Purchasing a U.S. investment property through an LLC as a Foreigner
September 1, 2023 • 3 min read
As a loan consultant working with many foreign real estate investors, I'm often asked if it's possible to purchase U.S. investment property under a limited liability company (LLC) while getting a debt service coverage ratio (DSCR) loan. The short answer is yes, but there are some key points to understand about this approach.
What is an LLC?
An LLC is a business entity that can provide liability protection and tax advantages for the owners. Purchasing real estate under an LLC can provide protection for foreign national's personal assets in case of lawsuits or other claims related to the property. Many investors also use LLCs for privacy and estate planning benefits.
Simple steps to form an LLC
If you're ready to establish your U.S. LLC as a foreign national, here is a quick overview of the key steps: Formation: You can form your LLC through an online service to handle everything and get your EIN quickly. Or you can file directly through the state agency yourself.
Banking: There are some banks that allow LLC business accounts for non-U.S. residents without requiring a SSN. Payments: You'll need a way to accept payments. There are services that allow this for foreign-owned U.S. companies. Phone: Get a U.S. phone number regardless of where you are located. There are services that provide virtual numbers.
Forming a U.S. LLC can provide liability protection and tax benefits even for foreign business owners. Costs are low compared to other countries, and you don't need U.S. citizenship or residency. Once your LLC is established, you can apply for financing like a DSCR loan to purchase U.S. real estate under your company's name.
Why purchase real estate under an LLC?
There are several reasons foreign investors may want to buy U.S. real estate under an LLC rather than personally:
- Liability protection - As mentioned, an LLC shields personal assets from legal issues related to the property
- Tax benefits - LLCs allow passthrough taxation which can minimize taxes for foreign owners
- Privacy - Keeps the owner's name off public title records, providing more anonymity
- Estate planning - Smoother to transfer property to heirs with an LLC in place
LLC requirements for financing
If a foreign national investor already has a U.S.-based LLC established, using it to buy property with a DSCR loan is definitely possible. However, the LLC needs to be set up and the tax ID number received before applying for financing. This can take 4-6 weeks, so proper timing is crucial.
The loan application and timeline are largely the same as getting a personal DSCR loan. The only extra requirement is providing the LLC formation documents upfront. Overall, an LLC is a beneficial option for foreign buyers who want liability protection along with DSCR financing. Reach out if you need any guidance on using an LLC to purchase U.S. real estate.
The information provided in this blog post is for general informational purposes only and should not be construed as legal, accounting, or professional advice. Real estate transactions involving an LLC can vary significantly based on factors such as jurisdiction, individual circumstances, and changes in laws or regulations. It is important to consult with qualified legal, accounting, and financial professionals before making any decisions related to real estate purchases or forming an LLC.
The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.
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