Brits Investing in the USA

The United States has long held a powerful allure for people from across the globe, and for Britons, that attraction is now translating into a significant surge in real estate investment. A recent survey by A Place in the Sun Live reveals a remarkable trend: the US has leapfrogged France to become the second most popular country for British overseas property purchases, with only Spain holding a more dominant position. This shift is a powerful indicator of a changing mindset among UK buyers, who are increasingly looking beyond traditional European destinations for their second homes, retirement properties, and lifestyle-driven investments.

The reasons behind this transatlantic move are multifaceted, extending far beyond pure investment returns. While the UK’s Office for National Statistics reports that Britons have already invested over £23 billion in overseas property, the motivations are deeply personal and lifestyle-driven. A quarter of all British buyers are classified as ‘family sun seekers,’ prioritising a safe and reliable haven for family holidays. Another fifth, the ‘reward reapers,’ are retirees looking for a well-deserved place in the sun to enjoy their golden years. The desire for new social horizons drives 16% of ‘lifestyle luvvies,’ while ‘life changers’ make up 8% of the market, seeking a completely new life abroad. Interestingly, the number of purely investment-driven purchases is comparatively low, with only a small minority of buyers identifying as ‘property tycoon wannabes’ or those looking to ‘jet-to-let’ to get a foothold on the property ladder. This strong emphasis on lifestyle and personal fulfillment shapes not only the why but also the where of their property choices.

 

The Allure of the American Lifestyle and Market

 

For a British buyer, the United States offers a compelling blend of familiarity and novelty. The shared language, cultural similarities, and a common-law legal system make the buying process feel more accessible and less daunting than in many non-English-speaking countries. Furthermore, the sheer scale and diversity of the US offer a property for every taste and budget, from bustling metropolises to serene coastal retreats and expansive rural estates. The stability of the US economy and the transparency of its real estate market are also key factors, providing a sense of security that is highly valued by overseas investors.

While the reasons for buying are largely personal, the investment fundamentals of the US market are undeniably strong. Foreign investors, including those from the UK, spent over $53 billion on US real estate in recent years, a testament to its global appeal. The combination of strong rental demand in popular tourist areas, rising property values in key growth markets, and accessible financing options for non-residents makes the US a solid choice for those looking for a long-term, predictable asset.

However, it is crucial for a UK buyer to understand the financial and legal nuances of buying property in the US. While the process is generally straightforward, it differs from the UK system. Non-residents typically face higher down payment requirements, often ranging from 30% to 50% of the purchase price, and may encounter slightly higher interest rates. It is also essential to work with a real estate attorney and a lender who are experienced in international transactions. These professionals can help navigate the complex documentation, from confirming the legal source of funds to ensuring a smooth closing process.

 

The Best Locations for British Buyers: A Regional Breakdown

 

The vastness of the United States means that “buying in the US” is a decision that requires a great deal of regional and local specificity. The best location for a British buyer depends heavily on their personal motivations—whether they are a ‘family sun seeker,’ a ‘reward reaper,’ or a ‘life changer.’ Here is a breakdown of some of the most popular and promising locations, and what they offer to different types of buyers.

 

Florida: The Sunshine State for ‘Family Sun Seekers’ and ‘Reward Reapers’

 

Without a doubt, Florida remains the top destination for British buyers in the US. Its enduring popularity is driven by a powerful combination of a warm, year-round climate, world-famous attractions, and a relatively affordable property market. The state’s appeal is particularly strong for ‘family sun seekers,’ who are drawn to the magic of Orlando’s theme parks, and for ‘reward reapers’ seeking a retirement paradise with a relaxed lifestyle.

• Orlando and Central Florida: This area is the epicenter of family-friendly tourism and a magnet for British buyers. The proximity to Disney World, Universal Studios, and other attractions creates a robust market for vacation rental properties. Many Brits purchase large detached homes with private pools for the same price as a small flat in a typical UK town. These properties offer a dual benefit: a personal holiday home and a consistent stream of rental income. The high volume of tourists ensures strong demand for short-term rentals, making it a viable ‘jet-to-let’ investment.
• Miami and South Florida: This region offers a more cosmopolitan and vibrant lifestyle. Miami is a cultural melting pot with beautiful beaches, a thriving arts scene, and a lively nightlife. Property here is more expensive than in Central Florida, but it offers a dynamic market with high-end condos and waterfront villas. This area is particularly attractive to ‘lifestyle luvvies’ who want to expand their social horizons and enjoy a luxury lifestyle. The market for high-end real estate is bolstered by a diverse international community and perennial appeal to a global elite, making it a stable long-term investment.
• The Gulf Coast: From the idyllic beaches of the Florida Panhandle to the serene communities of Naples and Sarasota, the Gulf Coast offers a more tranquil and laid-back alternative. This area is perfect for ‘reward reapers’ looking for a peaceful retirement. The beautiful white-sand beaches, stunning sunsets, and focus on golf and leisure make it an ideal place for those seeking a slower pace of life.

 

California: The Golden State for ‘Lifestyle Luvvies’ and Investors

 

California represents the aspirational dream for many British buyers. Its diverse landscapes, from the iconic coastlines to the majestic Sierra Nevada mountains, offer a rich tapestry of lifestyles. While property prices are significantly higher than in other parts of the US, the state’s robust economy and cultural dynamism make it a highly desirable location for a certain type of buyer.

• San Francisco Bay Area: Home to the global tech industry, the Bay Area is a hub of innovation and wealth. While a three-bedroom home can cost over $1.4 million, the thriving economy and high demand for rentals make it an attractive location for savvy investors. This area is not for the faint of heart, but for those with a substantial budget, it offers the potential for significant capital appreciation. The city’s dense British expat community also makes it an ideal choice for ‘life changers’ who want a sense of familiarity while embracing a new culture.
• Southern California (Los Angeles and San Diego): Southern California is all about lifestyle. The region’s perfect weather, iconic beaches, and global entertainment industry attract those who want to live the quintessential American dream. From the sprawling mansions of Beverly Hills to the laid-back surf towns of San Diego, there is a property for every type of ‘lifestyle luvvy.’ The short-term rental market is strong, making it a viable option for those looking to offset their costs while enjoying a stunning second home.

 

New York and the Northeast: The Urban Metropolis for the ‘Life Changer’

 

For those looking for a complete change of pace and a truly urban experience, New York City and the wider Northeast offer a unique proposition. This region is home to some of the most expensive property in the world, but it also provides unparalleled cultural, economic, and social opportunities.

• New York City: The ‘Big Apple’ is an enduring hotspot for British buyers, especially those with work or family ties to the city. While a two-bedroom apartment in Manhattan can average around $770,000, properties in outer boroughs like Brooklyn and Staten Island offer more affordable options. New York’s robust economy and high demand for rentals provide a strong and stable investment market. For a ‘life changer,’ the city offers a fast-paced, high-energy environment with a wealth of job opportunities and cultural institutions.
• New England: For a completely different vibe, the New England states of Massachusetts, Maine, and Vermont offer a charming, more traditional American lifestyle. The region is known for its beautiful autumn foliage, historic clapboard houses, and picturesque small towns. This area is perfect for those who want a tranquil retreat with a strong sense of community and a distinct seasonal cycle.

 

Financial and Tax Considerations for Overseas Investors

 

While the US market is accessible, it is not without its complexities, particularly concerning taxes. A UK citizen owning property in the US is subject to both US and UK tax laws, and it is crucial to understand how they interact to avoid double taxation.

• US Taxes: As a non-resident, you must pay US taxes on any profit from rental income and any gain from the sale of the property. The Foreign Investment in Real Property Tax Act (FIRPTA) imposes a 15% withholding tax on the gross sales price of a property sold by a non-resident, though this can be reduced or eliminated with the right planning. It is possible to elect to treat rental income as a business, which allows for deductions and a lower tax rate. You will also be required to pay annual property taxes, which vary significantly by state and even by county.
• UK Taxes: UK residents are generally required to declare their worldwide income and gains on their tax returns. However, the UK has a double taxation treaty with the US, which allows for a tax credit for the taxes paid to the US government, preventing you from paying the same tax twice.

Navigating these complexities requires the guidance of both a US real estate attorney and a UK-based tax advisor who specializes in international real estate. Their expertise is invaluable for structuring the purchase in a way that is both legally sound and tax-efficient.

 

A Strategic Move with a Lifestyle Focus

 

The surge in British interest in the US property market is a clear sign of a new era for overseas investment. While Spain remains the perennial favourite, the US is carving out a niche for itself as a destination that offers not only a safe and stable investment but also a diverse range of lifestyles. The motivations behind these purchases are deeply personal, driven by a desire for family holidays, a peaceful retirement, or a completely new life. By carefully considering their personal goals and choosing the right location, from the family-friendly resorts of Florida to the urban dynamism of New York, British buyers can successfully navigate the US market and find their perfect place in the sun.