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  • Obtaining Home Insurance.  Every mortgage lender will require a home buyer to purchase home owners insurance to protect the property from potential damage (water, fire, etc.) and natural hazards (hurricanes, etc.).  The cost of the insurance polity will vary based on the size of the property and the requested coverage level.
  • Property, Capital Gains, and Income Taxes.  A Foreign Investor will generally pay income tax just like a US investor on their real estate income.  You will also have to pay tax on capital gains derived from a sale of a US real property.  If the property is purchased for rental purposes, income taxes will have to be paid yearly.  The US government requires foreign nationals to pay federal income taxes on any net income (revenues less expenses) produced by the property.  The tax amount paid depends on the amount of net income produced by the property.  A foreign buyer can elect to either pay income taxes on their rental property in this manner or a flat 30% income tax will be assessed (unless there is a special tax treaty with the foreign investors home country).  Under direct ownership (property held under the individual’s name) the current long-term capital gains tax is assessed at 30%.  This tax rate could be different if the property is held under a US corporation, foreign corporation, or limited liability company.  It is important to consult with a tax advisor to determine which form of ownership is most beneficial to you.  Property taxes are also paid yearly and depend on the municipality where your property is located.
  • Property Maintenance and Home Owner Association Fees.  Other costs to consider are for the maintenance of the property.  This will likely include lawn and landscape care, pool maintenance, house cleaning, etc.  If the house or condo is located in a community that offers amenities (security, pool, fitness center, etc.) there will be a monthly “Home Owners Association” fee.  Generally, the more the amenities the more the monthly HOA fees will be.  Purchasing a condo will save on maintenance costs such as lawn and pool care, but will always incur a monthly HOA fee.  Some condo buildings in downtown Sarasota offer just basic services and thus have low HOA fees, while others offer full service amenities such as door man, 24 hour security, concierge, pool, fitness center, sauna & steam room, guest suites, conference rooms, community lounge, movie theater and more.  Full service luxury condo buildings generally have very high HOA fees in order to pay for the high level of lifestyle.
  • Property Management.  If you are purchasing the property for rental purposes you will probably want to enlist the services of a property manager to maintain and administer your property. The property manager will be in charge of renting out the unit, finding a suitable tenant, screening the tenant to ensure they are a good candidate, and maintaining the unit in working order.  Property managers typically a percentage of rental proceeds to manage and administer the property.  The SRQ Duo can recommend property management for any type of Sarasota real estate.

                    More About Taxes and Forms of Ownership


  • Direct Ownership, Limited Liability Company, or Corporation.  International buyers of real estate in the US should consider enlisting the services of a tax adviser to determine which form of ownership would be the most beneficial to their situation or unique set of circumstances.   The most common options are direct ownership, a limited liability company (LLC), or a foreign corporation.  The advantages of direct ownership include its simplicity and that the owner will enjoy preferable capital gain tax rates. The disadvantages include exposure to the U.S. estate tax.  Purchasing through a limited liability company might offer tax incentives but a special tax treaty between specific countries and the United States might cancel out those advantages.  Purchasing through a foreign corporation has the advantages of anonymity, limited liability for the shareholders, and avoidance of the US estate tax.  A disadvantage is that ordinary corporate income taxes have to be paid.
  • US Estate Tax.  The estate tax is the tax imposed on a property when a non-US owner dies and the property passes on by inheritance.  The estate tax is currently levied at a rate of 35%.  Persons considered US tax residents enjoy a credit that shelters the first $5.25 million of their assets from taxation, as opposed to foreigners who have only a $60,000 credit.  In other words, when a foreigner dies owning U.S. real estate, an estate tax is levied on the value of that property in excess of $60,000.  If the foreign investor is from a treaty country or is survived by a US citizen spouse, the investor may find some relief from the estate tax burden.  There are two other options to prevent the estate tax.  One is by obtaining a life insurance policy sufficient to pay the US Estate Tax.  Another is to set up a foreign corporation to own the property.   US tax code is complicated and always changing so The SRQ Duo advises to contact a tax adviser to discuss your specific situation.  Contact The SRQ Duo to recommend a highly capable and trusted advisor.
  • FIRPTA: Foreign Investment In Real Property Tax Act.  FIRPTA is a withholding tax required of a foreign seller.  The FIRPTA withholding tax amounts to roughly 10% of the gross sales price.  If the seller is current on all of their other taxes owed to the IRS (i.e. income taxes, capital gains tax, etc.) then they should receive a refund of the 10% that was withheld at the sale.

                    Frequently Asked Questions

  • Do I need to be a US Citizen to purchase real estate in the United States?  No, you do not need to be a US citizen to purchase a property in the United States. You will need a valid foreign passport as proof of identity.
  • Do I need to hire an attorney?  In Florida there is no need to hire an attorney to draft a real estate purchase contract.  However, it is advisable to consult an attorney or an accountant regarding how you should take title to the property as different types of ownership have different tax implications.  The SRQ Duo will facilitate all steps of the real estate transaction.
  • Should I buy the property in my name?  As a foreign buyer you can purchase US real estate directly in your name or through some sort of business entity such as a corporation, limited liability company, real estate investment trust, etc.  It is advisable to consult an attorney or an accountant regarding how you should take title to the property as different types of ownership have different tax implications.
  • Is there an advantage to purchasing a property with cash?  Yes, cash purchases can typically close in 7 to 30 calendar days. Purchases using a mortgage loan will take 30 to 60 days to close.  Cash buyers also save a substantial amount of money on mortgage application fees, loan origination fees, appraisals, title insurance and other lender fees.  Roughly 70% of million-dollar + homes in Sarasota are cash purchases.
  • If I purchase using a mortgage loan, what are the fees associated with this?  Purchasing a property with a mortgage loan will have fees ranging from 3% to 5% of the purchase price. Typical fees associated with a mortgage loan include mortgage application fees, loan origination fees, appraisals, lenders title insurance, and other lender fees.
  • If I purchase with cash, what are the fees associated with this?  Purchasing a property with cash will incur minimal fees that are limited to paperwork, legal, recording, administrative fees (typically called “Escrow” fees) and title insurance fees. They typically range in the $2,500 to $5,000.
  • What is a 'Title Insurance Policy'?  A title insurance policy gives the buyer his rights of ownership and ensures that a third party won’t ever be able to claim ownership of the property.
  • Can I inspect the property before purchase?  Yes, home inspections will be scheduled and coordinated by The SRQ Duo to ensure you are buying a property free of problems. If the inspections find problems with the property you can back out of the purchase or request credits to fix the problems.
  • Do I need to travel to the United States for closing?  No, it is not necessary to be present for closing.  If you are purchasing with a mortgage loan and a document needs to be notarized this can be done at the local United States Embassy or Consulate in your country of origin.  Another option is to execute a “Power of Attorney” in which you authorize another person to sign documents on your behalf.
  • Will buying a home in the United States affect my taxes?  It depends.  Your tax liability in your home country will vary depending on where you are from and if your country has a tax treaty with the US. Please consult a tax attorney to for details specific to your country.
  • Do I have to pay income taxes if I rent my property?  Yes, the US government requires foreign nationals to pay federal income taxes on any net income (revenues less expenses) produced by the property.  The tax amount paid depends on the amount of net income produced by the property. If tax returns are not filed on time, a tax of 30% of the gross rental income may be assessed.
  • What amount do I have to pay yearly in property taxes?  You property tax rate will depend on the municipality where your property is located.
  • What are the Capital Gains Taxes incurred when selling my property?  The federal long-term capital gains tax (property held for more than 1 year) is currently 30% for foreign citizens.you shop around
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  • Buying With Cash Vs. Buying With A Loan.  Another thing to consider when buying real estate in the United States is the type of purchase you will do.  Cash purchases can be closed in as fast as 7 to 15 days while financed purchases typically take 30 to 60 days to close due to the amount of additional paperwork needed to secure a mortgage loan.  Availability of financing in the US is limited with international buyers but there are several lenders that offer foreign national mortgages.  HSBC will offer mortgage loans to current clients that have a minimum of $100,000 USD in deposits with the bank.  There are several other direct lenders that have a foreign national loan program. Please contact us for additional details of if you need a reference.  Most lenders require foreign buyers to present extensive paperwork to demonstrate financial stability and ability to repay the loan. Examples of paperwork that might be needed are:
  1. Copy of Passport and or Visa.
  2. Bank statements that show deposits for a specific quantity.
  3. Investment account statements that show assets for a specific quantity.
  4. Letter from a creditor or other credit references (like for example credit card, car loan, etc) indicating your account was always paid on time and never late.
  5. Letter from an accountant if you are self employed.
  6. Letter from your employer if you are employed by a company.






 

International buyer's guide