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INTERNATIONAL HOME BUYERS GUIDE TO PHOENIX, ARIZONA REAL ESTATE

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www.ContigoRealty.com Contigo Realty-International Buyers Guide to US Real Estate

http://www.ContigoRealty.com

INTERNATIONAL HOME BUYERS GUIDE TO PHOENIX, ARIZONA REAL ESTATE !!!TABLE OF CONTENTS !!

Introduction 3 !Common Real Estate Practices in the US & Phoenix, Arizona 4 The MLS Commissions !Buying Your Home 5-7 Identity Match Making to the Perfect Home Financing & Mortgages All Cash Purchases Verification Documents Checklist Insurance !Taxes 8-10 Consult a Tax Specialist in Your Home Country Rental Income 101 Get the Most for Your Deductions !Establishing an LLC 10 !Work with a Professional Realtor 11 !Conclusion 12 !References 13

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INTRODUCTION !International real estate investing continues to be on the rise in prime markets such as Phoenix, Arizona. According to the National Association of Realtors, non-residents purchased an estimated $68.2 billion dollar of US real estate between March 2012 to March 2013. Thanks to buyers abroad & recognizing the real estate opportunities in the US, they have made up 6.3% of the US’s total home sale transactions. [1] The US & Phoenix, Arizona welcome our international home buyers. This information process to purchase as home is similar in nature to that of US home buyers. There are some processes & understandings foreign buyers will want to understand in order to prepare with variations in the market that any international investor will want to know. Tax policies, credit verification & financing will run a slightly different process for foreign buyers.

!!!!!! !!!!!!!!The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona.

Although the information is deemed reliable, it’s highly advised to enlist professional real estate/tax attorney services from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.

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COMMON REAL ESTATE PRACTICES IN THE US & PHOENIX, ARIZONA

!The MLS New real estate listings are posted to the Multiple Listing Service (MLS) within 24 hours of becoming available for sale. This process provides an opportunity to actively market & present homes to each agents & their perspective clients both internationally abroad & domestic. This business practice varies in many other countries, where buyers go from agent to agent to find a property. However, the advantage of working with one chosen professional in the US & Phoenix, Arizona

real estate market in particular are instrumental in sharing “pocket” or “quiet” listings. Therefore, it is important to have strong real estate agents working for you like those at Contigo Realty. The Agents know both; MLS listings & pocket listings providing our home buyer’s a significant selection in housing inventory options. !!The Commissions Sales commission in the US is paid by the seller, & is divided between the buyer’s & seller’s brokers & agents. Commissions range from 3 to 6%, depending on the market & the type of real estate transaction on hand. Buyer’s do not pay anything to have an agent working on their behalf, therefore working with an experiences broker or agent to protect your best interests in the transactions is important to finding your hard earned money’s worth. At Contigo Realty, we specialize in achieving home buyers needs matched with their real estate goals & lifestyle conveniences. ! !!!!!!The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona. Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/real estate/tax attorney services

from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.

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BUYING YOUR HOME Identity You don’t need to be a US citizen to purchase a home, however you do need an individual Taxpayer Identification Number. Obtained from the Internal Revenue Service, this id number is used for foreign nationals to file income tax returns. For more information visit: http://www.irs.gov/Tax-Professionals/Frequently-Asked-Questions:-Do-I-Need-a-PTIN%3F & reference: Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding.[2] This is a mandate when purchasing US real estate. To obtain your taxpayer identification number, you will need a valid foreign passport, two additional photo forms of identification (such as driver’s license) to verify who you are & your country of origin. !Matchmaking to the Perfect Home With a broad range of choices in the US Real Estate & the Phoenix, Arizona markets, we will want to help begin with your research & preparation. At Contigo Realty, we don’t want our international home buyers to buy a home just for the simple sake of owning piece of the real estate market. Helping you locate the best investment includes your lifestyle needs & wants. For example; do you

plan to use the property for strictly investment, education, business or pleasure (both), enjoy pools & barbecuing year round, golf properties, the vicinity to museums or dining & shopping, horseback riding, hiking & biking & etc. The type of property we can help search also is based on your requests for example, do you prefer a single detached residential home that offers endless entertainment & hosting events or a vacation style lock & go property the includes maintenance offered in such properties as town homes, condominiums or patio type

homes? We will cater to your choice as we strive to search for homes to reflect your lifestyle & needs. Talk to your Contigo Realty agent about your needs to help matchmake the perfect home to suit your needs. !!!The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona. Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services


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BUYING YOUR HOME Financing & Mortgages In the last two years, banks have begun lending again to international home buyers. However, banks do often require an additional business relationship going further than just the mortgage. HSBC offer international lending programs. To begin your research visit:https://www.us.hsbc.com/1/2/home/personal-banking/mortgages/international.[3] !When seeking a loan the banks will need proof of 12 months reserve to cover the mortgage payment, maintenance & taxes. Contigo Realty agents also have relationships with various major mortgage brokers & banks to help offer lender & mortgage terms suited to your needs. !!All Cash Purchases In 2013 NAR reported 63% of Real Estate transactions purchased by foreign buyers were all cash [3]. If this is the case, please note proof of funds (copy of recent bank statement) will need to be accompanied with home offers. !!

! !!!!!!!!!!!!!!!The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona. Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/real estate/tax attorney services


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BUYING YOUR HOME Verification Documents Checklist ‣ Credit References Four credit source references adequately documenting credit history directly from either your accountants, bankers, or insurance officials will suffice. !‣ Current Visa or Foreign Passport Copy Verify these documents are not expired or expiring any time soon. !‣ Verification of Mortgage/Rent Payment History Documentation with a one year minimum before the placement of the mortgage application. !‣ Proof of Employment Employment verification when applying for a mortgage can be obtained via paycheck stubs or documentation of employment on corporate letterhead. !‣ Adequate Closing Funds Showing the lender you can afford the purchase is great, however the lending institution will want to confirm the reserve funds on hand to ensure the full first year of payment, insurance, costs & taxes, etc are obtainable. !Insurance Lenders in the us requires borrowers to purchase homeowners insurance. This helps in protecting your asset from potential damages & in some cases natural disasters. State to state the home owners insurance will vary & the costs are based on the size of the property just as well. Please note: certain states prone to natural disasters typically run higher. !!!The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona. Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services


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TAXES Tax liability for foreign nationals differs from US residents ‣ Federal tax on long term investments

(holding property for over a year) US residents pay 15% where as foreigners pay 30%. (unless reduced by an applicable income tax treaty). [4] To begin research

visit: http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Persons-Receiving-Rental-Income-From-U.S.-Real-Property. !

‣ Under the Foreign Investment in Real Property Tax (FIRPTA), income tax is withheld immediately following a non US-resident owned property. The rate varies per state, but the federal rate is 10%. [5] Visit: http://www.irs.gov/Individuals/International-Taxpayers/FIRPTA-Withholding. [6] !

‣ “Statement of Withholding on Dispositions by Foreign Person of US Real Property Interests” is required by the IRS Visit: http://www.irs.gov/publications/p544/ar01.html. Many states also request a “Nonresident Real Property Estimated Income Tax Payment Form” Visit: http://www.irs.gov/pub/irs-pdf/f1040nr.pdf. !

We recommend seeking the expertise of an international tax accountant professional to provide assistance in facilitating these forms. !

Consult a Tax Specialist in Your Home Country International home buyer’s tax liability will vary from country to country & is referenced to the specific country’s tax treaty with the US. It’s best to consult a tax advisor in your country to review the tax treaty details & provisions. The capital gain rate for US residents is 20% in the event the property was owned for more than one year, but it could be higher if you are from certain countries. Please check with your local tax specialist before your buy. !!!!The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona. Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services


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MORE ABOUT TAXES Get the Most from Your Deductions International buyers who finance their property purchases with 40 to 40% down payments typically will not pay income taxes on their rental income for the first 10 to 15 years of ownership, since the US is generous when it comes to expenses eligible to be deducted from rental income. The following can be claimed as deduction against income; Mortgage interest, commons charges, depreciation, property taxes, insurance, & amortization of closing costs … resulting in negative

taxable income & not tax liability especially in the early years of property ownership. !Rental Income 101 The US law requires foreign nationals “elect” to pay US income taxes on net incomes earned from rental properties. If the election is not made in a time sensitive fashion & failure to file the proper form with the IRS a tax of 30% of the gross income amount could be demanded. This would also apply even in the event the property owner is incurring tax losses & does not own any taxes to the government. The filing of their tax

returns must take place in order to make the “election” required by law. Visit: http://www.irs.gov/pub/irs-pdf/p54.pdf. !Get the Most from Your Deductions International buyers who finance their property purchases with 40 to 40% down payments typically will not pay income taxes on their rental income for the first 10 to 15 years of ownership, since the US is generous when it comes to expenses eligible to be deducted from rental income. The following can be claimed as deduction against income; Mortgage interest, commons charges, depreciation, property taxes, insurance, & amortization of closing costs … resulting in negative taxable income & not tax liability especially in the early years of property ownership. !Please Note: You Do Not Have To Be in the US to Close on Your Property Talking to your realtor about the processes in place to close on your property is a common practice & can be convenient. The buyer does not need to present in the US. The owner can pre-sign with the preferred title company prior to leave or have your representative with “Power of Attorney”, assigned to close on the property on behalf of you as the new owner. !The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona. Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services


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ESTABLISH AN LLC !Buying a home under the name of a domestic US company or Limited Liability Corporation/Company (LLC), both have various tax advantages. We recommend seeking the help of your tax advisor who specializes in international law, to help prepare. The benefits vary between purchasing via a LLC, such as tax incentives involving treaties between foreign countries & the US & may sometimes detract from those advantages. !When forming a LLC in the US it takes a minimum of one to week, the LLC must be established in the same state as the property purchase that will take place, the LLC requires by law to file local, state & federal tax returns, an LLC can include foresight nationals & US residents, at the time of sale property owners can sell or transfer shares of the LLC to a buyer, A US based LLC can be owned by a Foreign Corporation for additional benefits. !Tip-on Avoiding US Estate Tax upon the passing of a non US resident, the estate will be taxed by the US government at an estimated 45%. To avoid this if the international buyer establishes a Limited Liability Corporation (LLC) in which owns the property & a Foreign Corporation to own the LLC, the US would not be able to tax the property upon the passing of the owner. This can serve considerably in tax saving as it can be done with minimal expense & non time consuming when enlisting professional assistance. !!!!!!!!!!!!!!! !! !!!!

The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona. Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/

real estate/tax attorney services from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US.

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WORK WITH A PROFESSIONAL By working with US professional real estate agents such as our trusted Contigo Realty agents, their expertise & experience in helping international buyers is to the greatest advantage. Knowledgable real estate agents such as ours will protect your interests, while guiding you to property searches with an international purchase process providing you with a seamless US home property purchase as possible. At Contigo Realty our agents cater to our clients’ lifestyle needs & are ready to help in every aspect of finding the perfect home or investment property for you. !!!!!!!! !!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona. Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services


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CONCLUSION Finding the right real estate agents at Contigo Realty is the first step to buying in the US. The next step, now is prior preparation in aligning the necessary paperwork to purchase. Investing in the US real estate is a great way for many international buyers to keep their money safe in a politically stable country. According to 53% of Realtors® surveyed by NAR, the international buyers purchases in the US are based on the profitability & security.[7] !Please contact us today to make contact with your Contigo Realty agent to begin receiving the perfect investment property or vacation home.

!! !!!!!The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona. Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services


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REFERENCES !1. ^ “National Association of Realtors®"2013 of Profile of International Home Buying Activity

online Retrieved January 30, 2014. http://www.realtor.org/reports/profile-of-international-home-buying-activity !

2. ^ “IRS”: Frequently Asked Questions: Do I Need a PTIN? Retrieved January 30, 2013. http://www.irs.gov/Tax-Professionals/Frequently-Asked-Questions:-Do-I-Need-a-PTIN%3F. !

3. ^ “National Association of Realtors®": 2013 of Profile of International Home Buying Activity online Retrieved January 30, 2014. http://www.realtor.org/reports/profile-of-international-home-buying-activity. !4. ^ “IRS”: Foreign Persons Receiving Rental Income from US Real Property: Retrieved January 30, 2014. http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Persons-Receiving-Rental-Income-From-U.S.-Real-Property. !5. ^ “IRS”: FIRPTA Withholding of Tax on Dispositions of United States Real Property Interests. Retrieved January 30, 2014. http://www.irs.gov/Individuals/International-Taxpayers/FIRPTA-Withholding. !6. ^ “IRS”: FIRPTA Withholding of Tax on Dispositions of United States Real Property Interests. Retrieved January 30, 2014. http://www.irs.gov/Individuals/International-Taxpayers/FIRPTA-Withholding. !7. ^ “National Association of Realtors®": 2013 of Profile of International Home Buying Activity online Retrieved January 30, 2014. http://www.realtor.org/reports/profile-of-international-home-buying-activity. !!!!!!! !!!The information prepared here within, are resources to help begin your research to US international home buying in Phoenix, Arizona. Although the information is deemed reliable, it’s highly advised to enlist professional insurance agent/ real estate/tax attorney services

from your country of origin to ensure correct procedures are customary & tailored to each country’s agreement with the US. !

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