Can an H1B Visa Holder Invest in a Rental Property in the USA?

Yes, an H1B visa holder can invest in a rental property in the USA. Renting a property in the USA is one of the most powerful methods of earning a handsome income. Many H1B visa holders take advantage of this opportunity, and you can too. Thinking How? Allow me to unfold the process for you. A thorough read-through of this article will help you understand the requirements, expedite the purchase and maximize your gains. So, go ahead and read on.

Is it Worth Buying a Rental Property as an H1B Visa Holder?

Yes, it is worth buying an investment property as a HIB visa holder. It is a great way of earning secondary income. Also, it helps you diversify your investment portfolio. Other reasons why HIB visa holders buy a rental property are:

1. Growth in Rental Returns:

Rental returns are usually higher than other investments, and with the increase in population, this trend is expected to continue. As a result, the average monthly rent for all apartments rose substantially in 2021. According to various reports, the rent for a two-bedroom apartment reached $1,295 from $1,100 a year before.

2. Appreciation in Property Rates

Home appreciation refers to the increase in value of an investment property in a given time frame. A good appreciation of property value can help owners make huge profits upon selling it or earning a handsome rental income. The current national average appreciation rate of real estate property is 2% monthly and 14.5% yearly. The average home value in the US has appreciated by 10.8% over a year, bringing the average US home value to $357,319.

(Source: Millionacres.com)

Trend of Home Value in the US

3. Generate Passive Income

H1B Visa holders are amongst the highest-paid employees in America. They constitute the 90th percentile of all wages. As per the Department of Homeland Security (DHS), the average salary for H-1B employees in 2021 was around $108,000, while the average income of all US workers was $45,760. (H-1B visa holders are among the highest-paid workers in the United States)

Thus, HIB visa holders are considered highly reliable applicants with sound repayment capacity. This helps them get bigger loans, buy the better property and enjoy the best returns. Also, one can imagine the spike in gross family income when an H1B visa holder decides to buy an investment property.

Therefore, purchasing a rental property as an H1B Visa holder is one of the best investment decisions for those who wish to grow their wealth safely and securely.

4. Tax Benefits of Owning a Property on an H1B visa

H1B Visa holders often stay in America for a very long time, making them more likely to purchase real estate here. In order to encourage the participation of HIB Visa holders in the US real estate market IRS has rolled out many tax breaks on property ownership in the form of tax deductions. Listed below are some of the most popular tax deductions an H1B visa holder can benefit from upon purchasing a property.

Get H1B Investment Mortgage with No US/Thin US Credit

5. Mortgage Interest Deduction

An H1B visa holder can claim a deduction of up to $750,00 for any mortgage interest payment undertaken in the current financial year. In addition, they can also benefit from the points paid for securing the mortgage. Also, they may acquire IRS Form 1098, showing the interest paid by the borrower in the previous year.

6. Property Tax Deduction

H1B visa holders take advantage of deductions on the property taxes paid on their homes yearly. This can help them save a lot of money in tax liability. The claim stands good for both state and federal taxes.

7. Private Mortgage Insurance (PMI) Deduction

PMI is a fee charged by lenders from borrowers for putting less than 20% of the total amount (down payment). By using the tax pay obligation, HIB Visa holders can deduct their PMI payments.

8. Tax Benefits of Selling the Property on an H1B visa

As an H1B Visa holder, you are exempted from the taxes on the profit of $250,000 if you’ve owned and resided in a given property for at least two of the previous five years.

And, if the H1B visa holder is married and the spouse meets the residency requirements and filing for taxes jointly, it can be highly beneficial as the capital gain exemption from taxes will double to $500,000.

9. Affordable Real Estate Prices

House prices in the US have always been more affordable, making it a great time to invest in the real estate market. The pricing of per-square-meter in several US metro is relatively lower when compared with the other global cities of the world.

For example, in San Francisco, per square meter of residential real estate costs $5,890, while it costs

1. $26,262 in London (UK)
2. $28,570 in Hong Kong (China)
3. $10,947 in Toronto (Canada)
4. $10,932 in Mumbai (India)

(Source: NAR)

The mortgage rates and home prices in the USA are much lower when compared to Australia and Canada, making it conducive for H1B visa holders to purchase multiple rental properties and benefit from the rental income while reaping the benefit of capital gains and other tax deductions.

Now that you know the benefits of buying rental property in the USA as an H1B visa holder, let’s move ahead to the next step.

Can I Rent My House on H1B Visa?

The answer is yes. While purchasing a property is not a problem as long as you can make the repayments and keep in line with the terms and conditions of the loan, things may get tricky if you start investing more than 20 hours a week to maintain your rental property. 

According to Land Wayland, an Immigration Attorney, ” Taking care of a property that you own is not considered to be “work” because you are not doing it for the benefit of an employer and you are not taking a job away from the US Worker.

Even though you may be earning rental income, you are not working for someone else to earn that income any more than you would be working for a company like Walmart if you bought their stock and earned money from dividends or stock appreciation.

Get an H1B visa mortgage to buy your rental property.

If you started buying multiple pieces of property and spending more than 20 hours a week managing it, that might start to look like work that would be taking you away from your H-1 company job and that is a no-no.”

So, while you can buy a rental property as an H1B visa holder, you should hire a property manager or real estate agent or contact a property management company to maintain and manage your property.

Must Read: How can foreigners buy property in the USA – A Complete Guide

How Can an H1B Visa Holder Own a Vacation Rental Property?

It is possible for an H1B visa holder to own a vacation rental property. In order to do so, it is important that the purchase and ownership arrangement complies with USCIS regulations. This means that the property must be an investment, not a personal residence.

The visa holder should also ensure that the property is used for short-term vacation rentals, not long-term leases.

Can H1B Visa Holder Legally Do Airbnb While on H1B Visa?

Yes, H1B visa holders can legally do Airbnb while on an H1b visa. The same regulations that apply to vacation rental properties also apply to Airbnb rentals. However, it is important to make sure you are in compliance with local laws and regulations regarding short-term rentals.

According to the Tax Consultant, Anu, “H1B holders are allowed to make income from passive investments without actively participating in the work. Like investment in stock, real estate, limited partnership, rental income, or any other passive source of income. As long as you are not actively participating in renting out the Airbnb, you can consider the option.”

Do H1B Visa holders need to set up LLC for Rental Income?

The H-1B is employer-specific, thus limiting the visa holder’s work arena to sponsor company-specific jobs. It is important to note that not receiving money is not considered a criterion for preventing something from being considered work if the hours involved in that work add up to more than 20 per week.

Stuart Reich, an Immigration Attorney, notices that “You can form a corporate entity without violating your visa – that in itself isn’t a problem. But you can’t perform work on behalf of that entity, and even negotiating a purchase of real estate for profit and ultimately managing that property (leasing, contracting with vendors such as attorneys, accountants, tradespeople for repair, etc.) could be viewed as work”.

Therefore, H1B visa holders can be a part of an LLC but cannot actively be involved in its functions and operations.

Get H1B Visa Mortgage for Investment Property

Important Pointers for Buying a Rental Property as an H1B Visa Holder

Hiring a property manager to manage your property is like a drop in the ocean of things you need to keep in mind while buying a rental property. But before you start feeling overwhelmed, here is some good news, we have you covered.

Instead of pondering over and investing time and effort in gathering the information related to the checklist for buying a rental property, all you need to do is run through the list below.

Visa Status:

You must maintain your visa status for at least two years before buying a rental property. This will help you gain confidence and also land you good mortgage lenders. 

Gauge Your Budget:

Gauge your budget by considering this formula,

mortgage (principal + interest) + property tax + insurance + HOA + unexpected maintenance. Also, while calculating your loan budget, cater the emergencies like visa issues, medical issues, etc. Always have a backup emergency plan in mind for urgently pulling up a few bucks when needed. 

Choose Property Location Wisely:

Be it for your primary residence or rental income; it is crucial to choose the right location when buying a rental property as an H1B visa holder. Consider that renting out the property should be easy if, in any scenario, you have to go back to your home country. Therefore, consider buying a property near a school, college, or office space.

HomeAbroad has a vast network of CIPS agents who have immense experience in working with H1B visa holders and finding the right property for them. Reach out to HomeAbroad now to Connect with them for free!

Have Clarity on the Type of House:

It is very important to strike a balance between spacious yet financially rewarding houses. Depending upon your budget and investment goals, you may choose either,

1. Condo: least expensive and minimum maintenance.
2. Townhouse: Moderate size, low maintenance, and moderate pricing.
3. Single Family Home: Spacious but expensive and requires higher maintenance.

Research on Taxes:

It is important that you understand the rental property taxes in the USA, as this will help you plan your long-term investment goals effectively. Also, check the lease rules in advance, as this will help you forecast your rental income more accurately.

Hire a Property Manager:

This step cannot be ignored if you are buying a rental property as an H1B visa holder. Hiring a reliable and efficient property manager can take away half of your worries. And also keep you away from legal troubles that can rise for the number of hours you may invest in maintaining your property.

Check Your Credit Score:

It is important to check your credit score as this will determine whether you are eligible for the mortgage or not and even if you qualify. HomeAbroad has a vast network of reliable and experienced mortgage lenders who have helped many H1B visa holders realize their dream of owning a rental property. Reach out to HomeAbroad and connect with them for free!

Get an H1B visa mortgage with no US credit.

Prepare Package For Mortgage Lender:

This package should include W2s of the last few years to prove your income, a copy of your visa status, bank statements, rental agreements, and your personal information. It will help lenders measure your creditworthiness quickly. 

Get-Pre Approved:

After you have submitted the package of documents to the mortgage lenders, get your loan pre-approved. This will help you in transparency with the sellers and act as proof that you are serious about buying a rental property. Also, it is an important measure of quantifying the loan amount that you will get.

How to Buy a Rental Property as an H1B Visa Holder?

Making the decision to buy rental property as an H1B visa holder can be a great way to build wealth in the process of purchase.

• Step 1 – Decide on the location
• Step 2 – Find a Real Estate Agent experienced in foreign real estate transactions
• Step 3 – Work with the Real Estate Agent  
• Step 4 – Analyse the real estate tax situation  
• Step 5 – Begin your home search process with the Real Estate agent 
• Step 6 – Make an offer on the property
• Step 7 – Arrange a Home Inspection  
• Step 8 – Sign the purchase contract with the seller 
• Step 9 – Complete a Title Report 
• Step 10 – Obtain Home financing through a US Mortgage for foreign nationals 
• Step 11 – Take ownership of your new house in the USA 

For further details, refer to: How can foreigners buy property in USA – A Complete Guide

H1B Mortgage with No/Thin US Credit

If you just moved to the US, and don’t have a US credit history, you can still get a cash flow mortgage loan. US has a loan program for the real estate investor, and you can get a mortgage based on the projected income of the property you are buying. It does not require any credit score or financial proof, your investment property is your way to the mortgage. So, your property will finance itself.
This loan program is effective, even if you have high DTI (Debt-to-Income) ratio, because you get mortgage based on the property itself.
Learn more about cash flow mortgage loan.

H1B Mortgage with Established Credit

H-1B visa holders have an opportunity to get a conventional mortgage if they have a good credit score and meet certain eligibility criteria. With the right requirements, H-1B visa holders may be able to obtain mortgages that are on par with what other borrowers would receive – including low interest rates, no-downpayment loans, and potentially better terms than other loan types.

All of this is possible with the right lender who works with H1B or other visa holders. Fortunately, HomeAbroad has lender partners that cater the H1B visa holders and can help you get the investment or other conventional mortgages for your property.

How to Get the Mortgage for Buying a Rental Property as an H1B Visa Holder?

For many H1B visa holders, buying a rental property can be a great way to create long-term wealth and financial security. However, it’s important to understand the process for securing financing as an H1B visa holder before taking the plunge.

When it comes to getting approved for a mortgage loan for your rental property, the first and most important step is to show proof of a steady income. This means that you’ll need to provide information about your job history, employment contracts, salary statements, and any other documents that demonstrate your ability to pay back a loan.

In addition to verifying income levels, lenders will also review credit reports, bank statements, and other documentation to assess a potential borrower’s ability to manage their finances responsibly. Having a good credit score and a history of paying bills on time can go a long way in giving lenders the confidence that you are a reliable borrower.

DSCR Loans:

DSCR (Debt Service Coverage Ratio) loans are another option for foreign nationals, as they allow borrowers to use their rental property income to help pay off the loan. To qualify, you must first establish that your rental income will be high enough to cover the debt service payments on the loan.

It does not require you to submit stacks of documents to prove your income and repayment capacity. It is one of the most popular loan types amongst H1B visa holders, as it is swift and hassle-free.

Reach out to HomeAbroad to get in touch with the best DSCR lenders; they can help you finance your purchase even if you need a US credit history.

Conventional Loan:

One of the most common ways to finance a rental property is by taking out a conventional loan. Banks usually offer these and require a 20% down payment to qualify. The interest rate and other loan terms will depend on your credit history and other factors. In addition, they often require pay stubs, income proof, and other documents for approval. Given the lengthy paperwork involved, they are tedious and extremely time-consuming.

To know more, click on H1B Visa: Buying House and Obtaining a Mortgage Home Loan

Conclusion

Buying rental property as an H1B visa holder is a great way to create long-term wealth. It is important to understand the process for securing financing while keeping in mind the other important aspects of buying a property as an H1B visa holder. Additionally, planning ahead and being familiar with all the legal requirements is crucial before taking the plunge. Reach out to HomeAbroad to seek assistance from expert mortgage lenders and CIPS agents who have international client experience, like H1B visa holders, and can make your investment property purchase super easy.

Frequently Asked Questions