International Buyer Specialists
ELIKA provides expert complimentary buyer’s representation, with 20 years of excellence
New York City real estate is popular amongst foreign investors due to its location, limited landmass, transparency, political stability, safe jurisdiction, capital appreciation and more.
Whether you are looking for an investment property, new construction, pied-a-terre or relocating to New York, our specialized buyer services make the process stress free and rewarding.
Elika works for you providing independent information, expert advice, and comprehensive knowledge to help you find and secure the ideal property for the best possible price. To help answer any immediate questions you may have with buying New York real estate as a foreigner, please refer to our guide below.
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NYC Real Estate Foreign Buyers Guide
Table of Contents
- Preparing to Buy Real Estate
- Why Invest in New York City properties?
- International Buyer’s Guide
- What are the ownership expenses?
- What is a tax abatement?
- What are the closing costs?
- Can I get a mortgage?
- Taxes Owed for Non-Residents
- LLC Ownership Structure
- What is the best way to find a property?
- How to estimate the fair market value of a property?
- What are the brokerage fees?
- Do I need a buyer’s agent?
- How to check a property title?
- How is ownership registered for foreign buyers?
- Do you provide property management?
Preparing to Buy Real Estate
In recent years, the number of foreign buyers scooping up NYC properties has been on the rise. Mostly due to the lack of individual taxes or levies on international buyers. International buyers are treated no differently than domestic buyers. The only exception is your tax treatment should you choose to sell or if you were to pass away. It is recommended that you hire an experienced buyer’s broker. They’ll serve as a guide and put you in contact with all the right people.
Any successful property acquisition involves two distinct phases — the first, initial planning and the second, finding and buying.
Choosing an ideal ownership structure
As a foreign buyer, you’ll need to decide on the perfect tax and ownership structure before further consideration. The federal government, NY state and New York City each impose an income tax on rental income generated by properties in NYC. These taxes can be as high as 65% and also apply to gains from the sale of the property. Along with that, both the federal government and New York State impose a hefty estate tax on the value of the property transferred on the owner’s death.
If the property is valued; at over $60,000, the federal government imposes up to a 40% tax. The New York State Estate Tax has a maximum rate of 16%. Unlike US citizens, foreigners do not enjoy any exceptions on either the federal or state estate taxes. For foreign buyers, a smart way of getting around this is by setting up two separate entities. You can purchase the property through a Limited Liability Company and form an offshore company to act as the sole member and owner of the LLC. You’ll need to do some planning and seek the services of an experienced attorney if you choose to go this road.
Obtain a U.S. Tax ID
Whether you’re planning to own the property in your name or through an LLC, you’ll still need to obtain a U.S. tax ID. For individuals, they’ll need an Individual Taxpayer Identification Number (ITIN) while business entities will need an Employer Identification Number (EIN). These are required for tax-reporting and opening a U.S. bank account. The application process for these ID’s can take as much as ten weeks or more so you should apply for them well in advance.
You can apply for an ITIN through the Internal Revenue Service (IRS) by submitting Form W-7, proof of identity and proof of foreign status. The most commonly used proof of identity is a foreign passport. However, it wouldn’t be prudent to send in your original passport; You can get a certified copy from the original issuing agency. Your embassy or consulate can help with this.
Open a U.S. Bank account
There is no hindrance on foreigner’s opening U.S. bank accounts. However, all banks must follow a set of rules known as Know Your Customer (KYC). These rules require a bank to obtain specific information on their customers such as their ITIN, EIN, a copy of the customer’s passport or driver’s license, information on their sources of income and copies of their utility bills. The whole process can take several weeks and depends on how soon an ETIN or EIN can be acquired.
Why Invest in New York City properties?
Well known; if not the most important, city in the United States. When people talk about America first, they think of New York as the financial capital and then LA as the entertainment capital of the US. Thus, investing in New York City which is diverse in industry and population with a rich history provides the perfect location and backdrop for housing.
From leading educational faculties too many company’s headquartered there makes it a magnet for economic and job growth.
Key Reasons to invest
- Well located globally
- Diversified industries
- US dollar
- Political stability
- Safe Jurisdiction – The Swiss bank of Real Estate
- Foreign Buyer friendly
- Transparent Ownership rights
- Supply and Demand
- Portfolio diversification
- Resilient Market
- Return on Investment – a Proven track record of outperformance
International Buyer’s Guide
Can I buy as a foreigner?
New York, the real estate market, is friendly towards international buyers. Indeed, countless foreign individuals and companies are taking advantage of this opportunity. New York condominiums and townhouses are the most popular choices among global buyers. Since purchasing coops and other particular types of housing requires buyers to show US tax returns, these options are more challenging for foreigners.
The Popular Choice For International Buyers A Manhattan condo offers a comfortable, contemporary lifestyle for individuals or families. Within a condo, a buyer owns an apartment freehold but shares common areas with other residents. Condo living is gaining immense popularity with US residents as well as foreign buyers. In recent years, New York has seen the construction of new condos as well as the transformation of older buildings into modern condominiums.
The new condos have the latest modern conveniences, feature luxurious touches, and offer a host of services. Also, buyers of new condos can receive depending on the property tremendous savings through tax relief for the initial 10-25 years. Amid an ever-growing market, New York condos comprise over one-quarter of all its real estate. Contact Us to find a newly-built condo or a state-of-the-art restoration.
- Secure Approval – Every condo has a Board, comprised of residents, which makes decisions about building issues such as use, repair, and rules. Every buyer has to be approved by the Board, but the process is more a formality than a complicated process.
- Minimum Restrictions – Condominiums have minimum restrictions regarding use or ownership. Part-time residence (pied-a-terre’s), as well as rental arrangements, are permitted under condo regulations.
- Attractive Investment – Even though condos are priced higher than co-ops, they make up for the difference in convenience and flexibility. In addition to providing an elegant style and excellent design, condominiums are an attractive investment. Since it is so easy to buy or sell a New York condo, more international buyers are eager to experience life in a Manhattan condominium.
Can Foreigners Buy a Co-op?
International buyers can purchase a co-op apartment, but it involves a more challenging process than buying a townhouse or condominium. Keep in mind that buying a co-op presents particular challenges for even a US buyer. Co-op Boards govern co-op buildings, and every purchaser must pass their approval. They are focusing on the best interests of the co-op shareholders.
The co-op boards set the policies and guidelines and make all vital decisions about each building. It is beneficial to the members if purchasers are good neighbors and able to contribute to the upkeep of the building financially. To gain approval from most Co-op Boards, one must be employed in New York, have an excellent US credit rating, and be able to present a US tax return. Co-op Boards are not legally required to explain their reasons for rejecting a potential buyer. Even if a foreign buyer gets approval, there are pros and cons to co-op ownership.
Co-op Advantages and Disadvantages
- Approval Period – In addition to the approval process being a difficult one, it also takes a considerable length of time which can range from weeks to months.
- Financing Restrictions – A co-op purchaser is restricted to a certain level of financing (a specific percentage of the sale price) usually equal to a maximum of 80%.
- Rental Restrictions – Purchasing a co-op may not be the perfect move for an investor. There are various restrictions on subletting co-op residences. These rules may forbid renting under any circumstance or allow it for a year or two but only after the owner has resided there for some years.
- Regulated Use – Certain regulations govern the use of a co-op. These rules can affect various aspects of a buyer’s life from the allowed number of guests to a proposed renovation.
- Selling Approval – Before selling (or renting, if allowed) a co-op, the owner needs approval from the Co-op Board. This requirement can affect the number of buyers as well as the asking price.
- Flip Taxes – When selling a co-op property, flip taxes are a reality. Their intended purpose is to deter speculator.
- Availability Since co-op apartments make up over three-quarters of all New York City real estate; there is a more extensive selection of available residences.
- Purchase Price – Compared to condo prices, the prices for co-op apartments are lower by ten to twenty percent. Potential buyers must consider that the monthly expenses may be higher. Monthly costs include the owner’s share of the mortgage (if applicable), general maintenance, essential utilities, and real estate taxes. Co-op members can deduct certain expenses (real estate taxes or mortgage interest on their loan) from their taxable income.
- Residence Satisfaction – Although co-ops may not suit the investor, these apartments can be the perfect full-time or part-time residence. New York co-ops tend to be older buildings (pre-1920) but with age comes quality craft, exquisite details, and luxurious features. Spectacular fireplaces, airy spaces, beautiful detailing, and glorious gardens are part of the charm of a New York co-op apartment.
What are the ownership expenses?
Whether one chooses a condo or a co-op, there will be expenses associated with the purchase. On the positive side, specific costs can be deducted, from an owner’s taxable income. Real estate taxes, as well as the interest payment resulting from the shared mortgage by co-op owners, may be used as a deduction. Investors can deduct real estate taxes and carrying charges as business expenses in the year of occurrence.
Owning New York Real Estate
- Real Estate Taxes – Depending on the property, real estate taxes can range from hundreds to thousands of dollars. Whether you are an average owner or an avid investor, seek information about decreasing your taxes through available deductions.
- The Common Charges/Maintenance Fees – Common charges and maintenance fees are monthly expenses. While co-op owners are responsible for maintenance fees, condo owners pay standard common charges. Monthly charges will vary from building to building but can cost hundreds to thousands of dollars per month. A higher level of amenities in residence translates into a higher monthly charge ( $1/square foot on the more upper end).
What is a tax abatement?
Tax abatement refers to programs which encourage New York developers to continue building and growing neighborhoods. Different properties qualify for various tax status. Elika agents can advise owners about the tax status of any NYC property.
NYC Tax Abatement Incentives
- Tax Exemption Program – This program covers new buildings as well as individual restorations. A 421-A or 421-G tax abatement is for new buildings, and a J-51 applies to converted buildings.
- 421-A – The 421-A program phases out tax exemptions over ten years. The real estate tax will increase 20% every second year until maturity (first and second year – 100% exempt, third and fourth year – 80% exempt, continuing to the tenth year).
- 421-G – The 421-G incentive applies to a specific area – below Murray Street in Manhattan. Available properties within this area will see tax benefits for 14 years. The lower payment is applicable in the initial 8-10 years and will phase out gradually until 2014.
- Additional Incentives – Some New York City buildings are eligible for lengthy abatement periods between 15-25 years. Specific factors such as location, availability of reasonably priced units, or receiving government assistance through loans and grants, will influence a building’s eligibility for long-term abatement incentives.
What are the closing costs?
Buyers and sellers have to pay closing costs during a real estate sale. This expense can add up to between 1% and 8% of the purchase price. Legal, registration and federal/state/city fees are in addition to a down payment. These charges must be at closing: Learn More
Can I get a mortgage?
Foreign buyers can obtain a mortgage to purchase New York City real estate. Most US banks have created programs to accommodate international buyers. Foreign buyers can finance between 65% and 75% of loans up to $1,000,000 and 60% of loans between $1,000,000-$2,000,000.
International buyers will be asked to provide specific documents. Some institutions waive this proof, but in return, these buyers will be charged more in interest rates. Elika agents can match international buyers with mortgage specialists who can get the best deal for non-residents.
- Proper Visa or Foreign Passport Copy – US banks require proof that a potential buyer is allowed to enter the country.
- Credit References – At least four references from credible sources will be requested for mortgage loan applications. These documents must originate from professionals in the area of finance such as accountants, bankers, or insurance officials.
- Verification of Rent/Mortgage Payments – Proof of rent or mortgage payments are required for at least one year before the application.
- Adequate Closing Funds – Use the closing costs calculator to determine the complete list of expenses.
- Proof of Employment – Foreign buyers will always be asked to verify their employment.
Taxes Owed for Non-Residents
Tax liability is not the same for US residents and non-residents. Elika can point out the differences. Our professionals can guide you through the process.
Tax Liability: Non-Residents
- Federal Tax While the federal tax on long-term investments (holding the property for over a year) is 15% for US residents; foreigners pay 30%.
- FIRPTA Under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), income tax is withheld immediately after a non-resident sells the property. New York State withholds almost 6.85% of the proceeds, and the Internal Revenue Service keeps 10% of the gain.
- Forms The IRS requires a Statement of Withholding on Dispositions by Foreign Persons of US Real Property Interests. New York State requests a Nonresident Real Property Estimated Income Tax Payment Form. We recommend seeking the expertise of a professional tax accountant to assist with these forms. For expert help, contact us.
- Should I Buy as a Company / LLC?
Although there are benefits to buying through an LLC ( Limited Liability Company ), certain treaties between a foreign country and the US can minimize the advantages. Overseas buyers should enlist the help of a tax adviser specializing in international law. Elika can put a buyer in touch with a tax adviser who can assess individual situations.
LLC Ownership Structure
- It takes approximately one week to form an LLC.
- The LLC must be established in the same state as the location of the property.
- An LLC can have unlimited membership including non-residents and US residents.
- The LLC is required to file tax returns (local, state, federal).
- At the time of sale, owners can sell or transfer LLC shares to a buyer. Learn More: Acquisition Vehicles
What is the best way to find a property?
Contact Us! As a member of the Real Estate Board of New York and the National and New York Realtor Organizations, Elika has access to all properties in the NYC marketplace. An Elika agent can show you any available New York property. In addition to our professional resources, Elika provides unbiased advise, history and detailed comparative market analysis when you have decided upon the specific property.
Buying real estate is a complex process involving selection of attorneys and bankers, presentation of documents, property research, as well as searches for rules and procedures, and meetings with brokers. Buyers should not solely put their trust in general online public sources.
Elika has the expertise/experience and the latest updated information about the NYC real estate market. Elika provides personalized service for each international buyer. Within New York, a buyers commission; is also paid by the seller.
How to estimate the fair market value of a property?
Once a property has been selected an Elika buyer’s agent would then perform a competitive market analysis.
First, we want to determine how motivated the seller is. Since one that is “highly motivated” is likely more willing to negotiate. We can ascertain someone’s financial or personal situation (e.g., divorce, already purchased another home, pending foreclosure) to help determine if he/she are flexible on the price or other terms, such as closing costs.
Current market conditions
Next, our agents use the current market conditions to help you. We work in the real estate market, and often know the circumstances in real-time before the widespread press reports on it. Currently, this is a seller’s market for New York City apartments priced up to $3 million, but we will likely know when this is changing given our work on the “front lines.”
We also examine the property’s; conditions, including the building itself. This is a complex area, with many factors to consider. Some of these include the building’s profile, age, unit mix, ownership share of primary users versus investors, and quality of the electrical/ plumbing.
Improvements and upgrades
An Elika agent looks at the enhancements. We know which are worth paying extra for, and which ones are not. Kitchens and bathrooms traditionally have added a lot of value, but we can focus on how this affects the price. If there have not been many upgrades and many repairs it is essential to understand the potential renovation cost.
Now, we can turn to sales comps. The comparison has to be meaningful, and at Elika Real Estate, we work hard to ensure that is the case. Recent closing prices in the same neighborhood, ideally in the building where the unit is in, are used. We look to make the comparison more meaningful by searching for like-kind sales that have more similarities to your condo unit. Essentials are bedrooms, bathrooms, amenities, etc. Beyond recent transactions, we also look at the listing price and trends for similar condo units. Aside from public records, we also use our market analytics.
Using an in-depth comparative market analysis and considering all the information that is provided in the report, anyone can come up with a competitive bid to get a great piece of New York City real estate at a price. If you’re ready to buy, Elika Real Estate will work with you to assess the market, pick a fair amount and get the best position in all negotiations.
What are the brokerage fees?
When international buyers choose an Elika agent, there is zero commission to pay. Foreign buyers do not pay brokerage fees in NYC. The general rule for residential real estate sales is that the seller pays the brokerage fee which is then co-brokered between the brokers for the seller and the buyer.
We are compensated as any other Broker and paid through the proceeds of the sale. Customarily, fees for real estate brokerage have been included, in the purchase price of the property. This means that a typical purchase will result in no additional out-of-pocket expenses for you! When an apartment sells, half of the 6% commission is paid to the real estate company that brings in the Buyer and the other half is kept by the company listing the property for sale, representing the Seller.
Do I need a buyer’s agent?
The majority of sellers have a broker. Since having an agent offers protection, buyers and sellers should have their brokers. A seller’s broker will not represent a buyer’s rights. Foreign buyers need a broker to work individually on their behalf. A broker can request concessions or intercede for a reduction in price. Having a buyer’s agent in your corner is essential in finding the right property for the right price. Since a seller pays for a buyer’s broker, there is no need for a buyer to go without the proper protection. Buyers should not risk making expensive mistakes by doing it on their own. Foreign buyers need the services of a qualified broker.
Should I hire a Buyer’s Agent?
- Using a broker makes buying a less time-consuming process
- Have access to every NYC property in the marketplace
- Can help with the presentation of documents and applications
- Coordinate the team of professionals needed to complete a sale
- Brokers simplify the buying process
How to check a property title?
Buyers and sellers need the services of an attorney to perform the title search, obtain insurance, and look for violations/liens on the building as well as negotiate a contract ( the initial agreement which outlines the deposit). Also, other professionals are needed to check the essential details. Appraisers discover the fair market value of an NYC property. Architects handle the technical side and look into the property’s condition. Surveyors check on the measurements of the property, and for that final step, mortgage brokers help buyers obtain loans. Elika connects foreign buyers with the best professionals in the industry.
How is ownership registered for foreign buyers?
The new buyer’s details are recorded at closing by the buyer’s attorney who will submit them to the New York City ACRIS. At purchase, the documents are photographed, copied, and filed for future reference.
Do you provide property management?
Yes, Elika Management ensures a hassle-free process when investing in the largest real estate market in the world. New York City is an investment goldmine, offering high returns as property values regularly increase. We manage every aspect of buying, leasing and selling property in New York City, so you enjoy a successful and stress-free experience.
Elika Management Corp. also assists in finding tenants should you wish to rent out your investment property, and provides full property management services. Whether you live locally or abroad, we specialize in managing individual condo and co-op units, so we can provide the hands-on service and staff to meet the needs of our discerning clientele.
Purchasing property in NYC as a foreign buyer presents little more difficulty than a domestic buyer. However, the process can still be a long one, so international buyers should have everything well planned out before even looking for a property. If you’re planning to sublet the apartment or sell in the future, there will be some extra tax hurdles to overcome which will be covered in a future article.
Find a property
To help you navigate the NYC real estate market, you should hire an experienced local buyer’s agent. Preferably one who specializes in the neighborhood of interest to you. As a foreigner, you’ll be largely restricted to condos in your search. Co-ops have rather strict rules on subletting and home rules which require a buyer to make the property their primary residence. Multi-family or townhouses also present difficulties because of the maintenance work that would be needed. Condos offer the least difficult as your condo fees will cover the insurance policy, building maintenance and maybe some of the utility bills.
It surprises many foreign buyers to learn that they can qualify for funding from a U.S. bank. However, this will come with some restrictions such as a limit on the loan amount and a requirement that they keep a certain amount of money on deposit with the bank. As a reference, the current average rate for a 30-year mortgage is 4.00% (2019).
Make an offer
Once you’ve found a property that you are satisfied with it’s time to make an offer. Your broker will handle any negotiations and work to get the best deal possible in your favor. Once an offer is accepted the seller will send out a deal sheet to all parties involved. A broad overview of the transaction and lists the who’s who in the deal such as the brokers, the attorneys, the lender, and the buyer and seller.
Sign the contract of sale and make the down payment
Once the final details have been, hammered out terms of the agreement will be issued by the seller’s attorney. In NYC, a contract does not become binding until both parties have signed and the seller retains the right to make the final signature which gives them a lot of leeway in negotiations. Once counter-signed, it becomes legally binding with neither party now able to back out with legal consequences. At this point you, the buyer, will be asked to make the down payment, usually a minimum of 10% of the offer price. The downpayment will be held in an escrow account until the final closing.
Submit your application to the condo board
Condo boards have the right of first refusal so even if you’ve reached an agreement with the seller you’ll still to pass the condo board application. Your application package will include details on your financials, the transaction in question and your circumstances. Condo boards are much less intrusive than co-op boards, but you should still make sure everything is in order before applying. Most contracts of a sale will include a clause that allows the buyer out of the contract with no legal consequences if the condo board rejects their application.
Close the sale by the power of attorney
The time it takes between the signing of the contract and the closing date is subject to a lot of variables such as financing, board approval and the people involved. In general, a closing in NYC takes 30-60 days through 90 days is not uncommon. How fast and smooth the whole process relies a lot on the competency of your attorney. In New York State a closing can only be done by an attorney so make sure you choose a good one.
Fortunately, the buyer does not need to be present on the actual closing date. This is when the remaining amount is paid to the seller, and the property deed is transferred to the seller. You can use a power of attorney to have them act on your behalf. However, to be declared effective under state law power of attorney must be notarized in a U.S. embassy or consulate. Scheduling an appoint for this can take anywhere from one to three weeks, so foreign buyers have one set up well ahead of time.