U.S. real estate and the
E-2 Treaty Investor
Real estate may be the first type of U.S investment people think of. When used in connection with the E-2 Treaty Investor visa, there are a few things to keep in mind.
1. To obtain E-2 Treaty Investor visa, real estate must be part of an active business
It is always a good idea to remember the policy behind the treaty visas; it is to bring people to each country to do business. Think of what the word “business” means whether in English or your own language. Generally, the mere concept of buying and holding real estate, to be sold later at a profit, is not a business. It is a passive investment.
So if you were simply to buy raw land and hold it as an investment, that is not a business. If you buy raw land so that you can build a shopping center on it and lease out shops to people, then buying that real estate is part of a business — the business of leasing shops,
Buying an apartment complex, or a small retail center, is probably a business. Buying one home and renting it on Airbnb, is probably not a business. Buying 20 homes for rental is a business.
2. You usually don't need a visa to own U.S. real estate
This might be a funny think to say on a website about visas. However, it is worthwhile to keep this in mind, for several reasons.
One is that receiving a visa is never guaranteed. And yet, you are required to have invested, or be actively in the process of making an investment, at the time of your application. If the visa is not granted, you may continue to hold, and earn income from, your investment in U.S. real estate. If, for example, you invested in an apartment complex, you can find a professional management company to take care of it. Indeed, this is what U.S. citizens do most of the time. You can come to the U.S. occasionally to visit your property, using a commonly available visa like the B.
In contrast, if you are a high-end fashion designer from Italy who is spending a million dollars on your store in Manhattan, and you don’t get the visa, you have a problem.
3. Real estate is probably the least risky investment to make
Entering into a new investment always has risk, especially when made in a new country. Except on rare occasions, real estate maintains its value, and in some cases produces substantial gains. If properly maintained, it seldom declines in value. The primary holding costs — that is, costs that must be paid no matter what else is happening — are limited to local property taxes and sometimes insurance. If held long enough, gain arising from its eventual sale is taxed at lower rates.
In contrast, an investment is machinery, equipment, and even inventory declines appreciably with time, especially if it is new when acquired.
4. Real estate can be used to borrow money
After money and money-like assets that can be quickly converted to money (NYSE-listed securities, gold, etc.), real estate is an often-used asset with which to collateralize loans. Depending on the type of property and type of loan, as well as the individual lending policies of the lender, loans may equal up to 90% of the property’s appraised value. This loan-to-value ratio may be much lower when other assets of the business are used as collateral.
Remember that the initial investment of the E-2, treaty investor, must be “at-risk,” that is, the investor must lose something of value if the business fails. Accordingly, the investment cannot represent a loan which is secured entirely by the business to be acquired.
The SIGNET Law Firm
We are dedicated to helping foreign business invest and operate in the United States successfully. As part of our services, we specialize in helping our clients procure the E-1 and E-2 visas, which enable them to live in the U.S. while they manage and operate their businesses.
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