Florida Realtor April 2012 : Page 26

STRucTuRIng ThE TRAnSAcTIOn Are global buyers and investors prepared to proceed through the maze of visas, real estate regulations and currency rules? By RAndAll l. SidloScA Attractive Deal Make An T he Florida real estate market is attracting global buyers and investors interested in getting a bargain in a tropical paradise. Prices are flat or declining, and foreign curren-cies are rising relative to the U.S. dollar. However, buying a bargain property is not that simple. Foreign buyers are exposed to a complex labyrinth of visas, real estate reg-ulations and currency rules. Prospective buyers need to be educated to avoid the mistakes that will cause them to be turned away at U.S. Customs or at the bank. And foreign buyers need to know that the U.S. government takes a different view of a real estate transaction when a foreign individual or corporation is involved. Here are some tips. Structuring the Deal Even before viewing residential or commercial properties, foreign buyers should secure the help of a tax expert or at-torney who can help them structure the purchase. Tax experts advise that because of estate tax and other issues, a foreign buyer should hold the property in the name of a corporate entity. Depending on the value of the property, the titleholder could be an offshore company, or it could be a Florida LLC owned by an offshore company. In any case, the companies should be set up well before the buy-ers have settled on a property so as not to impede the closing by completion of corporate paperwork. 26 FLORIDA REALTOR April 2012

Make An Attractive Deal

Randall L. Sidlosca

STRucTuRIng ThE TRAnSAcTIOn

Are global buyers and investors prepared to proceed through the maze of visas, real estate regulations and currency rules?

The Florida real estate market is attracting global buyers and investors interested in getting a bargain in a tropical paradise. Prices are flat or declining, and foreign currencies are rising relative to the U.S. dollar. However, buying a bargain property is not that simple. Foreign buyers are exposed to a complex labyrinth of visas, real estate regulations and currency rules. Prospective buyers need to be educated to avoid the mistakes that will cause them to be turned away at U.S. Customs or at the bank. And foreign buyers need to know that the U.S. government takes a different view of a real estate transaction when a foreign individual or corporation is involved.

Here are some tips.

Structuring the Deal

Even before viewing residential or commercial properties, foreign buyers should secure the help of a tax expert or attorney who can help them structure the purchase. Tax experts advise that because of estate tax and other issues, a foreign buyer should hold the property in the name of a corporate entity.

Depending on the value of the property, the titleholder could be an offshore company, or it could be a Florida LLC owned by an offshore company. In any case, the companies should be set up well before the buyers have settled on a property so as not to impede the closing by completion of corporate paperwork.

The biggest mistake: Buying in an individual’s name. That could result in U.S. estate tax problems, and it could also create tax or political issues in the customer’s native country.

Financing the Deal

As a result of the mortgage crisis, U.S. lending institutions became less accommodating to foreign buyers. At best, they will provide 50 to 60 percent financing.

More challenging is moving money into the United States as federal agencies want to know the source of the money. When Venezuelans and corporations transfer funds to a bank, whether a branch of a foreign institution or a U.S. bank, money laundering regulations come into play, especially if the sum is substantial or there are frequent transactions.

Most foreign customers keep funds offshore and transfer them bank to bank. It’s not that simple, however. They must comply with currency rules in their home country and may encounter withholding requirements. The more complicated the transfer process, the more time your customer should allot to getting funds ready.

For commercial transactions, real estate professionals must time the cash and the transaction. It’s important to explain to customers that deadlines for receipt of escrow funds and for closings can’t be moved.

For home purchases, timing is even more crucial. About 80 percent of international home-buying deals are all-cash transactions. If the property is a second or third home, the customer may seek financing, but the rate will be higher than an American customer would pay. One option would be for the customer to establish an investment relationship with a private bank.

Visiting and Managing the Property

In working with a foreign customer, you also need to be aware of certain immigration rules and encourage your customers to seek an attorney for guidance. After 9/11, the United States clamped down hard on visas.

Depending on how long the person wants to stay in the United States, a B-1 Tourist Visa of one to two weeks may suffice. The person may come and go through the state’s many international airports. But individuals who stay in the United States too many days could be taxed as Americans.

Investors and property managers can arrange long-term stays. The best visas require a direct investment in the United States in an American company or establishment of a local subsidiary of a foreign company.

Such an investment could cost customers more than a downtown condo, but it will enable them to stay legally in the United States for years.

Should the paperwork and complex rules scare away a foreign customer?
No. When the right property is found at the right price, you’ll already have legal and tax consultants there to assure that the transaction goes smoothly, the property is managed properly and a visa is obtained with a minimum of trouble.

Randall L. Sidlosca is a partner in the Miami office of Arnstein & Lehr. He practices immigration law, including matters related to visas and U.S. investment.

Visa Options

Here are some Visa choices and how they can affect a foreign buyer or investor:

E-1 Treaty Trader and E-2 Treaty Investor Visas: For executives and specialized workers of companies from nations that have trading relations with the United States. The company must be owned or controlled by a citizen of a treaty country.

L-1(A) Visa: For executives and managers of companies that transfer to a U.S. affiliate or subsidiary of a foreign company. To qualify, the individual must have been employed by the company for three years and worked in a different foreign country for one year.

TN Visa: Based on U.S. free trade agreements with Canada and Mexico, this visa can be used by a person in a qualifying profession who will work full or part time for a U.S. employer. The person can’t be self-employed. For Chileans, a close cousin of the TN is the H-1B1 Visa.

EB-5 Employment Creation Visa: Currently, the most popular visa, the EB-5 requires a minimum $500,000 investment in a targeted employment or rural area, called regional centers. These underemployed or under served areas get special treatment to encourage economic development in the United States. There are regional centers across Florida involving shipping, hospitality, manufacturing and other industries. An alternate is the EB-5 Immigrant Visa, which requires a $1 million investment that creates at least 10 jobs.

Read the full article at http://browndigital.bpc.com/article/Make+An+Attractive+Deal/1011353/105259/article.html.

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