Investing in Florida Real Estate
There are two kinds of taxes associated with owning residential property, property taxes (which everyone pays regardless of resident or non-resident), and capital gains taxes (due upon sale or disposition of the property).
Under U.S. tax tax law, all persons, whether foreign or domestic, must pay income tax on dispositions of interests in U.S. real estate (U.S. real property interests). Domestic persons are subject to this tax as part of their regular income tax.
Foreign Investment in Real Property Tax Act (FIRPTA), 26 USC 897, is a United States tax provision that imposes income tax on foreign persons disposing of United States real property interests. Tax is imposed at regular tax rates for the type of taxpayer on the amount of gain considered recognized. Purchasers of real property interests are required to withhold tax on payment for the property. Withholding may be reduced from the standard 10% to an amount that will cover the tax liability, upon application in advance of sale to the Internal Revenue Service.
Foreign persons are taxed only on certain items of income, including effectively connected income and certain U.S. source income. Foreign persons, however, are not taxed on most capital gains. FIRPTA treats gain on disposition of an interest in United States real property as effectively connected income subject to regular tax.
In order to ensure tax collection from foreign taxpayers, FIRPTA requires buyers of U.S. real property interests to withhold 10% of the sales price. The seller may apply to the IRS to reduce this 10% to the amount of tax estimated to be due. The IRS routinely and quickly approves such seller applications.
FIRPTA applies in virtually all cases where a foreign owner of a U.S. real property interest disposes of (sells) such interest. Provisions of the law which would prevent recognition of gain generally do not apply unless the seller receives a U.S. real property interest in a qualifying nonrecognition exchange.
Again, please consult a tax accountant before you invest in any real estate in the U.S.
GET ON IT! You’ve Almost Missed It in Florida Real Estate
By Dr. Steve Sjuggerud
Wednesday, December 5, 2012
Get on it, if you haven’t already!
Because if you don’t get on it right now, you’ll miss it.
Don’t get me wrong – you can still make great money here. Housing in Florida is still attractively priced. And I expect it will rise in price faster than just about anyone expects over the next decade. Even paying market price today is a great deal, as I will explain in a minute.
But I’m not talking about buying at market price. I’m talking about buying real estate below market…
I’ve been urging you to do this – no, beating you over the head telling you to do this – for a while now. I sincerely hope my message has gotten through.
I’ve been taking advantage of below-market deals… I bought one large property for 90% less than what it was under contract for in 2008. (I received an offer of twice what I paid for it a couple weeks later… and I turned it down!) And just last month, I bought a beach condo for about half of its CURRENT market value.
I knew the window of opportunity for below-market deals wouldn’t last forever. But I didn’t expect the end would arrive this fast…
Up until a few months ago, banks had to find someone to buy their properties – someone willing to take a risk. (The two properties I just described were previously owned by banks.) That’s because nobody else would step up to buy them. That is changing – fast.
Buyers are back!
Big investors are just now arriving, and they’re buying up everything. (The latest “buy” recommendation in my True Wealth newsletter is a company that has bought thousands of homes this year, mostly from banks and government entities.)
The latest numbers from my local area prove the buyers are back…
I live in northeast Florida. The Northeast Florida Association of Realtors just put out its latest numbers. And they are strong…
• Home sales (closed sales) were up 19.3% in October versus October of last year.
• Even better, pending sales were up 45% in October versus October of last year.
• The median sales price was up 7.9% year-over-year, to $137,950.
• Inventory of homes “plummeted,” dropping 30.5%.
• Not many homes are available… just five months of supply – down 39% from a year ago.
This creates the perfect recipe for higher home prices here in northeast Florida.
We have extremely cheap housing (median price of $137,950)… record-low mortgage rates (below 3.4%)… and extremely tight housing supplies, while demand is increasing.
The trend is up, too. One last factor is that the rent on a rental house beats the pants off interest on money in the bank.
And this isn’t just happening in northeast Florida. The story is probably similar in your neck of the woods, too.
If you want to find a below-market deal, you’d better get out there and find it, now. The window of opportunity is closing fast.
I strongly believe you won’t go wrong in the next few years… even if you pay market price for real estate. The thing is, YOU have to do it… You have to roll your sleeves up, get out there, and find your property.
So go! What’s taking you so long? Get on it!
This is the best deal in the investment world today. Take advantage of it… now!