5 Important Things a Non-US Citizen Should Know Before Buying an Apartment in NYC

NYC real estate attorney Adam Turk shares some valuable insights about the most important things a non-U.S. citizen should know before buying an apartment in New York City.

Simple mistakes made when buying a property in NYC can potentially cost a foreign buyer thousands of dollars. With the right team helping you with your NYC property purchase, the process will be much easier and possibly save you a lot of problems.

5 Important Things a Non-US Citizen Should Know Before Buying an Apartment in NYC

01) Owning property in the United States does not guarantee a Visa nor does it allow non-US citizens entrance into the U.S. at their leisure; they are still subject to immigration laws.

02) A non-US citizen is not subject to any additional taxes because of their status when they buy a property, however, when it comes time to sell or realize a profit from the rental of the property they may have to file additional tax related documents.  

When a non-US citizen sells their property they may have to pay capital gains tax and be subject to Foreign Investment in Real Property Tax (FIRPTA) withholding.

The FIRPTA withholding is approximately 15% of the gross sales price. This sum may be refunded in full if the seller does not owe any other taxes to the IRS such as income taxes, capital gains tax, etc.

The United States has tax treaties with many foreign countries that allow foreign residents reduced tax rates. Tax rates vary from country to country.  Tax treaties between the U.S. and foreign countries are available on the IRS website.

03) Discuss with your attorney and tax advisor about how you should take title to the property.

Before signing the contract the purchaser must have a conversation with his or her entire team about how to take title to the property. This is where many real estate agents and lawyers unfamiliar with foreign buyers get themselves into trouble.

The U.S. income tax code contains numerous traps for the unwary foreign investor. With proper legal advice, a foreign investor should be able to: (i) avoid U.S. estate and gift taxation on his or her investment; (ii) avoid the 30% withholding tax on the gross income generated by his or her investment; (iii) minimize the annual U.S. income tax liability on the net income generated by his or her investment; and (iv) minimize the potential capital gain on the profitable sale of his or her investment.

For privacy reasons many foreign purchasers choose to buy a property in the name of a LLC. There is not a significant difference in tax treatment between owning a property individually or through an LLC but there may be a difference in liability protection.

If a foreign person owns property in their name, they may be subject to lawsuits in the U.S. with all of their personal assets at risk, whereas an LLC may be able protect their assets outside of those owned by the LLC.

An LLC can also provide privacy protections as purchasers of property in New York are required to register their ownership with the city and state and these registries are accessible to the public.

There are various ways a real estate ownership structure can be set up such as Direct Ownership, Domestic (US) Corporation, Foreign Corporation, US Domestic Trust, Irrevocable Foreign Trust, Revocable Foreign Trust or a Partnership. Each one will have a different set of structure and tax issues.

Every foreign purchaser needs to consult with their team to determine what is right for them.

04) Understand the different types of properties that can be purchased in New York City, especially condominiums and cooperatives (co-ops).

The most popular types of properties for foreigners to purchase in NYC are condos and townhouses. Co-op apartments tend to be the less desirable for foreign buyers because of the extra work it may take to buy one along with the additional restrictions on how the unit can be used.

When buying a co-op apartment, the purchaser must meet with a co-op board in person in order for the purchase to be approved. The co-op board has the right to reject a purchaser and often provides little or no explanation as to why. They do not like when a potential purchaser has a significant portion of their assets or source of their income outside of the United States. If for some reason the co-op would need to sue an owner/shareholder it would be very difficult for them to be successful in collecting anything. Even if they do get a judgment, enforcing it overseas would be very difficult.

Additionally, co-op building rules vary from building to building, but most co-ops limit the ability of the apartments to be rented or do not allow renting at all.

05) Buying real estate in NYC can be easy if you have the right people to assist you.

It is important for a foreign buyer to have their team in place as early as possible. This team should consist of a real estate broker, accountant, local tax counsel and attorney who are familiar with foreign purchases.

Simple mistakes made when buying a property in NYC can potentially cost a foreign buyer thousands of dollars. With the right team helping you with your NYC property purchase, the process will be much easier and possibly save you a lot of problems.


Article written by Adam Turk, Esq., partner at Fentin Goldman Turk & Davidoff LLP.

Adam has had multiple articles published in the New York Law Journal. He is also named in the Rising Stars section of Super Lawyers since 2015. Rising Stars lists the top 2.5% of lawyers under the age of 40 in their respective practice areas as nominated by their peers.


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