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Foreigners Owning Property in the US

Buying and owning real estate is a satisfying and profitable investment strategy. Unlike stock and bond investors, potential real estate owners can use leverage to purchase real estate by depositing a portion of its total value and the rest and interest over time.

  • Can Non-US citizens or foreigners invest in real estate in the United States?
    Non-US citizens do not need citizenship to sell real estate, so they can buy real estate. In fact, foreigners may also qualify for a mortgage if they meet certain requirements. However, foreign property owners face a more difficult tax situation than U.S. citizens. The sale of real estate to foreign buyers in 2019 amounted to $78 billion, a major investment destination in the United States. In recent years, the largest proportions of foreign homebuyers have been China and Canada, followed by Mexico. Foreign buyers of real estate in the United States prefer suburban properties to properties in small towns and downtown areas of large cities.
  • Rental Properties for foreigners and the rental income tax
    Owning rental properties can be a great opportunity for those with renovation skills and patience with tenant management. However, this strategy requires significant capital to cover the initial maintenance costs and cover the free months.

    Taxes on rental properties are more complex than ordinary income taxes. However, the tax implications of owning rental properties are not as difficult as you might think.
    Rental property owners can reduce their income tax burden in several ways. In fact, rental properties may not show income or losses for tax purposes.

    Generally, non-U.S. citizens who rent a home in the United States are subject to a 30% withholding tax on the total amount of each rent. Foreign owners, U.S. real estate managers (i.e. foreign owner fees), and tenants are also responsible for filing a 30% tax with the IRS. The IRS can prosecute parties who fail to pay 30% of the total rental tax.

    Failure to comply with the appropriate IRS tax rules for non-U.S. property owners may result in seizure of U.S. property and adversely affect U.S. immigration rights.

    If a non-resident alien holds or owns real estate located in the United States for the purpose of generating income, the NRA may treat all income from that real estate as income actually related to trade or business in the United States. The selection applies to all income from real estate located in the United States. If you choose, a deduction may be imposed on your real estate income, so your net income is taxed.

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The Baltimore Real Estate Market

Baltimore is a relatively quiet coastal city and hidden gem, with many seeking convenience and urban culture. Renowned for its crab cakes and beautiful harbor views, it’s a convenient base for those needing to travel to Washington or Philadelphia occasionally, attracting residents who love the strong neighborhood vibe.

Baltimore is home to hundreds of other locations offering many opportunities for real estate investors. Baltimore’s real estate market is booming, with the number of days on the market hitting an all-time low.

After more than a year of dizzying demand, the Baltimore real estate market is showing signs of cooling. As a result of the coronavirus pandemic, home prices in Maryland and elsewhere have soared, and supply has plunged to all-time lows. State workforce shortages, construction disruptions, and high material costs contributed to this phenomenon.

The average home sells for $173,000 today, a slow but steady growth compared to the average of $137,000 five years ago. Real estate forecasts for Baltimore, Maryland, next year predict that the area will appreciate 8.7%, and according to Hawser’s year-end forecast, “average home prices in Greater Baltimore,” now is a good time to invest. This is an increase of 14.8% compared to last year.”

Baltimore still has many promising destinations. There are many opportunities for those who want to invest or have a portfolio to develop. Portions of Baltimore, for example, Mount Washington DC, will still be built and developed, with many positive returns.

  • Rental vacancies
    Baltimore’s current rental vacancy rate is 5.8%. This is an increase of 0.2% over the previous year. However, the national vacancy rate is 6.8%. So, Baltimore’s vacancies may be high, but this isn’t mainly a concern given the national average. However, it may change throughout the year due to the demand for detached houses.

    Nevertheless, Baltimore is considered one of the cheapest real estate markets because more people are leaving and fewer are moving in. Real estate prices are almost meager enough to attract people to the area, as the number of vacant or renovated (and in many cases beautifully) unpurchased homes exceeds the number of homes you want to buy here.
  • Baltimore Tax Rates
    If you live in Baltimore County, you can expect to be taxed at the following rates:

    - Property: $1.10 per $100 assessed.
    - Personal Assets – $2.75 per $100 of assessed value.
    - Personal income tax – 3%. Real Estate Transfer – 1.5% of the purchase price (excluding initial $22,000 for home transfer) and USD 2.50 for $500 of the total value.

    However, if you are a first-time homeowner, Maryland can give you a good start. There is a transfer tax refund for first-time buyers, so this is statewide. Loans to first-time homebuyers in Maryland can save you 0.25% on the sale price of your home.

Philadelphia Real Estate Market

Philadelphia is the largest city in Pennsylvania, with a population of nearly 1.6 million and over 6.1 million in its metropolitan area.

Philadelphia’s real estate market seems too good to be true, at least for real estate investors. Despite a growing percentage of renters, the city was ranked as one of the cheapest places to buy a home in the United States.

Philadelphia’s housing market is competitive due to its low fuel supply and aggressive price hikes. Rising house prices continue to outpace household income growth, and as Philadelphia’s population grows, more homes are getting cheaper and more affordable.

In the Philadelphia metropolitan area, listing prices have fallen, homes for sale are spending a little more time in the market, and fewer are typically for sale in the fall and holiday seasons. Last year, the pandemic shifted most of the market activity planned for spring and summer to a generally sleepier fall.

Fall 2020 wasn’t a typical fall market, but 2021 will see more typical fall markets. However, the market is still moving faster than we see at this time of year.

Philadelphia currently has over 3,000 home listings, an increase of more than 50% from the city’s historical average of 7,400 per month for nearly two decades. In the meantime, the seasonally adjusted average home price in Philadelphia rose 2.8% from April to June. However, growth was higher in Q1, at 5%. In October, 1 in 5 Philadelphia sellers cut prices, which does not necessarily indicate price weakness. Sometimes, sellers accustomed to seeing prices soar across the market become over-excited and have to adjust their listings to be more realistic. West and Southwest Philadelphia experienced the most significant year-over-year increase in house prices.

The sale-to-list price ratio is 100%, meaning that, on average, homes in Philadelphia are being sold for their entire sale price. Of Philadelphia’s 152 boroughs, Rittenhouse is the most expensive, with an average listing price of $675,000. The cheapest place to buy a home in Philadelphia is in Olney, with an average listing price of $160,000.

Low mortgage rates are urging Americans to take the first steps on the homeownership ladder. Interest rates fluctuate daily, but 30-year mortgage rates are typically less than 3%, and 15-year mortgage rates are around 2.25% or less.

Low borrowing costs encourage Philadelphia buyers to enter the market, increasing competition to purchase existing products. Buyers and sellers can expect interest rates to remain low for the rest of 2021, which will curb property growth shortly.

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