

Short-term rentals may create:

• State sales tax;
• County lodging or tourist tax;
• Municipal tax;
• Licensing requirements;
• Periodic tax returns;
• Guest tax-collection obligations.

Investors should not assume that a booking platform collects and remits every tax applicable to the property.

Requirements vary by state, county, municipality, platform, and rental period.

Federal Tax When the Property Is Sold

The sale of a US investment property may create federal tax on the gain.

The taxable result may consider:

• Original purchase price;
• Eligible acquisition expenses;
• Capital improvements;
• Depreciation claimed or allowable;
• Selling expenses;
• Ownership structure;
• Applicable federal tax rules.

Understanding FIRPTA

FIRPTA means the Foreign Investment in Real Property Tax Act.

When a foreign person disposes of a US real property interest, the buyer or another withholding agent generally must withhold tax from the amount realized.

The IRS states that the general withholding rate is 15% of the amount realized, subject to exceptions and specialized rules.

The amount realized generally includes:

• Cash paid or to be paid;
• The fair market value of other property transferred;
• Liabilities assumed by the buyer;
• Liabilities to which the property remains subject.

Review the official IRS FIRPTA Withholding resource.

FIRPTA Example

Assume a foreign investor sells a property for $700,000 and the general 15% withholding rule applies.

$700,000 × 15% = $105,000

This does not necessarily mean the investor’s final federal tax is $105,000.

FIRPTA is generally a withholding mechanism. The seller reports the transaction on the applicable federal tax return, calculates the actual tax, and claims credit for the amount withheld.

FIRPTA Withholding Certificate

Form 8288-B may be used to request a withholding certificate to reduce or eliminate withholding when the permitted requirements are satisfied.

Potential situations may include:

• Estimated actual tax lower than standard withholding;
• Limited gain;
• A property sold at a loss;
• A qualifying nonrecognition provision;
• Another basis authorized by the IRS.

Review the official IRS Form 8288-B resource.

FIRPTA planning should begin before the property is listed or closing is scheduled.

Estate and Succession Planning

Foreign owners should evaluate what happens to the property if the owner dies or becomes incapacitated.

Important questions include:

• Who inherits the property?
• Will US probate be required?
• Does the ownership structure simplify or complicate succession?
• Could US estate tax apply?
• Does a treaty affect the result?
• Are beneficiaries located outside the United States?
• Can the mortgage or entity interest be transferred?

Estate and tax planning should generally occur before the property is purchased because changing ownership later can create tax, title, financing, or gift consequences.

Home-Country Reporting

An international investor may also need to report:

• US property ownership;
• Foreign bank accounts;
• Ownership of a US LLC or partnership;
• Rental income;
• Capital gains;
• International transfers;
• Foreign tax paid or withheld.

The investor may be eligible for a foreign tax credit, treaty benefit, exemption, or other mechanism, depending on the home country and individual circumstances.

US and home-country tax planning should be coordinated.

Complete Purchase Process

1. Define the investment objective: income, appreciation, personal use, diversification, or capital preservation.
2. Select the rental strategy: long-term, short-term, medium-term, or value-add.
3. Calculate the complete budget: include purchase, closing, financing, repairs, furniture, and reserves.
4. Review ownership structure: obtain cross-border legal and tax advice.
5. Obtain financing scenarios: compare rates, fees, penalties, and total cash required.
6. Select the market: analyze population, employment, rent, supply, taxes, insurance, and regulation.
7. Identify properties: compare supported rent, condition, association fees, and resale demand.
8. Submit the offer: understand deposits, deadlines, and contingencies.
9. Complete inspection: investigate the physical condition.
10. Review title: confirm ownership, liens, restrictions, and title coverage.
11. Review association documents: confirm finances, assessments, and rental permission.
12. Obtain insurance: verify cost and coverage before the due-diligence period ends.
13. Confirm property taxes: estimate taxes after the ownership transfer.
14. Finalize financing: review complete final loan terms.
15. Prepare property management: establish local operations before closing.
16. Complete closing: verify all funds and documents independently.
17. Organize ownership: banking, bookkeeping, insurance, management, licenses, and tax records.
18. Monitor performance: review monthly reporting and annual investment results.

Documents Foreign Buyers May Need

Requirements vary, but documents may include:

• Valid passport;
• Proof of address;
• Tax-residency information;
• Bank statements;
• Source-of-funds documents;
• Income or asset verification;
• International credit reference;
• Entity documents;
• ITIN or EIN when applicable;
• Purchase contract;
• Lender forms;
• Insurance documents;
• US and home-country tax forms.

Records to Maintain After Closing

• Purchase contract;
• Closing statement;
• Deed;
• Title policy;
• Inspection reports;
• Loan documents;
• Insurance policies;
• Property-tax bills;
• Association statements;
• Leases and reservations;
• Property-management reports;
• Repair invoices;
• Improvement records;
• Bank statements;
• Entity documents;
• Tax returns;
• Currency-transfer records.

Common Foreign Buyer Mistakes

• Choosing a property before defining the investment objective;
• Assuming all foreign buyers face identical rules;
• Believing that property ownership provides immigration status;
• Using every available dollar for the purchase;
• Confusing gross rent with net profit;
• Selecting a city based only on popularity;
• Relying only on a seller’s rental projection;
• Choosing the ownership structure after signing the contract;
• Assuming an LLC automatically reduces taxes;
• Comparing loans only by interest rate;
• Ignoring prepayment penalties or balloon payments;
• Purchasing a short-term rental without confirming permission;
• Skipping an independent inspection;
• Failing to obtain an insurance quote during due diligence;
• Using the seller’s current property-tax bill as the future estimate;
• Ignoring association assessments;
• Failing to maintain reserves;
• Hiring a property manager based only on the lowest fee;
• Ignoring US tax filings;
• Waiting until the sale to understand FIRPTA;
• Ignoring home-country reporting;
• Sending money using unverified wire instructions.

Foreign Buyer Checklist

1. Confirm eligibility: review sanctions, state restrictions, property type, and location.
2. Define the objective: income, appreciation, personal use, or diversification.
3. Select the strategy: long-term, short-term, medium-term, or value-add.
4. Calculate complete capital: include closing and operating reserves.
5. Preserve liquidity: maintain funds after closing.
6. Build the professional team: real estate, legal, tax, lending, insurance, inspection, and management.
7. Review ownership structure: complete the analysis before contracting.
8. Compare markets: use local economic and rental data.
9. Calculate net performance: include all realistic expenses.
10. Stress-test the property: model lower income and higher costs.
11. Compare financing: review complete written terms.
12. Complete due diligence: inspection, title, association, insurance, tax, and rental permission.
13. Confirm remote closing: establish notarization and document procedures.
14. Verify all wire instructions: confirm them through a trusted channel.
15. Establish management: appoint the local operating team before closing.
16. Organize tax compliance: address federal, entity, FIRPTA, and home-country obligations.
17. Define the exit: plan the sale and tax process before purchasing.

Frequently Asked Questions

Can a foreigner buy investment property in the United States?

Foreign nationals commonly purchase US real estate. The buyer must still confirm sanctions, state restrictions, CFIUS considerations, source-of-funds procedures, lender rules, and any restrictions affecting the specific property.

Does a foreign buyer need a US visa?

A visa is not automatically required solely to own real estate. Property ownership does not provide immigration status or the right to remain or work in the United States.

Do I need an ITIN to purchase property?

Not for every transaction. An ITIN may be required for tax filings, certain mortgage programs, and other federal tax procedures.

Can a foreign buyer obtain a US mortgage?

Some lenders offer foreign national, DSCR, portfolio, and business-purpose financing. Eligibility, rates, fees, down payments, reserves, and documentation vary.

How much down payment does a foreign buyer need?

There is no universal percentage. Requirements depend on the lender, loan program, property, borrower, loan amount, rental income, and financial reserves.

Is a cash purchase better?

A cash purchase may simplify closing and eliminate mortgage payments but can concentrate substantial capital in one property. Financing preserves liquidity but increases payment and default risk.

Should a foreign buyer create an LLC?

An LLC may offer legal and administrative benefits in some cases, but it can also create tax, reporting, financing, and annual compliance obligations. The structure should be reviewed before purchase.

Can I complete the purchase remotely?

Many transactions can be completed remotely, subject to state law, title-company procedures, lender requirements, notarization rules, and document requirements.

Should I obtain an inspection?

Yes. An independent inspection is an important part of due diligence. Specialist inspections may also be needed based on the property’s age, systems, condition, and location.

What is title insurance?

Owner’s title insurance may protect the buyer against certain covered ownership claims or title defects that existed before closing. Lender’s title insurance protects the mortgage lender.

Can I operate an Airbnb anywhere in the United States?

No. Short-term rental rules vary by state, county, city, zoning district, condominium, and homeowners association. Permission must be confirmed for the specific property.

Do foreign buyers pay US tax on rental income?

Yes. US rental income can create federal tax, withholding, and filing obligations. The result depends on tax residency, ownership structure, elections, income, expenses, and treaty eligibility.

What is FIRPTA?

FIRPTA generally requires withholding when a foreign person sells a US real property interest. The general rate is commonly 15% of the amount realized, subject to exceptions and specialized procedures.

Is FIRPTA the final tax?

No. FIRPTA is generally a withholding mechanism. The seller files the applicable tax return, calculates the actual tax, and claims credit for the amount withheld.

How can I know whether the property will be profitable?

Calculate supported rent and subtract vacancy, management, taxes, insurance, association fees, maintenance, utilities, financing, furnishing, licenses, and reserves. The property should also be tested under downside assumptions.

What is the most important step for a foreign buyer?

The most important step is establishing a complete investment plan before committing funds. The plan should address strategy, total capital, structure, financing, due diligence, management, taxes, and exit.

Build a Complete US Property Investment Plan

Buying US investment property as a foreign buyer is possible, but successful ownership requires more than completing the purchase.

The investor must select a strategy that matches the objective, calculate the complete capital requirement, preserve liquidity, choose an appropriate ownership structure, analyze financing, complete independent due diligence, arrange insurance, appoint local management, and understand tax obligations from the beginning.

The strongest investment is not necessarily the property with the highest advertised rent or the most recognized location. It is the property that continues to make financial sense after realistic expenses, risks, financing, management, taxes, and exit costs are considered.

Buldora helps international investors compare US real estate markets, evaluate investment properties through complete financial scenarios, and coordinate the process with qualified real estate, lending, legal, tax, insurance, inspection, and property-management professionals.

Start your US investment property analysis with Buldora

About the Author

Raphaela Banks is Co-Founder and Global Real Estate Strategist at Buldora Invest. She develops strategies and educational content to help international investors understand real estate opportunities in the United States, Brazil, and Dubai.

Sources & References

This article was researched using original government publications, official consumer guidance, federal tax resources, regulatory information, and primary real estate market reports. Laws, tax rules, mortgage programs, ownership restrictions, prices, insurance conditions, and investment performance may change after publication.

• National Association of Realtors — International Transactions in U.S. Residential Real Estate
• National Association of Realtors — Complete 2025 International Transactions Report
• US Department of the Treasury — Committee on Foreign Investment in the United States
• US Department of the Treasury — CFIUS Real Estate Instructions
• Consumer Financial Protection Bureau — Loan Estimate Explainer
• Consumer Financial Protection Bureau — Closing Disclosure Explainer
• Consumer Financial Protection Bureau — Schedule a Home Inspection
• Consumer Financial Protection Bureau — Owner’s Title Insurance
• Internal Revenue Service — How to Apply for an ITIN
• Internal Revenue Service — Form W-7
• Internal Revenue Service — Form SS-4, Application for Employer Identification Number
• Internal Revenue Service — Nonresident Aliens: Real Property Located in the United States
• Internal Revenue Service — Publication 519, U.S. Tax Guide for Aliens
• Internal Revenue Service — Publication 527, Residential Rental Property
• Internal Revenue Service — Form 5472
• Internal Revenue Service — FIRPTA Withholding
• Internal Revenue Service — Reporting and Paying Tax on U.S. Real Property Interests
• Internal Revenue Service — Form 8288-B
• Federal Emergency Management Agency — Flood Map Service Center

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This article is provided for general informational and educational purposes only. It does not constitute legal, tax, accounting, immigration, securities, lending, insurance, financial, property-management, or investment advice. Foreign ownership requirements vary by investor, nationality, state, property location, property type, lender, ownership structure, rental strategy, and home-country rules. Real estate investment involves the risk of vacancy, declining values, unexpected expenses, financing default, currency movements, regulatory changes, and partial or complete loss. International investors should consult qualified US and home-country professionals before making a purchase, financing, ownership, rental, or sale decision.