The Foreign Investor’s Guide to Participating in US-based Real Estate Syndications

by | Dec 22, 2020 | Uncategorized | 0 comments

How to Participate in US-Based Real Estate Syndications as a Foreign Investor

The following 7 guidelines are for Foreign Investors participating in US-based real estate private equity investments. 

1 – Form a US-Based LLC / Corporation

Foreign investors have to create an entity with which they can invest, an LLC or a corporation.

An LLC with a minimum of 2 partners (equity split does not matter) is required to qualify for some tax benefits.

2 – Apply for EIN (Employer Identification Number) and Register the LLC with Required Agencies

Once the LLC is formed, foreign investors must apply for an EIN (Employer Identification Number) and register the LLC with various agencies. This is another area where CPAs’ and Attorneys’ experience with foreign investments is valuable.

3 – Execute an Operating Agreement Among Partners

Create and execute an agreement among all partners of the LLC.

4 – Apply for ITIN (Individual Taxpayer Identification Number)  or Social Security Number

Each individual partner in an LLC needs to have a social security number or apply for an ITIN (Individual Taxpayer Identification Number). Usually, foreign investors are granted an ITIN within 4-6 weeks of submitting their application.

5 – Open US-Based Accounts

With an EIN, operating agreement, and ITIN completed, a foreign investor can open a US-based bank account. Strive to choose a global bank with online access. 

6 – Filing the LLC US Tax Returns (Federal, State, and City) and Personal Tax Returns for all Partners

The LLC will need to file returns and the partners will have to file personal tax returns. The Schedule K-1 (tax document issued to LLC syndication partners) often has significant tax deductions that result in paper losses each year while the investors receive cash flow. 

In addition to the scheduled distributions, the paper losses can be offset against future gains from the sale of the asset and reduce the negative tax consequences.

Foreign investors should consult with professionals for asset protection strategies, legal structures, and related disclosure requirements. 

7 – Tax Treaty Benefits Are Available

CPAs and Cross-border tax specialists can help foreign investors discover the tax treaty benefits available, as they vary from country to country.

It is imperative to seek out an Attorney and CPA who are experienced in providing professional guidance to foreign investors who invest and run businesses in the United States.  The content herein is not, and shall not, be considered, or relied upon, as legal or tax advice.

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