Owning property in a foreign country - who had done it - how?

[Disappointed]

DW was talking about buying a condominium in her motherland, I have never done this before.

For those that own property in a foreign country, how did you handle the financial end of it? I assume one can wire transfer the money to an escrow account and handle it from there?

Also, wonder if there is a requirement to report the transaction to the IRS or any other government agencies?

Thanks,

MP

 

[Dd852]

Hi. It is really important to have a good lawyer on the ground who is bilingual. He/she can handle an escrow account. One key question is whether you are doing it all cash or needing a mortgage - that's where the IRS question comes in, not when you buy but when you sell as you need to figure the foreign exchange gain/loss on paying off the note. If it is a gain, that's income that year. Otherwise the only reporting is when you sell on capital gains, Unless you are also opening a local bank account to handle routine expenses and repairs (for example you don't want to wire money for electricity each month! You'll want that handled automatically locally). Foreign bank accounts get you into fbar territory https://www.irs.gov/businesses/smal...t-of-foreign-bank-and-financial-accounts-fbar and of course if you rent it out you have to report the rental income both in the country where it is earned and in the us. My experiences have been in the uk where I was living, so I had the bank account infrastructure already, and France where I did everything long distance. My lesson is doing it long distance is work - you need to go in thinking it will be a significant hobby and be willing to put the time in. If you imagine it will be all smooth and easy, you will end up stressed out.

 

[Sunset]

Depending upon the value, you may be required to report it yearly to the FINCEN and the IRS, especially since you will have a bank account in the foreign country.

Then you have the typical issue of having a property without having your eyes on it, meaning it's subject to damage/theft and a real pain to have work done on it.

Who would look after it when you are not there ?

 

[Dd852]

Here is info on the mortgage issue I raised http://www.ustaxfs.com/foreign-mortgage-repayment-exchange-rate-gain/

 

[braumeister]

H a local bank account to handle routine expenses and repairs (for example you don't want to wire money for electricity each month! You'll want that handled automatically locally). Foreign bank accounts get you into fbar territory

And that's assuming you even can open a bank account in the country without an existing local address and proof of legal residence.

 

[Dd852]

Depending upon the value, you may be required to report it yearly to the FINCEN and the IRS, especially since you will have a bank account in the foreign country.

Then you have the typical issue of having a property without having your eyes on it, meaning it's subject to damage/theft and a real pain to have work done on it.

Who would look after it when you are not there ?

There's no requirement to report real estate (unless you buy it through a local company structure instead if personally ) - just the bank account reporting requirement

 

[Dd852]

And that's assuming you even can open a bank account in the country without an existing local address and proof of legal residence.

It is a bit of chicken and egg - once I had title of the French property and thus an address it was relatively easy to open the account, especially as I did it with the French subsidiary of the bank I already had a relationship with. But you are right that it is non trivial

 

[Sunset]

When you sell the property, the foreign country often will treat you as a pure investor (a foreign investor), so that means you pay capital gains on all the gains of the property at a special high tax rate.
Then you pay capital gains on it here in the USA as well, although you can offset some of the tax paid via the fun foreign tax credit

 

[Alan]

We've owned a house in England, renting it out while living in the USA. We already had a bank account in England, and we employed an agent to manage the property.

We had to report our bank account to the Treasury (FBAR) and each year do a profit/loss calculation to complete our US tax return. When we sold it we had to pay Cap Gain taxes.

 

[Disappointed]

Thanks everyone for the info.

 

[Texas Proud]

I assume you plan to live in it off and on... so my comment will not help...


DW still owns her place overseas... it is a nice place in the center of town... she never sold since her kids also own part of it after their dad died... we are getting them to sign their ownership away when they become adults and we will not cut them out of our will....

Hers is rented out and her mother takes care of the place... mom gets a GOOD payment to do the work, but that is also a way to funnel her money without 'giving' it to her...

We do not keep enough money in the local account so we do not have to report the bank account.... however, we do report the rental income and take the expenses....