Kishner & Miller have been assisting foreign investors/purchasers for over 30 years. We have represented individuals throughout the world in successfully acquiring a piece of the “Big Apple”. We recognize that an acquisition of a property in New York City from someone who is not familiar with the real estate acquisition process may be extremely daunting. However, our offices take the time to explain in detail each step of the process so that by the time you finish your purchase you feel like a true New Yorker. As the world becomes more unstable, there is almost no better investment than a properly analyzed New York City piece of real estate. Many foreign investors are simply scared that because of their lack of contact and ability to quickly physically enter their property and think that somehow their property is not protected. This is simply not the case. Not only does Kishner and Miller take you through each and every step of the entire purchase and/or sale process but upon request manages and leases the property for you so that your investment is wholly protected. As a licensed Attorneys, Kishner & Miller are required and do zealously protect your interests and remain loyal to you. As such, if you are a foreign investor and are looking for real estate in New York please call us immediately so that we may commence consultation with you. Remember that as licensed attorneys of the New York State and New Jersey Bar Associations the information that you provide to Kishner & Miller remains private and confidential. This means that if you consult with us any information that you provide is completely privileged and non-accessible to anyone. This is a major advantage than speaking to anyone else in the real estate environment/field. As such, your first contact regarding your purchase should be with Kishner & Miller.
While it would be impossible to delineate each and every aspect of what it takes to acquire a New York City property the following should be looked at as a guide and commencing what promises to be one of the greatest journeys that you will ever have becoming an owner of a piece of the most wonderful City in the world. Please note that one visiting this website should also take a look at the sections regarding the purchase of a condominium and/or a townhouse which provides more specific and detailed information regarding the particular acquisition process. The New York real estate market has always welcomed international investors. In fact, many foreign individuals and companies are taking advantage of this great opportunity. The most popular options are to purchase a Condominium and/or a townhouse/brownstone
Information on purchasing property in New York as a Foreigner/Investor
Types of Properties – Coops VS Condos
The first step in the process for a foreigner/investor is to immediately determine whether or not the particular unit they are looking at is a Condominium and/or a Cooperative.
Cooperatives generally speaking are not foreign friendly. However, this is not always the case. As such, do not immediately rule out cooperative just because it is a Cooperative. In many instances, a Cooperative may be foreigner friendly. Kishner & Miller will be able to immediately assist you in making this critical analysis. When commencing a search it will soon become abundantly clear that there are more Cooperatives available then Condominiums and cooperatives tend to generally cost a bit less. While this is not necessarily so for new construction buildings which are generally always a condominium, cooperatives are generally speaking more available in New York City and tend to take up almost 70% of the New York City marketplace. Because of the great volume of cooperatives and the emerging intertwining of our world many cooperatives are adopting new policies to allow foreigners to acquire a Cooperative unit. As many of our clients have learned, many foreigners would have lost valuable opportunities had they not contacted our office to discover that a Cooperative may indeed be available to a foreign investor!
When trying to find an appropriate unit/apartment it should become clear and delineated in the listing that you are looking at whether the particular unit is a Cooperative and/or a Condominium. Therefore, making the initial determination as to whether a particular unit is a Cooperative and/or a condominium should not be difficult. Many people wonder what exactly is a Cooperative. Technically speaking, a Cooperative is a corporation. When you look at the particular building which is entitled to be a Cooperative, the building is owned by the Cooperative corporation. When you buy into a Cooperative you are buying shares in the Cooperative corporation. As such, cooperative unit owners are really shareholders in a corporation. The Cooperative Corporation then leases back to you your particular unit with what is known as a proprietary lease. Skipping the technicalities, the major point of this structure of ownership is that the Cooperative has a great control over who ultimately gets to buy into the building. The reason for this is that the Cooperative is controlled by the shareholders which are the unit owners. Therefore, the unit owners may make requirements as to who gets to own shares in their Corporation. One of the major requirements that a Cooperative has is the presentation of a US tax returns and having a US credit history. Therefore, right off the bat, it becomes a more challenging process for foreigners to purchase a Cooperative unit. While many foreigners and, for that matter, others in the world think that it is very unfair to have this form of ownership which restricts those who may be able to acquire property into a particular building, there are many valuable reasons for this type and structure of ownership. Furthermore, the structure is completely legal and has been upheld by the United States Court systems. The alleged major reason why cooperatives get to choose who lives in their building and become shareholders is because the cooperatives want the individual who is purchasing the property to actually live in the property thereby almost guaranteeing that they will make payment of monies that may be due to the cooperative by the unit owner.
Ultimately, even if you find a Cooperative unit that is foreign friendly, you will still be required to submit an application to the cooperative board will get to review your finances and actually meet with you. Many foreigners do not like this process and find it to be contrary to their objectives. Interestingly, if an application to a Cooperative which is foreigner friendly is rejected, the co-op board does not need to provide any reason for its rejection. Furthermore, cooperatives may have many other restrictions which may also make it also not appealing to a foreigner. A co-op purchaser may also restrict the amount of financing that one is able to obtain on the unit , prevent one from leasing their unit, place all sorts of restrictions on renovating their unit, etc. furthermore, knowing that the Cooperative has the right to approve any purchaser, also means that when the foreigner is getting ready to sell their particular unit, there purchaser will also need to go through the same application process. Unfortunately, when making an application to a Cooperative, the Cooperative may take many weeks to months to issue their decision as to whether or not they will be providing to you there approval.
Despite the challenging nature of potentially owning a Cooperative by a foreigner, many foreigners are delighted by the cooperative form of ownership and one should not simply rule out every Cooperative that one sees. Please take the time and call our offices prior to eliminating a potential wonderful investment. If a foreigner ultimately buys a cooperative, they will also have the benefit of knowing that there is only one payment that is due to the cooperative on a monthly basis commonly known as a maintenance payment. As will be discussed later herein, condominiums tend to be a bit more complicated as to the amounts and payments that are due and owing. Remembering that you are a shareholder of a corporation when owning a Cooperative, the Cooperative Corporation makes all payments of taxes and other utilities on the building so that as a cooperative owner you are simply making your one monthly payment to the Cooperative which will serve as full payment of all your underlying obligations to the Cooperative Corporation
Condominium buildings are often newer buildings but more expensive than cooperatives. They offer more flexibility which is more attractive for investing. It is much easier to buy and sell because of fewer restrictions. Condominiums offer a less complicated approval process. The board, usually comprised of residents makes decisions about the building (repair, use and rules) and the approval process is more a formality. There are also minimum restrictions on use and ownership (rentals are allowed). Condominiums are unique creature of New York state. They are usually confused by many other forms of ownership. A New York City condominium is a very specific creature and needs to be fully understood. When purchasing a condominium in New York City, you do not only obtain a deed to your particular unit but you also buy a piece of a corporation. As such, it is very important to know the condominium Corporation which were buying into. As such, when you are looking at a condominium, you’re looking not only at your particular unit but should also be looking at the entire building as you be becoming a part owner of the condominium Corporation. Many foreigners lacking this understanding get themselves into major difficulties and hardships not realizing that they own a piece of a corporation as well as their particular unit. As such, Kishner & Miller will be able to assist you in making a proper determination as to whether there were any underlying problems with the condominium Corporation that you should be made aware of. As you will soon find out, every condominium has attributable there to a specific charge known as a common charge. As you look at listings for condominiums you will notice that there are usually delineated two monetary figures, one being for the common charges that will be due and owing to the condominium Corporation and the other one for real estate taxes that will be due and owing to New York City. It is important to understand that condominium common charges may increase dramatically/sharply and one needs to have a full understanding and knowledge as to what is happening to the condominium Corporation. Without this full understanding a foreign investor is simply gambling in their investment. As attorneys, Kishner & Miller are able to analyze the current situation with what is happening to the particular condominium to ensure that you do not have significant issues when you buy into a condominium.
- Applications to Condominiums
- Many foreign investors are tricked into believing that there is no application to be submitted to a condominium to obtain condominium approval. This is simply not correct. Potential condominium unit owners must submit a condominium application. While technically the condominium does not have the right to formally reject a candidate, they do have the right to make a decision as to whether or not the condominium itself wishes to buy the unit or not. This is commonly known as the waiver of the right of first refusal. Almost every condominium in New York City has what is known as the right of first refusal. This means that a seller wishing to sell their condominium unit, must first present to the condominium it’s offer that it has received to purchase the unit. While condominiums generally rarely ever exercise their right of first refusal they do have this right. Practically speaking what this means for a foreign investor, is that a foreign investor will need to submit an application to the condominium so that the condominium may analyze whether or not it wishes to exercise its right of first refusal. The application may be rather lengthy requesting a great amount of data/documentation from the potential purchaser. Therefore, Kishner & Miller may be able to immediately acquaint you with this application process so that it is not as harsh upon you. This is a significant factor which is often overlooked by many foreigners. It is only after a foreigner has entered into a contract of sale that they suddenly find out that there was a lengthy time-consuming application process which they thought that they had avoided by purchasing into a condominium rather than a cooperative.
- Condominium Fees
- As mentioned earlier, a condominium unit owner will be required to make a payment to the condominium on a monthly basis. This fee is known as the common charge fee. The common charge fee is subject to major increases. Additionally, a condominium corporation may also impose assessments which are additional charges on top of the common charges to every unit owner. An assessment may be imposed upon a unit owner due to renovations and major capital improvements which are needed to the building. Once again, many foreign investors get trapped into not knowing that there was a major assessment on the horizon which they simply did not know about prior to their purchase. Kishner & Miller is there to assist you in guiding you to make the right decision and having a full knowledge of the common charges and assessments that may be due to the condominium which were seeking to buy it. Do not get caught by unknown fees.
C. New Construction Condominium v. Existing Condominium
Whether or not you are a foreigner, there is an obvious distinction between whether one is making an acquisition into a new condominium construction or a condominium that is already built and people already living therein. Ultimately, the legal significance of condominium ownership and the structure of condominium ownership remains essentially the same i.e. That you were buying into a condominium and will become a condominium unit owner owning not only your particular unit but a piece of the entire condominium by way of having a percentage interest in the condominium Corporation. However, the pathway in which you buy and how the purchase procedure will go forth varies dramatically as to whether or not you are buying a new condominium construction and/or buying in an existing condominium. Thus far, what has been discussed is an existing condominium which is already been created with occupants living in the building. However, if you are buying into a brand-new condominium which is either yet to be built and/or is in the process of being built, then the rules/procedures in the acquisition process will change. Some of the more significant changes are the following:
- Application process-if buying in a new condominium you will not need to submit an application. As such, the entire discussion and filing of an application becomes completely unnecessary. As you are now acquiring from the developer/sponsor/owner (please note that generally all of these terms refer to the seller and are used interchangeably throughout the process) there is no need for you to submit an application.
- Closing date-if you are purchasing into an existing condominium there is generally a discussion as to when you’re closing date will occur. The closing is the date in which you take formal ownership and obtain a deed to the property. With a new condominium the closing date may be completely unknown to the seller and yourself. As such, as a purchaser you need to be prepared to close when the building is ready for occupancy. Furthermore, the closing date, when fixed, becomes a very strict date in which you must honor and be ready to close. As such, you must have the cash ready to go. Kishner & Miller, carefully goes through the risks and analyzes with you what needs to be done to ensure that you are able to honor the closing date.
- Finished product-it becomes rather obvious that if you are not buying into an existing condominium in the building does not yet exist that there are obviously risks that naturally develop in ensuring that you obtain what you have a bargain for . Unfortunately, many foreigners have found themselves in situations in which they believed that they were buying a particular type/structure/square footage/amenities, etc. only to find out that that is not what they actually signed up for. It is only through the aid and assistance of Kishner & Miller may you be guided correctly in the acquisition of ensuring that what you think you are purchasing is what you wind up with.
- Closing costs-when buying into a new condominium construction your closing costs will vary dramatically. Costs which are normally paid for by the seller become the purchaser’s obligation. Of course, there is always room for negotiation but, generally speaking, in a “sellers’ market “the custom in the industry is that many of the expenses that would otherwise be paid by a seller or placed upon a purchaser. However, you should also not have to pay more than you need to. There were so many closing costs attributable to a new condominium construction that once again this may only be carefully analyzed by you through your attorney. Kishner & Miller must be called upon so that you do not have what is commonly called a “closing surprise”. While the bad news is that you may have more closing costs attributable to a new condominium acquisition the good news is that these closing costs are discoverable and you may gain complete knowledge with proper representation.
Every purchaser should know the specific closing cost attributable to their particular acquisition. It is difficult enough analyzing the closing costs when you are a New York State resident but it even becomes that much more difficult to understand when you are a foreigner purchasing for the first time or, for that matter , even your second acquisition of the property because closing costs can vary dramatically depending on the type of property that you are buying as well as the particular building in which were buying into. Therefore, it becomes critical that Kishner & Miller be contacted to provide you with the detailed analysis that you will need in calculating and making your decision as to whether or not a particular investment makes sense. As you may appreciate, it is not simply looking at a purchase price and thinking that there are no other cost attributable to your potential purchase. Closing costs may make the complete difference in whether or not you choose to acquire a particular property. The following is a quick guide to the various costs that you will encounter. Please look to the other sections of this website which deal with the very particularly closing costs and go into a great amount of detail/specifics into closing costs. However, as a quick reference we denote for you the following:
As a general matter, it is very important to distinguish between whether you are buying into a new condominium development or an existing condominium building. The closing costs may vary dramatically depending upon the particular type of acquisition. Only a thorough review of the condominiums documents may one thoroughly make an analysis. Be that as it may, we attempt here to provide you with the following
- NYC Real Property Transfer Tax: For a new Condominium the Purchaser must pay this tax. This can range from 1%-3% of the purchase price depending on the acquisition and as to whether or not seem is considered to be a commercial investment if you are buying more than one unit. Special attention must be taken if you are dealing with a combination of units. Sometimes, one does not even know that they are buying a two units that are not actually legally combined.
- NYS Transfer Tax: This tax amounts to .4% of the purchase price.
- Title Insurance/Fees for Ownership: in the United States one acquires what is commonly called a Title Policy to confirm that they are the official owner of the premises as well as ensuring that there were no other liens, encumbrances, and judgments against the property. If you are obtaining a mortgage, there will be an additional requirement to obtain mortgage insurance. As such, the total cost of title insurance/fees, which shall also include the recording of your deed may cost anywhere from $450- $100,000 depending upon the purchase price. The good news about obtaining a title policy/mortgage policy is that the fees in New York State are regulated. As such, it is really a calculation based upon the purchase price/type of property.
- Mansion Tax: This is imposed on a property that costs over a million dollars. The fee is 1% of the sales price.
- Building Fees/Closing Costs: Some buildings can charge for an Application Fee of $200/$500; a managing agent fee of $250-$500; a move-in deposit of anywhere from $500-$1500
- If you were dealing with a mortgage, then you must be careful as to whether or not there will be what is commonly known as “points ” and also known as Mortgage Loan Origination Fees which can be between .5% and 3% of the mortgage value.
- Bank fees: for those taking out a mortgage one should be looking at: appraisals costs $500 to $5000 depending upon the value of the property; Credit Report Fees can range between $30 and $100 per applicant; Loan applications cost in the range of $500; Bank Attorney Fees are between $1500 and $2500; home insurance and escrow of real estate taxes can add up to $400 to $15,000 depending upon the amount of the particular insurance policy and the amount of real estate taxes.
- Broker Commissions: As a buyer you are generally not responsible for paying any fees to a real estate broker. Sellers generally have pre-arranged with their listing agent to pay all fees for both their agent and the agent representing the buyer of their property. It is always advisable for a buyer to work with a buyer’s agent who will protect the buyer’s interests in the transaction
Real estate taxes: first, as an owner of a cooperative unit, if you have been fortunate enough as a foreigner to locate one, there will be no real estate taxes due on the particular cooperative unit. Rather, real estate taxes are included in your monthly maintenance payment. As such, if you are purchasing a cooperative, you may move out of this particular section dealing with real estate taxes and look below regarding your maintenance fees. However, as an owner of a condominium, whether it be an existing condominium and/or a new development condominium is responsible for their particular units we will state taxes. Real estate taxes are controlled and paid to the New York City Department of Finance. It is imperative to know the exact amount of real estate taxes that is attributable to a particular unit. One should by no means rely on a quote from the seller and/or the broker as, even innocently, amounts may be not accurately portrayed to you based upon that the particular year in which were buying in and the fact that real estate taxes are subject to abatements, exemptions, reductions, etc., depending upon, once again, the particular building, etc. Real estate taxes may vary anywhere in the range from hundreds to thousands of dollars depending on the property. The good news is that real estate taxes may often be deducted from an owners’ taxable income.
Maintenance Fees for Co-ops/Common Charges for Condos:
It is important to understand the terminology being used when acquiring a cooperative and/or a condominium. Simply put, when purchasing a cooperative you are dealing with a maintenance fee and when dealing with a condominium you are dealing with what is commonly known as common charges.
This monthly fee varies from building to building and varies in range. Generally, the more amenities a building offers, the higher the monthly fee will be. These charges go toward maintenance of common areas such as the lobby, gym, or pool and to pay building employees.
It is important for an attorney to be reviewing in detail the buildings maintenance and/or common charges to make a determination as to whether or not there will be a drastic increase in these particular fees. This is one of the largest areas where foreigners ignore and therefore get stuck paying potentially hundreds of thousands of dollars more than they had initially thought. It is not unusual to find a scenario in which a seller knows that there will be a significant increase in the monthly amount of the charges that the seller is paying only to have an unknown foreign purchaser acquire the property prior to the imposition of the specific increase to the maintenance fee and/or common charges. It is very difficult and almost impossible for a purchaser who has already acquired a property and then suffers a significant increase in the amount of common charges and/or other monthly fees to try to go back to a seller to try to recoup monies. In New York the motto is caveat emptor, this in its most simplest terms means “buyer beware”. Kishner and Miller will be able to engage in a detailed analysis to help you understand the risk associated with the possibility of a severe and dramatic increase in the monthly common charge amount or the imposition of what is commonly known as an assessment. As mentioned, condominiums are run by a Board of Directors. If a major capital improvement is needed to a building, such as the placement of a new roof, and/work on the façade of the building, which cost millions of dollars, it is the condominium unit owners that get stuck with the bill by way of an increase in their common charges. Hence, it is not buyer beware when you are a foreigner, but foreigner beware.
Many foreigners believe that it is almost impossible for them to obtain a mortgage loan in the United States. This is actually not correct. Foreigners can obtain a loan but it must be carefully scrutinized by the foreigner to ensure that they are getting the best deal possible. Provera many reputable bankers in the industry it is generally understood that the higher the interest rate that a foreigner pays the more monies that may potentially go to the bank/mortgage broker who is located for you the loan. Foreigners can obtain a mortgage and most U.S Banks have certain programs that accommodate international buyers. Keep in mind that as a foreigner the down payment will be higher. Buyers can finance between 60% and 75% of loans up to a million dollars and 60% of loans between one million and two million dollars. In order to obtain a mortgage there will be specific documents requested.
Verification Documents to provide:
- A Visa or Foreign Passport, at least four credit references (from professionals), verification of employment, proof of rent/mortgage payments (a year’s worth) and the ability to show adequate funds for closing costs. Some institutions will waive this but interest rates will be higher.
- Purchasing in cash will help avoid the NY Mortgage Tax which is approximately 2% of the loan amount.
Income Tax when Financing:
When foreigners finance with a 40% to 50% down payment, they may be fortunate enough not have to pay income taxes on the net rental income for the first 10 to 15 years. This is because the US government is very generous when it comes to those expenses that are allowed to be deducted from rental income. Since mortgage interest, common charges, property taxes, depreciation of the asset over approximately 27.5 years, insurance, and amortization of closing costs are all deductions against income, in the early years the property will generate negative taxable income. In the future years, when the apartment generates taxable income, such income can be offset by the prior year’s negative taxable income. This should be explored with an accountant and Kishner and Miller.
- Federal Tax—For US residents, the federal tax placed on long-term investments is 15%. For non-residents, it is 30%.
- A foreign person is not treated differently when they buy the property for tax purposes. However, buying a property in the name of a trust or a foreign holding corporation such as a BVI can avoid sometimes estate tax in the US and provide additional liability and privacy protections. Keep in mind that purchasing a property through a trust or an offshore company will not avoid Federal capital gains tax or FIRPTA withholding tax on the sale.
Foreign Investment in Real Estate Property Tax Act (FIRPTA):
Generally, a foreigner is welcome to the United States to purchase property. As long as the monies that are being placed into the property are legal and not from some criminal source, the acquisition of a property becomes a rather easy process assuming that the foreigner is guided correctly through the professional representation of an attorney. However, when a non-resident sells US property, the world changes and the Internal Revenue Service and New York State wants to be sure they get paid capital gains taxes. Generally speaking, New York State withholds 6.85% of the proceeds and the IRS withholds 10% of the gross purchase price of the property. When a US tax return is submitted reporting the capital gains tax, if there is any refund due it will be refunded to the filer.
Death Tax – For any tangible/personal property located in the U.S. and valued over approximately $60,000 a death tax has to be paid by Foreigners if they own property in New York when they die by filing of a New York estate tax return. New York estate tax currently has a rate of 16%. However, this is always subject to change and one must know exactly the particular time and date that they are referencing in order to come to an appropriate number. Foreign persons are also subject to Federal estate tax on property owned in the U.S. when they die. Currently the estate tax rate can be as high as 35%. Non U.S. citizens are not granted an exemption, unless a treaty exists with their country. As a result, property valued above $60,000 is subject to estate tax. Suggestions may be to create an irrevocable trust and a foreign holding company. Once again, long term capital gains tax rates are 15% for individuals however there may be potentially no capital gains treatment for C corporations. Federal corporate tax rates can be as high as 35%. What this means for a foreign purchaser is a tax savings on the capital gains on the sale of the property if it is held individually as opposed to a standard corporation. The Federal capital gains tax rate of 15% can be avoided by creating an LLC. LLCs allow individuals to be taxed at their own individual tax rate, instead of being subject to the high corporate tax rates of 35%. As a result, there is not a significant advantage in tax treatment to a foreign purchaser if they own a property individually.
Defer Capital Gains Taxes by Buying another Investment Property: The 1031 tax free exchange.
US government allows Foreign Sellers to use Section 1031 of the IRS Code to defer capital gains taxes. The rules are quite complex and one must follow the rules; otherwise the transaction won’t qualify for deferral. Please see the section of the website dealing with 1031 tax free exchanges.
Limited Liability Corporation (LLC):
It is sometimes said that there is not much of a difference in tax treatment between owning the property through an LLC or individually. However, there is a difference in liability protection. Owning a property individually can subject the foreign buyer to lawsuits in the U.S., whereas, an LLC can protect the foreign buyer’s assets outside those owned by the LLC from liability. An LLC can also provide the foreign buyer with additional privacy protections, as purchasers of property in New York are required to register their ownership with the city and state and these registries are accessible to the public in online databases. If a foreign person wishes to purchase the property individually, they can create an irrevocable trust to hold the property. An irrevocable trust will avoid estate tax when the foreign person dies. In addition, a trust can provide similar privacy protections to a corporation.
Important things to know about LLCs:
- Has to be formed in the same US state in which the property is located.
- Must file local, state, and federal tax returns.
- After the sale occurs, the owners can transfer or sell the LLC shares to the buyer.
- There are unlimited membership requirements. It can be composed of US residents and non-residents.
- It takes about a week to form an LLC.
Purchasing in the name of a US corporation or LLC:
Owning a property through an LLC or US corporation can provide liability protection and additional privacy. Unlike a corporation, an LLC provides the foreign person the ability to be taxed at their individual rate, as opposed to corporate tax rates. However, owning the property through an LLC alone, will not avoid estate tax. In order for a foreign person to avoid estate tax, they can create a New York LLC in addition to a foreign holding corporation such as a BVI, which is a corporation formed in the British Virgin Islands. Provided the BVI is the member of the New York LLC, the foreign person can avoid estate tax on US owned property. Under this structure, the IRS views the ownership of the property as an intangible asset, which is not subject to estate tax.
Tax Treaty and tax liability:
The US has tax treaties with many foreign countries. Under these treaties, foreign residents are taxed at reduced rates, or are exempt from U.S. taxes on certain items of income. These reduced rates and exemptions vary from country to country. Many of these treaties also cover Federal estate tax and provide certain residents of foreign countries a pro-rated amount of the Federal Estate tax exemption of 5 million dollars for individuals.
If there is not a treaty between the buyer’s country and the U.S., or if the treaty does not cover Federal estate tax, then a foreign person is subject to Federal estate tax on the value of the property over $60,000 when they die. The IRS currently has copies of the tax treaties between the U.S. and foreign countries available on its website:
Consulting with Tax Specialists:
A Foreign Buyer’s overall tax liability may be different than that of a US resident depending upon the buyer’s home country’s tax treaty with the US, if any. Therefore, it is best to consult a local tax advisor that is familiar with the tax treaty. For instance, the capital gains rate for US residents is 20% (if the property was owned for more than one year). Foreign Nationals, however, could be required to pay a higher rate, depending upon their home country’s tax treaty with the US and how they structure their purchase. A local tax lawyer who is familiar with your home country’s treaty would be the best resource for answers to these questions.
Obtaining a TIN:
A taxpayer identification number (TIN) is required by the IRS to file all tax returns in the U.S. There are four different types:
- Social Security Number: To obtain a social security number you must complete form SS-5 and submit evidence of your identity, age, and U.S. citizenship or lawful alien status with the social security administration. The social security administration’s website is: http://www.ssa.gov
- Employer Identification Number
- An employer identification number (EIN) is used by business entities as well as trust and estates. You can apply online through the IRS website: http://www.irs.gov
- Individual Taxpayer Identification Number
- An Individual Taxpayer Identification Number (ITIN) is a tax number for certain nonresident and resident aliens, who cannot get a Social Security Number (SSN). It can be obtained by filing a W-7 application with the IRS.
- Preparer Taxpayer Identification Number
A paid tax preparer must apply for a Preparer Tax Identification Number (PTIN) on the IRS’ website.
Tax abatements are intended to encourage real estate developers in New York to keep building and enhancing neighborhoods. Tax abatements are programs that allow taxpayers to be granted a reprieve from paying a certain tax for a period of time, for either a total or a percentage of that tax. The tax status a building qualifies for is dependent on the specifics of any given building.
- Tax Exemption Program—Covering new buildings and some specific renovations.
- 421-A—Intended for new buildings, this program’s purpose is to phase out tax exemptions over a period of 10 years. Real estate tax increases by 20% each 2nd year until it reaches maturity. For example, 100% exempt for the 1st and 2nd year, 80% exempt for the 3rd and 4th year, until it reaches the 10th year.
- 421-G—Intended for new buildings, this program applies to one specific area, namely below Manhattan’s Murray street. The buildings that are eligible in the area get tax benefits for 14 years. This lowered payment applies for the first 8-10 years and is gradually phased out till it expires in the 14th year.
- Other Incentives—Many New York City buildings can qualify for abatement periods that range between 15 to 25 years. A building’s eligibility will be influenced by factors including the availability of units that are reasonably priced, location, and receiving assistance from the government in the form of grants and loans.
Foreign Buyers do not have to be in the US to Close the Deal:
At the closing of the transaction, when the property is transferred to the new owner, the new owner does not need to be in the US. The purchaser can provide his or her real estate Attorney with a “Power of Attorney” and they will have the right to close the deal on behalf of the new purchaser. This is very common and convenient for the buyer who does not want to travel to the US for the closing.
How can I ensure that my purchase is legitimate, safe and legal?
It all begins and ends with working with the right team. Hiring an attorney you can trust is absolutely crucial. Attorneys are needed to obtain insurance, investigate tax status, perform a search on the title, and research any violations or liens on the building, in addition to negotiating the contract, the initial agreement that goes hand-in-hand with paying the deposit. If you are working with the right attorney, everything should be explained to you in detail, and the entire apartment-buying process should be transparent and comprehensible.
Appraisers are needed in order to research a New York City property’s fair market value. Surveyors, as experts of the technical sides of buildings, are needed to research the condition of the property. Architects are needed to check a property’s measurements. Finally, the mortgage brokers are needed in order to help the buyers obtain their needed loans. Brokers will help international buyers connect with all of the professionals they need to make the process go smoothly and successfully.
Renting the Apartment:
The agent fees for both landlord’s and tenant’s agents are paid by the tenant.
Renting out the apartment after purchase:
At Kishner and Miller we or for the very unique service, unique to almost all attorneys in that Kishner and Miller as experienced real estate managers of property may assist you and manage every aspect of buying, renting and selling property in NYC. They can rent your apartment at no cost since renters pay the broker fee in NYC. They can advertise and show units, collect applications and screen applicants (credit score, salary, work history, references), execute leases and arrange for the tenant to move in.
Repairs and Managing the apartment while living outside the U.S:
To manage a property in New York causes one of the biggest headaches for a foreigner and the potential for disaster should that be a problem with the unit that may not be tended to on an immediate basis if required. If you have a tenant, who is in need of immediate repair, you need somebody here in the United States/New York to immediately address the concern of the tenant. Failure to address this concern that could result in a lawsuit by the tenant and a major withholding of rent and other financial problems for a foreigner. However, at Kishner and Miller, because of our unique abilities to manage a property and oversee it along with our concurrent ability to legally represent you in any potential dispute, we may handle every aspect of any issue with a tenant whether it be that something breaks and/or a tenant stops or fails to pay.
If something breaks in the apartment the building superintendent can take care of minor problems at no charge or minimum charge to the owner for material costs if one knows how to correctly talk to the superintendent. Kishner and Miller will be able to communicate directly on your behalf with the doorman or superintendent to advise them of the problem and to keep the tenant completely in the loop to let them know that somebody is here in New York City taking care of the issue. However, even if the building maintenance staff cannot fix the problem, then because of the vast array of contacts that Kishner and Miller have many of which are already on staff through Kishner and Miller’s various management entities the problem may be readily cured.
Because of the need to have on-site local New York City management immediately available to sometimes rather needy Manhattan tenants who are usually high income paying tenants you really need the professional management assistance of Kishner and Miller . The fee for our management services which are unique to the industry are anywhere from 3% to 10% of gross rent. However, because of our unique role as also being attorneys, the additional cost that most management companies have of having to pay for potential problems with tenants when it comes time to collect rent, Kishner and Miller may take immediate legal action to protect your interest.