Israelis Investing in US Real Estate: Everything You Need to Remember

Now that the travel restrictions between Israel and the United States for vaccinated individuals have been eased and visa waivers for Israeli citizens are being considered, it stands to reason that investment will also see an uptick, including real estate investment.

Before international travel shutdowns, Israelis were one of the largest segments of foreign real estate investors in the United States, investing $2.4 billion in real estate in the United States in 2019 alone. While real estate investment trends had continued at a significant annual increase prior to this, the shutdown created an abrupt halt in foreign real estate investment, not just from Israel but also around the globe.

The Advantages of Real Estate Investment in the US 

In early 2020, Zillow market research reported that the combined value of residential real estate in the United States came in at approximately $33.6 trillion, nearly equalling the GDP of our country and China combined. Ignoring all the COVID upheaval over the past two years, demand for investment real estate in the United States has remained high for years.

As one of the more sizable and stable world economies, when it comes to real estate investment, there is truly something for everyone here. And with an abundance of available real estate and continued new construction and growth, other global real estate markets often cannot compete.

Right now, the US economy is stable and the real estate market is remarkably agreeable. Because of the openness of our economy that embraces investment from other countries, favorable debt terms, and relatively low property values compared to many other areas in the world, we garner a great deal of real estate investment interest from around the globe, with good reason.

Considerations for Israeli Investors 

Despite the advantages of investing in United States real estate, there are some things that Israeli investors should consider when purchasing real estate here, however. While it is perfectly legal to invest in real estate, it may be difficult to secure financing as a foreign investor. Even though our banking systems are generally similar between the two countries, there are some unique differences regarding mortgage financing.

Conventional real estate loans guaranteed by the two main government guarantors of mortgage money in the United States will not buy loans made by non-US citizens. In addition, many other institutional lenders will also pass on investors who have no verifiable income through US tax returns.

Fortunately, some lenders offer nonresident foreign national loans for global investors. While lending criteria and interest rates will vary, and down payment requirements are often higher, the main eligibility requirement of the loan applicant is that they are unable to meet the substantial presence test of the United States Internal Revenue Service.

Tax Considerations

While an Israeli investor is not required to maintain residence in the United States, he or she must obtain an Individual Taxpayer Identification Number through the United States government to purchase real estate here. Consequently, any real estate taxes, capital gains taxes, estate taxes, and source income from the investment property must be considered by the investor.

These can have significant consequences for a foreign investor that should be addressed with a tax professional before the purchase to ensure that the purchase still meets their financial objectives.

The Use of Holding Structures 

For those who wish to avoid the tax implications of investment real estate, there are other ways to structure the purchase of the property. Other than direct individual ownership, an investor can set up other structures such as a limited liability company or blocker corporation, which have different tax liability rules when it comes to investment property ownership.

Most Hurdles Can Be Overcome

Now may be the time for Israelis who have been considering investing in US real estate. While foreign investors may encounter a few hurdles along the way, these can typically be worked around and overcome. Investment real estate in the United States offers many advantages and typically higher returns on investment than in other areas of the world. If you have considered investing in US real estate, it may just be the perfect time with our current low interest rates.