Foreign Buyers

Buying Property in Paradise: A Guide for Foreign Buyers on Anna Maria Island

Welcome, international buyers! Anna Maria Island and Florida's Gulf Coast offer an idyllic setting for real estate investment, whether for personal use, vacation rentals, or long-term growth. While the Sunshine State broadly welcomes foreign investment, recent regulations have introduced specific considerations. Adrienne Carter Real Estate is here to guide you through the process, ensuring a smooth and compliant purchase.

What are "Foreign Countries of Concern"?

Florida's law specifically identifies these countries

  • People's Republic of China
  • Russian Federation
  • Islamic Republic of Iran
  • Democratic People's Republic of Korea (North Korea)
  • Republic of Cuba
  • Venezuelan regime of Nicolás Maduro
  • Syrian Arab Republic

Affected Properties and Restrictions

SB 264 imposes restrictions based on the type and location of the property

  • Agricultural Land: Foreign principals are generally prohibited from directly or indirectly acquiring any interest in agricultural land.
  • Near Military Installations or Critical Infrastructure: Foreign principals are prohibited from acquiring real property within 10 miles of a military installation or a critical infrastructure facility (e.g., power plants, seaports, airports).
  • There's a limited exception for a natural person who is a foreign principal: they may purchase one residential property of no more than two acres, provided it's not within five miles of a military installation, and the individual holds a valid U.S. visa (not solely tourist-based) or has been granted asylum.

Specific Restrictions for Chinese Nationals

Chinese nationals and entities face additional and more stringent restrictions. Specifically, the law prohibits

  • China, the Chinese Communist Party or other Chinese political party officials or members, Chinese business organizations, and persons domiciled in China who are not U.S. citizens or lawful permanent residents of the U.S. from purchasing or acquiring any interest in real property in Florida.
  • This prohibition does include the limited two-acre residential property exception for natural persons with valid non-tourist visas or asylum status, similar to the general exception.

Ownership Before July 1, 2023

If a foreign principal owned property covered by these restrictions prior to July 1, 2023, they may generally continue to hold it. However, such ownership must be registered with the relevant Florida state department (Department of Agriculture and Consumer Services for agricultural land, and Department of Commerce for other properties). Failure to register can lead to significant penalties.

Penalties for Non-Compliance

Violations of SB 264 can carry severe consequences, including

Important Considerations for All Foreign Buyers

Beyond the new regulations, there are other crucial aspects for foreign buyers in Florida:

Tax Implications and ITIN

  • No Special Property Tax: Foreign buyers generally pay the same property taxes as U.S. citizens. However, the "homestead exemption" for primary residences does not apply to vacation or investment properties, regardless of the buyer's nationality.
  • Income Tax on Rentals: If you rent out your property, you will be subject to U.S. income tax on the rental income. It's often advisable to make a Section 871(d) election to treat rental income as business income, allowing you to deduct expenses.
  • FIRPTA Withholding: The Foreign Investment in Real Property Tax Act (FIRPTA) requires a percentage (typically 15%) of the gross sales price to be withheld at closing when a foreign person sells U.S. real property. This is remitted to the IRS as a prepayment of potential capital gains tax.
  • Individual Taxpayer Identification Number (ITIN): A foreign national generally needs an ITIN to purchase property in the U.S., especially for tax purposes. An ITIN is a tax-processing number issued by the IRS.

Financing Your Purchase

  • Cash Transactions: Many foreign buyers opt for all-cash purchases to simplify the process and strengthen their offer.
  • Foreign National Mortgages: Some U.S. banks offer specialized mortgage programs for foreign nationals. Be prepared for:
  • Higher down payments (often 30-50% of the purchase price).
  • Potentially higher interest rates.
  • Extensive documentation requirements, including proof of funds and foreign financial records.

Taking Title to Property

Foreign nationals have several options for how to hold title to real estate, including

  • In their own name.
  • Through a domestic corporation (e.g., an LLC).
  • Through a foreign corporation.
  • A Limited Liability Company (LLC) is a popular choice for its potential benefits related to liability protection and tax planning.

Seeking Professional Guidance

The laws and regulations surrounding foreign real estate investment can be complex. The following recommendations are for general informational purposes only and do not constitute advice from Adrienne Carter. Foreign buyers are strongly encouraged to:

  • Consult Legal Counsel: An attorney specializing in U.S. real estate and foreign investment can provide tailored guidance and help ensure compliance with applicable laws.
  • Consult a CPA or Financial Advisor: For comprehensive insight into tax implications, investment strategies, and maximizing potential returns.