A Chinese tech entrepreneur loses $1 million on a Seattle condo deal after 6 months of negotiations when he’s unable to transfer enough money out of China to complete the purchase, leading to a forfeiture of his earnest money. A Vietnamese developer acquires a $15 million industrial property, only to be blindsided by a roughly $5 million environmental cleanup obligation because it never conducted even a basic environmental due diligence before it bought the property. A Spanish company walks away from an 8-month, $12 million land acquisition after discovering that only half the property is zoned for industrial use.
These aren’t rare outliers—they’re cautionary tales that underscore why foreign nationals buying U.S. real estate need experienced, cross-border legal guidance.
For foreign buyers and international property investors, the U.S. offers a compelling blend of robust legal protections, market transparency, and long-term growth potential. However, U.S. real estate law is uniquely complex and highly decentralized. Navigating this intricate system successfully demands thoughtful planning and experienced legal counsel.
Navigating a Complex Legal Landscape
One of the most critical aspects for international investors to grasp is the vast variation in real estate law across U.S. jurisdictions. The United States operates under a layered legal system—federal, state, and local—meaning the rules governing a property in one city can differ dramatically just a few miles away. This complexity makes cross-border real estate attorneys essential for foreign investment in U.S. real estate markets.
Consider a development project in Seattle compared to one in Bellevue, its neighboring city a 15 minute drive across Lake Washington. We’ve seen projects falter when investors, unaware of nuanced permitting differences or overlooked zoning requirements, failed to obtain the necessary approvals. Understanding these distinctions and preparing for them proactively is fundamental to a successful real estate investment.
Tax Is Only One Piece of the Puzzle
Foreign buyers and overseas property investors must also contend with a multifaceted tax environment. This can include federal income tax, capital gains tax under FIRPTA (Foreign Investment in Real Property Tax Act), and additional state and local taxes—all regardless of their residency status.
While rigorous tax planning is undeniably important, it’s just one component of a comprehensive investment strategy. Successful real estate ventures also require meticulous consideration of entity structure, financing, robust due diligence, and compliance with numerous overlapping regulatory regimes.
Key Steps for Foreign Real Estate Investors
Before diving into any U.S. real estate investment, international buyers should follow these essential steps.
These steps are essential for all international property investment transactions, regardless of size or complexity.
Pre-Investment Phase:
- Establish a U.S. bank account and secure foreign national mortgage pre-approval
- Obtain an Individual Taxpayer Identification Number (ITIN) from the IRS if you don’t have a Social Security Number
- Research state-specific foreign investment disclosure requirements—some states like Florida require additional filings
Due Diligence Essentials:
- Always order a comprehensive title search going back at least 30 years
- Verify zoning compliance through municipal records, not just real estate listings
- Budget an additional 2–5% of the purchase price for closing costs, which vary significantly by state
Financing Strategy:
- International real estate investors typically need a 25–40% down payment for investment properties
- Establish credit history through secured credit cards or alternative credit programs
- Consider portfolio lenders who keep loans in-house rather than selling to government-backed entities
Your Guide to U.S. Real Estate Investment
While these steps provide a foundation, successful international property investment requires comprehensive legal support throughout the entire process.
At Harris Sliwoski, we approach foreign real estate investment—both commercial and residential—with a comprehensive, strategic mindset. Our lawyers guide clients through every stage of the process, transforming potential challenges into manageable steps:
- Strategic Planning & Partnerships: We help to identify and connect you with specialized brokers, and real estate financing companies.
- Due Diligence & Risk Mitigation: We conduct comprehensive due diligence, assessing everything from legal and business risks to zoning issues, restrictive covenants, and encumbrances.
- Entity & Ownership Structuring: We design ownership structures that optimize for tax efficiency, operational goals, and, where permissible, investor anonymity.
- Contract Negotiation & Drafting: Our team drafts, reviews, and negotiates all necessary contracts, ensuring clarity and protecting your interests.
- Regulatory Compliance & Permitting: We navigate the complex web of multi-level regulations, securing required permits and licenses, and addressing land-use and environmental considerations.
- Professional Management: If needed, we assist in retaining and managing qualified professionals crucial to your project, including contractors, architects, engineers, and title service providers.
Failing to anticipate regulatory or structural issues can have major financial and operational consequences. Our proactive, risk-managed approach provides clients with confidence and clarity from the outset.
