International Real Estate investments

[Matt Pursley]

Hey Everyone,

I'm about a year into real estate investing. I've got a large interest in investing overseas. If anyone has any resources or experience with this I'd love to hear from you and learn. I have a few markets in mind and have worked a decent bit internationally in the last 7 years but I'd love to hear from you and learn how to do it. Specifically the legal/tax implications of this.

[Mike Lambert]

Matt, your question is very general and therefore it's very difficult to give you a meaningful question. And the fact that the reply would be very different depending on the country doesn't help.

The first question though is always to start with your objective. That probably would include what return you want to make. Unless your return expectation is very low, you'd have to find the countries in which you can achieve that return, and which strategies can give you that return within these countries. Then, if you find anything that works, you have to look at the risks and decide if they are worth taking. Applying such criteria will strongly limit the possibilities and help you narrow down your research and decision making.

I'm not sure what you mean by the legal implications but you certainly have to look at the right of ownership for foreigners in your target countries and sometimes it will influence whether you invest in your own name or use a legal entity.

Regarding taxes, you'd first have to pay all the applicable taxes in the country in which you invest (let's call it the target country), including the income and capital gains taxes. You'll have to pay income and capital gains taxes to the US as well. However, the US has signed treaties for the avoidance of double taxation with many countries . So, you need to check if such a treaty exists and if it covers real estate income and capital gains taxes. If the answer to both questions is yes, you can credit the income and capital gains taxes paid to the target country against your US income and capital gains taxes. In that case, you'd end up paying taxes at the highest rate between the two countries. In the absence of treaty, you'll be double taxed.