Buying US Real Estate Through an LLC as a Foreign Investor
Why foreign investors hold US property in an LLC, liability and privacy benefits, how rental income is taxed (30% gross or net election), FIRPTA on sale, estate tax and what to know before you buy.
US real estate attracts investors worldwide: stable markets, strong property rights and rental demand in many cities. Holding property through an LLC is common, and often sensible. But foreign owners face special US tax rules that local investors do not, so plan the structure before you buy.
This is general information; for a property purchase, take advice from a US tax adviser and a real estate attorney.
Why use an LLC?
- Liability protection: claims from tenants, visitors or contractors are generally limited to the LLC's assets, not your other wealth. See LLC liability protection.
- Privacy: in some states, owner names do not appear in public LLC filings (property records show the LLC as owner).
- Easier management of several properties, each in its own LLC if desired.
- Clean records: rental income and expenses in a dedicated US bank account.
- Easier transfers: selling or gifting membership interests can be simpler than transferring deeds, depending on state rules.
How rental income is taxed
By default, rental income paid to a foreign owner is FDAP income: subject to 30% US withholding on the gross rent, with no deduction for mortgage interest, repairs, property taxes or depreciation. For most leveraged properties, that is a heavy burden. See FDAP and 30% withholding.
The net election
Foreign owners can usually elect to treat rental income as effectively connected business income. Then:
- tax is calculated on net income, after deductions including depreciation,
- the normal graduated rates apply (or 21% for a corporation),
- a US tax return must be filed every year, and
- withholding on gross rents can be avoided by giving the tenant or property manager the appropriate W-8 form.
Because of depreciation and interest, many properties show little taxable profit under the net election. See effectively connected income.
Selling: FIRPTA
When a foreign person sells US real property, the Foreign Investment in Real Property Tax Act (FIRPTA) generally requires the buyer to withhold 15% of the gross sale price (with some exceptions and reduced rates for lower-value residences used by the buyer). The actual tax is then calculated on the gain when the seller files a US return, and any excess withholding is refunded. Plan for this in your cash flow.
Estate tax: the big hidden risk
Non-resident individuals can be subject to US estate tax on US-situs assets, which include US real estate, with only a $60,000 exemption (far lower than for US residents). A single-member LLC that is disregarded for income tax may not, by itself, remove the property from a foreign owner's US estate. Investors often use other structures, such as a foreign holding company, a US corporation or specific trusts, after professional advice. Take this seriously before buying.
Which structure?
| Structure | Typical features |
|---|---|
| LLC owned directly by you | Liability protection; income taxed to you; estate tax exposure remains |
| LLC owned by a foreign company | Can address estate tax; more complex reporting |
| US C-Corporation | Corporate tax on income and gain; dividends withheld |
The right answer depends on your country, the property, financing and your long-term plans.
Financing and banking
US lenders do offer mortgages to foreign nationals, usually with larger down payments. The LLC needs a US bank account for rents and expenses. See the US business bank account guide.
Annual compliance
- State filings for the LLC.
- Form 5472 + pro forma 1120 for a foreign-owned single-member LLC. See Form 5472 explained.
- US income tax return if you make the net election.
- Property taxes and local registrations, including rental licences in some cities.
How UCB helps
We form property-holding LLCs in the property's state, obtain the EIN, open the US bank account, and handle annual federal filings. For the purchase itself, estate planning and the net election, we coordinate with your real estate attorney and tax adviser.
Planning to buy US property? WhatsApp us at +91 8105 199 399 or email info@ucbsolutions.com before you sign, so the structure is right from the start.
Let our experts handle it for you
Every business is different. Message us with your country, business type and goals, and we will recommend the right structure, state and package. We do the work; you focus on your business.
This article is general information for non-resident business owners and is not legal or tax advice. Rules and fees change; contact us to confirm what applies to your situation.
