So, you’re thinking about buying a piece of property in the United States. Congratulations! Investing in American real estate can be a truly exciting adventure. And you’re not alone: the allure of owning property in the U.S. is quite strong, drawing in folks from all around the globe, year after year.

But, as with any major life change, if this new opportunity isn’t navigated with care, then the uninformed can fall prey to some common mistakes. But have no fear! This article will help you identify these potential pitfalls, and equip you with the necessary knowledge so that securing your slice of the American dream goes beautifully.

Mistake 1: Failing to consider the future

You don’t need a crystal ball to look into the future, and this new real estate venture is no exception. Have you considered your long-term goals? 

Many foreign buyers purchase US property with short-term goals in mind, such as a vacation home or rental income, without considering their long-term plans for the asset. However, life circumstances and financial priorities can change over time, leaving you with a property that no longer fits your needs.

How will you plan to use the real estate in the next 5-10 years? Are you prepared to manage a rental property from abroad? How will owning the property impact your taxes?

You don’t have to have an answer for these right now, and these aren’t intended to discourage you – in fact, considering these questions is a great way to realize the potential value of your investment and to feel more confident about your purchase! 

In fact, as we continue through this article, you may find that the answers to these questions become clear. For instance, buyers often overlook the investment potential in terms of resale and rental opportunities, which can affect the long-term value of their purchase. And this brings up to our next point.

Mistake 2: Lack of knowledge about the local market

So, assuming you’re reading this article, it’s probably a safe assumption that you already have a few areas in mind where you might like to make a purchase, whether it’s in the heartland of America or in beautiful Florida. In any case, going into the search for a new home without appreciating the value that knowledge of the local market brings can be a critical blunder.

The US is a vast country with diverse regional economies, demographics, and housing trends. A seller's market in New York City could be a buyer's bonanza over in Houston, Texas.

Before setting your heart on a specific location, take time to study up on the area. The reality may differ from your expectations. Here are some breadcrumbs you can follow as you conduct your research:

  • The local economy and job market
  • Population and demographics
  • Average home prices and appreciation rates
  • Rental demand and vacancy rates

And here we come to the importance of having a team of professionals on your side: consulting with a real estate agent who understands the nuances of the market can be quite beneficial; they can help identify neighborhoods that align with your budget, lifestyle, and investment goals. Overpaying for a property or investing in an area that doesn’t meet your needs could be more of an American nightmare than a dream.

Mistake 3: Failing to plan for the cost of true homeownership

The retail price of a piece of real estate is likely what catches the eye first, but let’s be frank here – there is so much more to the cost than just that magic number. 

Taxes. Insurance. Homeowner association fees. Repairs. The particulars of what you’ll need to budget for beyond the mortgage payment can vary from case to case. If you decide to go it on your own, be sure to keep these in mind and adjust your funding expectations as needed.

However, we can again pivot back to the idea of utilizing a team in order to get your best result: the ability to consult with a qualified real estate agent and tax professional can be a big help. Further, it’s also advisable to communicate with your lender to make sure you understand the nuances of the mortgage situation.

Mistake 4: Neglecting funding concerns

This mistake is very much related to the previous item. Even once you’ve budgeted, it’s important to think about how you’ll obtain the necessary funding in the first place.

In particular, the process can be a bit different for foreign nationals compared to U.S. citizens, and this can often mean steeper interest rates and higher down payment requirements. Moreover, securing financing from U.S. banks can be more challenging for non-residents stemming from a lack of local credit history.

Thankfully, there is a path forward here. It could be beneficial to start building your US credit profile as early as possible. Open a bank account and secure a credit card or auto loan to establish a track record of timely payments. Of course, this can take time to bear fruit.

Beyond that, when shopping for a mortgage, focus on lenders that have experience working with foreign buyers (such as international banks or specialized mortgage brokers). These institutions will be better equipped to help guide you through the documentation requirements and find programs that fit your unique financial situation.

Finally, the tax system in the States can be complex for citizens, so it’s no surprise that it can be even more daunting for foreign nations. Here, a tax advisor who specializes in international property ownership can help provide peace of mind.

Additionally, states have different rules in terms of property tax and laws, and this can affect issues related to real estate rights and purchase. A real estate attorney who has experience working with international clients can be your advocate here.

Hopefully, this article has given you an idea of what to be mindful of, and a few points to follow up on. Whether you decide to go it alone, or work with a team of professionals, the important thing is to start thinking about these issues now!