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Making informed real estate decisions starts with having the right knowledge. At HomeAbroad, we offer US mortgage products for foreign nationals & investors and have a network of 500+ expert HomeAbroad real estate agents to provide the expertise you need. Our content is written by licensed mortgage experts and seasoned real estate agents who share insights from their experience, helping thousands like you. Our strict editorial process ensures you receive reliable and accurate information.
Key Takeaways:
1. An LLC protects personal assets in the event of legal litigation by creating a clear separation between the business's liabilities and the owner's personal finances.
2. LLCs offer superior tax advantages compared to individual ownership, including deductions for property-related expenses that can optimize tax efficiency.
3. LLCs are often seen as more structured and stable ownership, which can make it easier for foreign investors to access HomeAbroad's mortgage options with competitive terms.
Buying real estate in the US as a foreign national involves more than choosing the right property or location. The way you structure ownership can directly impact your legal exposure, taxes, financing options, and long-term investment flexibility.
With years of experience helping foreign investors acquire and finance US rental properties across multiple states, we’ve seen firsthand how the right ownership structure can prevent costly mistakes later on. In many cases, setting up an LLC early has helped investors protect assets, streamline financing, and plan more effectively for long-term growth.
Before delving into these benefits, let’s first understand what an LLC entails and why it’s a preferred vehicle for real estate investment in the US.
Table of Contents
What is an LLC and Why Foreign Investors Use It?
An LLC or Limited Liability Company is a legal business entity that separates personal assets from investment assets. When structured correctly, it offers a practical balance of liability protection, tax flexibility, and operational control, all of which matter even more for foreign nationals investing in US real estate.
As mortgage lenders working closely with foreign investors, we’ve consistently seen that LLCs are often the preferred ownership structure because they:
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Reduce personal liability risk - Simplify multi-property ownership
- Provide flexibility for tax and estate planning
- Align well with investment-focused mortgage options
At HomeAbroad, we work closely with international real estate investors to help them secure US mortgages while setting up their LLCs correctly from the start. The focus is not just on forming an LLC, but on structuring it in a way that supports both property ownership and financing.
Based on what we’ve seen across multiple US markets, aligning the LLC structure with the investor’s goals and mortgage strategy early on helps avoid complications later.
Now, without further ado, let’s explore why foreign real estate investors should consider purchasing US real estate under an LLC.
Key Benefits of Using an LLC for US Real Estate
Buying US real estate under an LLC offers significant advantages for foreign investors. Structuring investments through an LLC, compared to individual ownership, can maximize investment returns through strategic tax planning and operational efficiencies.
Here are 10 key reasons to consider an LLC.
1. Protect Your Personal Assets:
An LLC separates personal and business assets, shielding investors from personal liability for debts and legal actions related to the property.
Tenants can sue landlords for various reasons, including injuries on the property, habitability issues, illegal clauses in rental agreements, security deposit violations, violation of quiet enjoyment, wrongful eviction, discrimination, and failure to reimburse for repairs.
If something goes wrong, claims are generally limited to the LLC’s assets, not your personal wealth outside the entity.
For foreign investors who may not be familiar with US legal exposure, this protection is often the primary reason for choosing an LLC.
Example of Lawsuit Where an LLC Helped:
In this case, an individual and his wife owned shares in five LLCs and other personal assets. When a bank won a judgment against them, it sought to seize and sell their assets, including their interests in these LLCs.
The court ruled that the bank could not directly seize or sell the LLC membership interests. Instead, the bank’s only option was to place a “charging order” on these interests. This order means that while the bank couldn’t immediately liquidate the LLC interests, it could potentially receive any distributions from the LLCs if and when they occurred.
However, personal assets like cars and homes were not protected by this order and could be seized by the bank.
In this case, the LLC structure effectively shielded the investors’ interests in the LLCs from direct liquidation, illustrating how LLCs can protect personal assets from creditors’ claims. (Source: BiggerPockets)
2. Get More Tax Deductions
When foreign investors form an LLC, they can deduct costs like operational expenses and depreciation from their taxes. This lowers how much they owe. The LLC earns money from renting property, just like any business, and deducts costs related to running the business. This helps investors save on taxes.
Here is one of our client’s example:
Details | Sarah’s Rental Property in Los Angeles |
|---|---|
Entity | Global Rentals LLC |
Annual Income |
|
Annual Expenses | $25,000 |
Annual Depreciation: | $18,182 |
Total Deductions (Expenses + Depreciation) |
|
Taxable Income After Deductions | $56,818 |
Estimated Tax Savings (24% rate) | $10,364 |
3. Maximize Tax Savings
LLCs offer options on how to be taxed, such as a sole proprietor, partnership, S corporation, or C corporation. This flexibility allows investors to choose the tax treatment that best suits their financial situation.
4. No Double Taxation
When you purchase rental property under an LLC, profits and losses are reported on the owners’ or members’ personal tax returns based on their respective shares. This structure prevents double taxation, where income is taxed both at the corporate and individual levels.
For instance, if the LLC earns $100,000 in profit, each member reports their portion of the profit on their individual tax return.
5. Customizable Profit and Loss Allocation Among Members
Members can adjust profit and loss allocations through the operating agreement. This flexibility allows members in higher tax brackets to receive a larger percentage of depreciation expenses, leading to more significant tax deductions and reducing their overall tax burden.
6. Easy Financing
LLCs are often viewed as a more structured and reliable ownership setup compared to holding property as an individual. This clarity can lead to more favorable financing terms and higher approval rates for investment mortgages.
Additionally, operating through an LLC allows investors to pool resources with other members, increasing financial credibility and potentially securing larger investment opportunities in the competitive US real estate market.
For foreign investors seeking US investment mortgage programs without a US credit history, HomeAbroad offers specialized solutions. Our foreign national mortgages require no US credit history, simplifying qualification. We also provide expert real estate agents with international expertise to guide your US property purchase, ensuring compliance with regulations and minimizing tax liabilities.
7. Flexibility in Ownership Structure
LLCs can accommodate multiple investors with varying ownership interests, simplifying the management of investments involving multiple parties. This structure facilitates joint investments, allows for profit distribution according to ownership stakes, and enables easy adjustments to ownership interests as needed.
Moreover, LLCs simplify the process of transferring ownership interests. Members can sell or transfer their ownership stakes without the need to transfer the actual property deed, which can be more complicated and time-consuming.
8. Estate Planning Benefits
Establishing an LLC for your real estate investments can simplify estate planning. With an LLC, you can designate ownership interests and transfer these interests to heirs or beneficiaries more easily than with individually owned properties.
This structure can help mitigate potential complications and costs associated with probate proceedings, ensuring a smoother transition of assets to future generations.
9. Privacy and Anonymity
An LLC can provide a level of privacy for foreign investors. Public records typically show the LLC as the property owner, not the individual members, which can be beneficial for investors seeking to keep their ownership interests confidential.
10. Easier Management of Multiple Properties
An LLC structure allows investors to manage multiple properties under one umbrella, streamlining operations, accounting, and reporting. This is particularly advantageous for foreign investors who may own multiple properties across different states.
While purchasing US real estate as an individual is always an option, buying under an LLC offers numerous advantages with minimal costs. From enhanced liability protection to strategic tax planning, LLC ownership provides flexibility and security for foreign investors.
Here’s what our Mortgage Officer, Steven Glick, has to say about setting up an LLC for US real estate investing:
Important Considerations Before Forming an LLC
Forming an LLC can offer real advantages for foreign real estate investors, but it’s not a one-size-fits-all solution. Before moving forward, it’s important to understand the legal, tax, and operational implications that come with LLC ownership in the US.
- State-level requirements: LLC rules, fees, and annual obligations vary by US state.
- Ongoing compliance: Annual filings, reports, and record-keeping are required even if the property is not generating income.
- Tax reporting: Foreign-owned LLCs have specific US tax and reporting obligations.
- Banking setup: Opening and operating a US bank account for an LLC may take additional time for non-residents.
Final Thoughts
For foreign real estate investors, an LLC is a strategic tool. When structured correctly, it protects assets, simplifies ownership, and aligns well with rental-focused financing.
At HomeAbroad, we are dedicated to democratizing US real estate for foreign nationals. We specialize in foreign real estate transactions in the US, offering tailored foreign national mortgage products and the expertise of our international real estate agents.
We guide investors through the LLC setup process by helping them understand the right structure, coordinating with trusted professionals, and ensuring everything is aligned from the start.
In addition, we offer an AI-powered property search platform and property management services to help you find the best investment opportunities and manage them effectively.
We offer a complete package to streamline your purchasing journey and property management.
Start your investment journey with us today!
FAQ
Can a foreign national form an LLC in the US to purchase real estate?
Yes, foreign nationals can form an LLC in the US to buy real estate. The process is similar to that for US citizens, and you don’t need to be physically present in the US to set it up. HomeAbroad provides the complete support to foreign investors buying US real estate under an LLC. Reach out to get started!
Which state is the best for forming an LLC for real estate investment?
Wyoming is a top choice for forming an LLC for real estate investment because it provides strong legal protections, low formation and maintenance costs, and excellent privacy benefits.
Can I own multiple properties under one LLC?
Yes, you can, but it’s not usually the best idea. If something goes wrong with one property, it could affect all the others if they’re all under the same LLC.
Do I need to form an LLC in the same state where the property is located?
Not necessarily. You do not have to form an LLC in the same state where the property is located.
At HomeAbroad, we ensure the reliability of our content by relying on primary sources such as government data, industry reports, firsthand accounts from our network of experts, and interviews with specialists. We also incorporate original research from respected publishers when relevant. Discover more about our commitment to delivering precise and impartial information in our editorial policy.
Census.gov: Business Formation Statistics May 2024
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