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Tips for buying NYC real estate as a foreign citizen

If you're a foreign buyer in need of a mortgage, look to banks like HSBC, First Republic, and Bank Audi.

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Buying real estate as a foreigner is easier in the United States than almost anywhere else. Many countries around the world restrict land sales to citizens, but in the U.S., buyers don’t even need a green card or a particular type of visa.

“The housing market in the U.S. is extraordinarily friendly to foreign buyers who want a primary or secondary residence, or simply an investment,” says Hayim Nommaz, a broker with international expertise who works from Corcoran’s West Side office.

But that doesn’t mean that navigating the real estate market is a cakewalk for international buyers. Condo and co-op boards can impose certain limitations; financing can sometimes be more difficult to obtain; and there are complex tax rules that incentivize structuring the purchase in different ways.

Below, a few things to know before buying real estate as a foreign citizen in New York.

Shop for condos, not co-ops

Simply put, the rules set by most co-op boards make it very complicated for foreigners to buy a co-op.

Most co-ops require that the apartment be a buyer’s primary residence. That’s a non-starter if you’re seeking an investment, a vacation home, or a pied-à-terre.

“Intentional buyers prefer condos due to ease of ownership and flexibility, and investors certainly always prefer condos because you usually cannot rent out a co-op,” Nommaz says. “I actually can’t remember the last time I sold a co-op to an international buyer.”

Even if you intend to primarily reside in New York, if you’re new to the city, you might want the flexibility to relocate to, say, London or Paris after a year. It’s much easier to do that if you buy a condo.

How to get a mortgage as a foreigner in New York

It’s actually not as hard as you might think. There are banks with U.S. branches that lend to foreign nationals, such as HSBC, First Republic, and Bank Audi, and now is a particularly plum time to buy, with a depressed luxury market and low mortgage rates.

“The general rule of thumb is that international buyers can finance up to 50 percent of their purchase, compared to a U.S. national, who might be able to borrow up to 90 percent,” Nommaz explains. “But of course, there are exceptions—if you’re a multimillionaire and you have big holding accounts at an international bank, they’ll lend you more.”

International buyers have to demonstrate steady income and liquidity—just like American buyers. And context is important: Your country of origin, your assets, and your relationships with banks are all determinative factors.

But more lenders are getting into international financing, in part because “money is cheap,” Nommaz says. “These banks can charge international buyers a bit of a premium sometimes if they’re not the primary resident—it’s an investment for them. I would think it’s quite a profitable venture for the lenders.”

Structure your purchase to minimize tax consequences 

“Strategically structuring your purchase is very important for a number of reasons,” Nommaz says. “A seasoned agent who is accustomed to working with multiple nationalities across the globe will have the correct attorneys and tax and estate planning experts to structure the purchase in such a way that more value is created for the buyer.”

Estate taxes: In the United States, combined federal and state taxes on the U.S. assets and real property of a deceased nonresident can rise to more than 40 percent of the overall estate. Buying real estate under a limited liability corporation (LLC) can help shield you from certain liabilities and protect your personal assets, though an LLC alone is usually not enough to dodge the estate tax; there are legal ways of structuring the purchase to do that. 

If you’re an older buyer or you’re purchasing the property for an underage heir, Nommaz advises buying it in a trust. Legally speaking, that means you’re simply holding the property for your benefit and the benefit of a named successor, you becomes the trustee upon your death. In a trust document, you can also name your beneficiaries.

Capital gains taxes: When selling your property, profits will be subject to capital gains taxes, though that number fluctuates based on other line items in your tax return. 

Tax deductions: Your real estate agent can connect you to a tax expert to help you offset ownership expenses on your tax return and maximize deductions for things like mortgage interest, common charges, and depreciation.

Rental income:  If you plan to rent your New York property out, be aware that the U.S. government requires foreign nationals to pay income taxes (state and federal) on any net income (rental revenues minus expenses) received from rental property. If you don’t file your taxes on time, a tax of 30 percent of the gross rental income may be assessed. But investors can lower their tax burden by electing to offset expenses from income. Some banks also offer foreign national mortgage loans specifically for buyers who don’t plan to be a permanent U.S. resident and for whom the property will serve as an investment property.

Plan for closing costs—and lots of financial disclosure

Nommaz says first-time international buyers are often surprised by closing costs in New York City. On a higher-end condo, you may pay the equivalent of 3 to 4 percent of the purchase price to seal the deal.

Another surprise for first-time international buyers is the amount and breadth of information you will need to disclose to a condo board.

“I find many buyers are surprised by how intrusive some of these condo applications are,” Nommaz says. “They’re buying an asset here, but they have to disclose bank statements, reference letters, and other materials.”

Despite some of these complications, buying real estate in the U.S. is almost always a good investment for foreign citizens, Nommaz says. Plus, you get the benefits and bragging rights of owning a piece of property in one of the world’s greatest cities. It’s hard to put a price on that.

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