Measurement system. The United States uses the imperial measurement system instead of the metric system. Apartments’ and houses areas are measured in square feet – SQ.FT.
Conversion: 1 sq.ft. = 0.093 m2. That is, if an apartment has 1,000 square feet, it’s the equivalent to 93 m2.
TIP: To convert square feet into square meters, move one decimal to the left and subtract 7%.
Everything is really very simple. But you must be well informed about the buying and selling processes and the implications of accounting, legal issues, taxes and expenses. Many buyers are unaware of some details, to find later that they were not properly informed. You must seek professional help in order to avoid further headaches.
Complying with certain basic requirements, buying real estate in the United States is quite simple. The entire purchasing process is standardized and regulated, so all real estate brokers or associate agents act similarly and use preprinted forms and standard fill-in-the-blanks contracts. United States’ laws strongly protect private property and buyer’s investment and money.
TIP: In the United States buyers don’t pay broker’s commission –it is paid by the seller.
Average period time of the buying process is between 30 and 45 days from the moment the buyer reserves the property to the closing of the sale. When the purchase is made in cash, it takes about 30 days; and 45 days when it’s purchased with a mortgage loan.
Payment terms vary depending if a property is under construction or already built. To buy properties under construction, a Contract of Adhesion must be signed in accordance with the developer’s conditions. For properties already build, the buyer must reserve the property with a small amount of money (Earnest Money Deposit) of about 1% to 2% of the property’s price – usually on a check which is kept by the broker in custody. When the sale is accepted by the seller, the buyer must complete 10% of the price within three days of acceptance.
All realtors in the United States must be licensed and must have -at least- two years experience working with a licensed broker as a broker associate. The associated brokers may act independently but are required to be associated with a licensed broker. Most brokerage firms have a real estate broker and many associated brokers. International brokers operate internationally outside the United States and must also be associated with a broker in the United States.
In the State of Florida brokers are represented by the Florida Realtors and all their activities are regulated by the FREC (Florida Real Estate Commission).
In general, all properties for sale or for rent in the United States are in a shared database called MLS (Multiple Listing Service) which ALL brokers and associate brokers have access. The difference among brokers is in the quality of the service provided to his client by each broker or associate broker.
The main difference between a condominium and an apartment is the type of owner that each building has. Basically, the definition of condominium – or condo – is that each unit is individually owned and the building or complex common areas are owned by all the individual owners in the form of an association.
In contrast, an apartment building has one owner – usually a corporation – which rents apartments to tenants.
Already built properties:
WARNING: According to United States’ laws -and especially Florida State, if you breach a contract, in most cases the money you already deposited will be lost in favor of the seller and the various professionals involved in the process.
TIP: When you buy a preconstruction condo, after signing the contract, you have a 15-days decision period where you can cancel your contract any time for any reason without loosing any money.
Construction steps:
Making repairs and improvements in your property
WARNING: Any major repair or improvement in your property must be previously approved by the authorities and / or the condominium, and the work must be done by properly licensed professionals.
TIP: All expenses and renovations in your property are tax deductible.
Renting your property
Buying a property for rent in the United States, in South Florida or Miami in order to get an income has implications that a foreigner should carefully evaluate.
WARNING: Before purchasing a condominium make sure the condominium rental rules are flexible and will not put obstacles when you lease your property. You -as the owner- are responsible that all basic services work perfectly for your tenant’s use.
TIP: Regarding the building’s administration and maintenance monthly expenses (condo fees), extraordinary expenses and taxes, there are no fixed rules; therefore who pays what is negotiated between landlord and tenant at the time of signing the contract.
You are required to pay taxes on the collected rent. In case that the property is under your sole name, you – as a nonresident alien individual, the tax rate is fixed at 30% on the rental price. This tax can be reduced by deducting expenses. Consult with a tax specialist accountant.
WARNING: Beware of the activities you personally do in the process of renting or managing your property because this is considered a commercial and business activity and, if you do not have a proper visa or you’re not a resident, you could have problems with the IRS and/or the immigration authorities because you’re not allowed to perform any commercial or labor activity.
Foreigners who buy properties for income, they usually do it through an American company (Corporation, LLC -Limited Liability Corporation, etc). We strongly suggest that when planning the purchase of properties for rent, first consult with a tax specialist accountant and an immigration lawyer.
Because of FIRPTA (Foreign Investment in Real Property Tax Act of 1980) regulations, when a non-resident alien sells his property in the United States he/she must pay taxes. A Certified Public Accountant – CPA prepares an accounting income statement and a 10% of the sale value of the property is retained (Witholding Tax) by the closing agent or title company, and deposited in escrow until the IRS (Internal Revenue Service) review the documentation and decides on the amount of taxes you owe, then deducting the amount of taxes from the 10% money in escrow.
Witholding Tax is a retention that applies in advance of supposed profits. The withholding agent has up to 20 days after the closing to report and pay the tax. If there is a difference in your favor, it will be returned to you. If you consider that the tax imposed by the IRS is excessive, you can appeal by filling out the appropriate forms. This tax arises from the difference between what you paid for the property plus improvements made in it, costs, fees, etc and the selling price.
If you buy the property under your personal name and keep it for a full year, you must pay 15% tax on capital gains on the difference – if any.
There are exceptions to avoid your money being kept in withhold: i) if you declare the property as a single home for personal use, ii) if you resided in the property for at least 50% of the time in the first year from purchase, and the sale value does not exceed $300,000.
If the property is owned by a domestic corporation FIRPTA does not apply. Therefore when it is sold, the property is not subject to the 10% withholding tax nor the 30% income tax on incomes resulting from renting the property – which is regularly applied to nonresident aliens. Moreover, the costs of maintenance and the upkeep of the property – among other expenses like condo fees, property taxes, renovations, electricity, depreciation in the case of income, an annual trip of the directors of the corporation, etc., can be declared as operating losses (Net Operating Losses – NOL) for a period of 20 years and is deducted from the gain when the property is sold.
The tax laws in the United States have many variables and you should consult your case with a Certified Public Accountant specialized in non-resident aliens’ investments and an immigration lawyer.
Pegasus Luxury Realty offers the best deals and opportunities in residential and commercial real estate in Miami and Southeast Florida. Contact us and find out our advantages and why our worldwide clients choose our firm over other real estate brokers. We have a selected inventory of residential properties: condos, condominiums, apartments, preconstruction, new construction, new developments, luxury realty, luxury penthouses, luxury condos and apartments, and commercial real estate.
Disclaimer: The information provided in our website is for basic general guidance only and DOES NOT constitute legal advice or intends to replace the advice of an attorney or a certified public accountant. We believe the data displayed in our site and its sources to be reliable; however, Pegasus Luxury Realty makes no warranty, guarantee or representation about it. Any interested party must seek appropriate professional advice.