Certainly US capital growth is not at the levels of previous years.  Still in certain hot spots such as Las Vegas, rapid growth is being attained at a healthy rate of 30% per annum. Construction is widespread, particularly in condo style developments, with property prices up by 16% last year.  Buyers in Vegas are not only benefiting from high returns on investment but also in renting out their properties to very well paid casino employees and well-to-do tourists. With a year-round tourist season, buy-to-let opportunities are highly popular. Becoming more and more popular is the purchase of units in condo-hotels, where owners have the benefit of the amenities of the hotel and typically have their unit signed into the hotel rental program. Rental yields in prime tourist locations such as these currently stand at about 12% per annum, with figures expected to remain as stable as the strong tourist industry they support (annual tourist of about 40 million). Also attracting tourists and overseas property investors is the wide availability of direct budget flights to the USA from Europe. An “Open Skies” agreement is being considered, which would eliminate the exclusivity that British Airways and Virgin Atlantic have profited from. No doubt this will bring fantastic benefits to consumers and push competitive pricing.

Property is still one of the most profitable forms of investment. An advantage of the slower market is that prices are being held steady to give new investors the opportunity to buy into the market. Clever investors are making the most of the current USA real estate market; with prices slower to rise they wait tolerantly for stable and inevitable medium to long term growth.

Practical Advice:

It is important to know real estate agents in the USA must be licensed; as a result buyers are covered by the code of conduct the agents follow. Another plus is agents collaborate much more in this country than in European countries. Agents in every major city and region enter properties they have for sale on to a database- the Multiple Listing System (MLS). The majority of real estate agents have access to all properties entered in MLS and can present any of the houses to prospective buyers. This means larger numbers of buyers are reached and a sale is accomplished much quicker. Another difference is that a legally binding contract is required at an earlier point in order to proceed.

Keep in mind the real estate agent works for the seller, and as a result legally obliged to protect the interest of the seller. So, the local know-how and advice of a buyer's agent is valuable for an overseas buyer. A buyer should also be aware that when they register their interest without an agent they are not allowed to later appoint one. Vigilant examination of the rules is crucial and so is a buyer’s agent.


Tax Highlights:
Taxes vary from state to state. The following are likely to be charged:

Sales Tax
Not always imposed on the purchase of property; however in 36 US states a property transfer tax between 1% and 5 % is charged on the assessed value of the property.

Stamp Duty
A charge made when a mortgage has been obtained for the purchase of the property and consists of documentary stamps calculated on the total of the loan. In states such as Florida, stamp duty is charged at a rate of 35 cents per $100 of mortgage. In addition to stamp duty, investors must pay an Intangible Tax at 0.002% on the mortgage amount. Neither of these taxes will be charged if cash is used to finance the property purchase.

Capital Gains Tax
Varies according to state, yet if the property is owned for more than a year the rate can amount to anything from 8% to 15%.

Inheritance Tax
Refers to gifts or transfer of ownership either while you are alive or upon your death. Both federal and state inheritance taxes will apply however there are big differences between the states in regards to how your estate is taxed upon your death, so it pays to find out what your liabilities might be before committing to an investment.

Local Taxes
Based on the assessed value of the property and likely to be about 75% of the market value, depending on state. On a positive note, in 2006 ten US states decided to review local taxes in order to reduce them to more affordable levels.

Tax on Rental Income
All rental income is subject to USA tax. A standard withholding tax rate of 30% is applied to all rental income and paid locally. In some states a double taxation agreement exists. Tax on rental income can be very low if handled correctly by financial professionals, with generous allowances in place, including mortgage interest relief, as well as the cost of inspection flights.

Credits & Mortgages:

Mortgages, including several interest only options, are readily available for overseas property buyers in the USA. Presently, the minimum overseas investor deposit requirement is 20% down, yet varies up to 35%. Most of the time the higher the deposit made the lower the mortgage interest rate. A US dollar mortgage is typically at a fixed rate for a 5, 15, or 30 year term. Be cautious of the implications of an up-front payment, commonly referred to as points, which can have a significant effect on the cost of a mortgage. For the most part, it is a good idea to borrow money in the same currency as it is to be paid back in.