© 2014 by M Squared Advisory

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Frequently Asked Questions

Can M Squared help arrange financing for my purchase?


Yes, we work with trusted mortgage advisers who specialize in loans given to overseas borrowers. Lending can be arranged for self-employed individuals as well. Typically a 30% down payment is necessary for an overseas borrower.


If you have not already done so, opening a US bank account is a necessary first step.


Can M Squared help manage my property?


Yes, we can provide management solutions to suit your property needs. Whether it’s finding a tenant, calling on a handyman, or simply making sure the place is kept pristine until you’re back in town, we’ll strive to make your property ownership stress-free.


What are the tax implications for buying property in the US?


This question comes up often with international buyers. At first, many investors find real estate in the United States intimidating because of potential tax implications. Most of this trepidation is unnecessary. We are experienced property owners, operating from a foreign and a domestic ownership stance, and we can help simplify the tax burden.

In the US, if an investment property is sold for profit, and the funds are used to buy one or more properties for the same amount or more within 180 days, then no capital gains is payable. 


Ordinarily, a flat capital gains tax is applied at 20% for non-US residents. For US residents, a sliding scale is applied, with a cap of 20%. US residents selling their primary home are also shielded tax on the first $250,000 of capital gains, or $500,000 if they are married.


To compare, capital gains tax in the UK is done in stages, with 28% being the maximum band (the first £11,100 is exempt).


What about inheritance tax?


For US residents or citizens, inheritance tax is shielded for the first $5,450,000 of assets (this figure rises every year), but this figure is capped at $60,000 for non-US citizens or residents.


To compare, in the UK a flat rate of 40% is applied to inheritance above £325,000 for both citizens and non-citizens.


Can you help me find a tax adviser?


Absolutely, we work with a number of trusted accountants on tax filing and would be happy to pass on our recommendations. Your accountant is often your best friend when it comes to buying property, and we will only work with financial planners who are accessible and capable.


Is it necessary to structure a company, such as an LLC, to purchase the property?


It is not necessary; it is more of a personal preference depending on what you want to do with the property. If you have no interest in renting it out, registering the title in your own name saves costs and an extra tax filing. Some owners who intend to rent out their property prefer to set up an LLC to shield their personal assets away from the property in case of litigation. Insurance against litigation can be purchased, however, and this is generally sufficient for most landlords.


For estate planning purposes, however, an offshore company can prove to be beneficial, and we can refer you to professionals who can provide advice in that field. 


What are the best areas to buy for future capital appreciation?


This is an answer that evolves over time. Recently, the area with the quickest capital appreciation has been Venice Beach. This is partly a result of the gentrification of the first half a mile inland, with trendy cafes, yoga studios and restaurants. It also coincides with a large influx of technology companies that have spurned Northern California for cheaper rents and better weather. Venice is now known as ‘Silicon Beach’ for good reason.


Here is a recent article from Time Magazine describing the phenomenon.


Areas such as Santa Monica, West Hollywood, and up-and-comer Culver City are also on the rise. In the Greater Los Angeles area, areas just south of LAX airport like Hermosa Beach and Manhattan Beach have become trendy and preferable to many for their great beaches and dining options, as well as their proximity to central Los Angeles without the bustle.