Buying USA Property As A Foreigner

The allure of the United States property market for international buyers remains strong in 2025, driven by a combination of perceived economic stability, strong property rights, and diverse investment opportunities. While the process of purchasing real estate as a foreigner in the US is generally open, it involves navigating specific legal, tax, and financial considerations that differ significantly from those faced by domestic buyers. This comprehensive guide will delve into the intricacies of buying property in the US as a foreigner, covering the necessary steps, key legal frameworks, tax implications, and the essential role of a local bank account.

 

The Landscape for Foreign Buyers in 2025

 

As of mid-2025, the US real estate market continues to attract a robust flow of international capital. Data from the National Association of REALTORS® (NAR) indicates a significant resurgence in foreign buyer activity between April 2024 and March 2025, with purchases totaling $56 billion – a 33% increase from the prior year. This marks the first year-over-year rise in international buyer demand since 2017, signaling a renewed confidence in the US market.

The primary motivations for foreign buyers often include:

• Investment and Diversification: Seeking stable returns and diversifying portfolios beyond their home countries.
• Vacation Homes and Lifestyle: Acquiring properties for personal use during holidays or for future retirement.
• Education and Family: Purchasing homes for children attending US universities or for family members residing in the US.
• Economic Stability: Viewing the US as a safe haven for capital, particularly during times of global economic or political uncertainty.

The largest groups of foreign buyers continue to originate from China, Canada, Mexico, India, and the United Kingdom. Florida remains the top destination for foreign investment, extending a 15-year streak, followed by California, Texas, New York, and Arizona. Notably, nearly half of all foreign buyers (47%) pay for their properties entirely in cash, significantly higher than the 28% seen among all buyers, and they tend to purchase homes at higher median prices ($494,400 compared to $408,500 for existing homes).

 

Legal Framework: Can a Foreigner Buy Property in the US?

 

The fundamental answer is yes, a foreigner can buy property in the United States, regardless of their citizenship, immigration, or residency status. There are generally no federal restrictions preventing non-US citizens from owning real estate, whether it’s a residential home, condominium, commercial building, or vacant land. This right is largely equivalent to that of US citizens. Importantly, purchasing real estate in the US does not automatically grant immigration status (such as a green card or visa) or the right to live or work in the country. This is a common misconception that needs to be clarified from the outset.

While federal laws are largely permissive, it’s crucial to understand that state and local laws can introduce certain nuances or restrictions. For instance, some states have recently enacted legislation aimed at restricting land ownership by foreign individuals or entities from “countries of concern” (e.g., China, Russia, Iran, and North Korea) due to national security considerations.

Key examples of state-level restrictions in 2025 include:

• Florida: Florida’s Senate Bill 264, enacted in 2023, notably restricts property ownership by entities or individuals associated with certain “foreign countries of concern.” While it generally exempts individuals from these countries if they are purchasing a single residential property under two acres that is not within 5 miles of military installations or critical infrastructure, it still imposes significant limitations on other types of purchases. Legal challenges to this law have been ongoing.
• Texas: Following Florida’s lead, Texas enacted Senate Bill No. 17 in June 2025, effective September 1, 2025. This law significantly restricts direct or indirect ownership, or leases of one year or longer, of real property by certain foreign individuals, entities, and governments from designated “countries of concern.” While it includes an exception for purchasing a primary residence, other purchases of residential, commercial, or agricultural properties, as well as water and mineral rights, are broadly defined as restricted. Violators can face severe civil penalties and even potential state jail time. This law is also facing constitutional challenges.

Beyond specific state-level prohibitions, other federal regulations exist that impact all buyers, including foreigners:

• Office of Foreign Assets Control (OFAC) Rules: The US Department of the Treasury enforces economic sanctions against certain countries, entities, and individuals. All “US Persons” (which includes US citizens, permanent residents, and entities within the US) must comply with these sanctions, meaning transactions with sanctioned parties are prohibited.
• Committee on Foreign Investment in the US (CFIUS): This interagency committee reviews foreign investments in the US for national security implications. While primarily focused on businesses, FIRRMA (Foreign Investment Risk Review Modernization Act of 2018) expanded CFIUS’s authority to include certain real estate transactions near sensitive national security facilities or those connected to critical infrastructure, critical technologies, or sensitive personal data. Foreign investors might be required to make disclosures under these laws.
• The Patriot Act: This act requires financial institutions to implement anti-money laundering measures, which can lead to stricter scrutiny and additional documentation requirements for foreign buyers, particularly for all-cash transactions exceeding $10,000, which by law must be reported to the IRS.
• Bureau of Economic Analysis (BEA) Reporting: Foreign investment in a US business that results in 10% or more ownership may trigger reporting requirements administered by the BEA.

Key Documents Required for Foreign Buyers: Generally, foreign buyers will need:

• A valid passport or government-issued ID.
• Proof of funds (bank statements, brokerage statements) if paying cash.
• A pre-approval letter from a mortgage broker if seeking financing.
• An Individual Taxpayer Identification Number (ITIN) if they do not have a Social Security Number (SSN). An ITIN is essential for tax reporting, opening a US bank account, and applying for a mortgage. It can be obtained by filing Form W-7 with the IRS.

 

Financing a US Property as a Foreigner

 

While possible, securing a mortgage in the US as a non-resident can be more complex than for US citizens or residents. Many US banks and mortgage lenders do offer “foreign national loans” or “non-resident mortgages,” specifically designed for individuals living outside the US. However, these often come with stricter requirements:

• Higher Down Payments: Expect to pay a larger down payment, typically ranging from 25% to 50% of the purchase price, compared to 10-20% for US residents.
• More Extensive Documentation: Lenders will require thorough financial documentation, including foreign bank statements, proof of income (pay stubs, tax returns from your home country), and a “source-of-funds” letter to verify the legality of your capital.
• Credit History: As foreign buyers typically lack a US credit history, lenders will often rely on international credit reports or require alternative forms of financial verification.
• Relationships with International Banks: Some large international banks with a presence in the US may be more accustomed to dealing with foreign clients and could offer a smoother financing process.

It is highly advisable to seek pre-approval for a mortgage early in the process to understand your borrowing capacity and simplify your property search.

 

The Necessity of a Local Bank Account

 

Yes, a local US bank account is essential and highly recommended for buying property in the United States as a foreigner. While it might technically be possible to use an international account for the initial purchase funds (though wire transfer fees and exchange rates could be substantial), having a US bank account simplifies numerous aspects of the transaction and ongoing property ownership:

• Deposits and Purchase Price: Earnest money deposits, down payments, and the final purchase funds are typically handled through wire transfers to an escrow or title company’s US-based account. Having your funds in a US bank facilitates these transfers.
• Closing Costs: Various closing costs, including legal fees, title insurance, appraisal fees, and local taxes, are often paid from a US account at settlement.
• Ongoing Expenses: Crucially, a US bank account is vital for managing recurring property expenses. These include:
  • Property Taxes: Paid annually or semi-annually to local authorities.
  • Homeowners Insurance: Essential coverage for your property.
  • Utility Bills: Electricity, water, gas, internet, etc.
  • Homeowners Association (HOA) Fees: If applicable to condos or planned communities.
  • Mortgage Payments: If financing.
  • Rental Income (if applicable): A US account simplifies receiving and managing rental income.
• Reduced Fees and Convenience: Using a local account minimizes international wire transfer fees and currency exchange costs. It also provides a direct and convenient way for service providers (e.g., property managers, utility companies) to collect payments.

How to Open a US Bank Account as a Foreigner: Requirements vary by bank, but generally, you will need:

• Passport and Proof of Identity: Your valid foreign passport.
• Proof of Address: This can be a utility bill or bank statement from your home country. Some banks might require a US address.
• ITIN or SSN: An ITIN is typically required.
• Initial Deposit: To open the account.
• In-Person Visit: Many banks prefer or require an in-person visit to open an account for non-residents due to “Know Your Customer” (KYC) regulations. Some banks might allow opening an account remotely if you have an existing relationship with an international branch.

It is advisable to open a US bank account early in the buying process, ideally before or soon after starting your property search.

 

Tax Implications for Foreign Property Owners

 

Owning and eventually selling property in the US as a foreigner involves several layers of taxation at federal, state, and local levels.

1. Annual Property Taxes: All property owners in the United States, regardless of residency or citizenship status, are required to pay annual property taxes. These are local taxes assessed by counties, cities, or school districts based on the assessed value of the property. Rates vary significantly by location and can range from under 0.5% to over 2.5% of the property’s assessed value per year. These taxes are typically paid to the local tax assessor’s office and are usually factored into escrow payments if you have a mortgage.

2. Income Tax on Rental Property (if applicable): If you rent out your US property, the rental income is subject to US income tax. Foreign owners generally have two options for how this income is taxed:

• 30% Flat Withholding Tax on Gross Income: This is the default. Unless a tax treaty provides a lower rate, a flat 30% tax is withheld from the gross rental income by the tenant or property manager. This means no deductions for expenses (like mortgage interest, property taxes, maintenance) are allowed.
• Election to Treat as Effectively Connected Income (ECI): Foreign landlords can make an election (by filing Form W-8ECI) to treat their rental income as “effectively connected income” with a US trade or business. This allows them to deduct legitimate business expenses (e.g., property management fees, mortgage interest, property taxes, repairs, depreciation) against their rental income. The net income is then taxed at standard US income tax rates, which are often lower than the 30% flat rate. This option generally results in a lower tax liability. You will need to file an annual US tax return (Form 1040-NR) to report this income.

3. Capital Gains Tax on Sale of Property: When a foreign person sells US real property, any gain realized from the sale is subject to US federal income tax under the Foreign Investment in Real Property Tax Act (FIRPTA) of 1980. FIRPTA was enacted to ensure that foreign sellers pay US tax on gains from the sale of US real estate, treating these gains as “effectively connected income” (ECI).

• FIRPTA Withholding: The most significant aspect of FIRPTA is the withholding requirement. When a foreign person sells a US real property interest, the buyer (or the buyer’s settlement agent/attorney) is generally required to withhold 15% of the gross sales price (not the gain) and remit it to the IRS. This 15% withholding is a prepayment of the foreign seller’s potential US tax liability.
  • Exemptions/Reductions: There are certain exemptions or possibilities to reduce the withholding:
    • If the buyer intends to use the property as a residence and the sales price is $300,000 or less, no withholding is required.
    • If the sales price is between $300,001 and $1,000,000 and the buyer intends to use it as a residence, the withholding rate may be reduced to 10%.
    • The foreign seller can apply to the IRS for a Withholding Certificate (Form 8288-B) to reduce or eliminate the withholding if they can demonstrate that the actual tax liability will be less than 15% of the gross sales price (e.g., due to a low gain or an existing loss). This application must be submitted before or on the date of disposition, and withholding is generally delayed until the IRS processes the application.
• Filing a US Tax Return: Regardless of the withholding, the foreign seller is still required to file a US federal income tax return (Form 1040-NR for individuals) for the year of sale to report the actual gain or loss from the disposition. Any FIRPTA tax withheld is then credited against the actual tax liability. If the withholding exceeded the actual tax owed, the foreign seller can claim a refund.

4. Estate Tax: For non-resident aliens, US-situs property (including real estate) is generally subject to US estate tax upon the owner’s death. Unlike US citizens who have a very high estate tax exemption, non-resident aliens have a significantly lower exemption, typically around $60,000. Any value exceeding this threshold could be subject to estate tax rates as high as 40%. Many foreign investors choose to hold US real estate through specific entity structures (e.g., certain types of foreign or domestic corporations) to mitigate potential US estate tax exposure, though this introduces other complexities.

5. State and Local Taxes: In addition to federal taxes, states and sometimes local jurisdictions may impose their own income taxes on rental income or capital gains from real property sales. These vary widely by state. For example, some states have no state income tax, while others have progressive tax rates.

 

The Buying Process for Foreigners

 

The general process of buying property in the US is similar for foreigners as it is for citizens, but with additional layers of due diligence:

1. Define Your Needs and Location: Research specific states and cities, considering property types, market conditions, and any state-specific foreign ownership laws.
2. Engage a Professional Team: This is crucial. Assemble a team including:
   • Real Estate Agent: Look for an agent with experience working with international buyers who understands the unique challenges and requirements.
   • Real Estate Attorney: Highly recommended for foreigners. An attorney can advise on contracts, ownership structures (e.g., individual, LLC, corporation, trust, partnership, which can impact tax liability and legal protection), FIRPTA implications, and ensure compliance with state-specific laws.
   • Tax Advisor/Accountant: A US-based tax professional specializing in international taxation is indispensable to advise on ITIN application, income tax for rental properties, FIRPTA, estate tax planning, and filing requirements.
   • Mortgage Broker: If financing, find one specializing in foreign national loans.
3. Obtain ITIN (if needed): Apply for an ITIN early in the process if you don’t have an SSN.
4. Secure Financing (if needed): Obtain a pre-approval letter.
5. Open a US Bank Account: Essential for managing funds and ongoing expenses.
6. Property Search and Offer: Work with your agent to find suitable properties and submit an offer.
7. Due Diligence: Once an offer is accepted, conduct thorough inspections, appraisals, and a title search. Title insurance is highly recommended to protect against past ownership disputes or liens.
8. Closing: The closing process (or settlement) involves signing legal documents, transferring funds, and officially transferring ownership. Foreign buyers may be able to close remotely via a power of attorney or through their country’s US embassy/consulate, though an in-person signing at a US title office is also common.

 

Considerations for Investment Visas (E-2 and EB-5)

 

While buying property does not automatically grant a visa, certain investment visas can be relevant for those who wish to reside in the US while managing their property investments as part of a bona fide business:

• E-2 Treaty Investor Visa: Available to nationals of countries with which the US maintains a treaty of commerce and navigation. To qualify, you must invest a “substantial amount” of capital in a bona fide US enterprise and actively develop and direct the business. Purchasing real estate alone typically isn’t enough; you would need to establish or purchase a real estate business (e.g., a property development company, a property management company, or a significant portfolio of rental properties that constitutes an active enterprise) and actively manage it. The investment must be “at risk” and not marginal (i.e., it must be capable of generating more than minimal living expenses).
• EB-5 Immigrant Investor Program: This program provides a pathway to a green card for eligible foreign investors. It requires a substantial capital investment in a new commercial enterprise that creates or preserves at least 10 full-time jobs for qualifying US workers. The minimum investment amount is typically $1,050,000, reduced to $800,000 if investing in a “Targeted Employment Area” (TEA – a rural area or high-unemployment area) or an infrastructure project. Many EB-5 investments are in commercial real estate projects (e.g., hotels, resorts, mixed-use developments) that meet the job creation requirements.

These visas are complex and require significant legal and financial planning; they are distinct from simply purchasing a vacation home.

 

Buying property in the United States as a foreigner in 2025 offers compelling opportunities for investment, lifestyle, and diversification. The market remains largely open, with no blanket federal prohibitions on foreign ownership, though an increasing number of states are enacting specific restrictions on buyers from “countries of concern.” Key to a successful purchase is a thorough understanding of the legal landscape, particularly FIRPTA for sales, and meticulous tax planning for ongoing ownership and potential rental income. Establishing a local US bank account is a practical necessity for streamlined transactions and managing expenses. Crucially, assembling a team of experienced US-based professionals—including real estate agents, attorneys, and tax advisors—is paramount to navigating the complexities and ensuring a compliant and beneficial investment in the diverse and dynamic US property market.