How Foreign Investors Can Participate in an US-based Majestic Real Estate Syndication?

Majestic investment group has grown tremendously with investor referrals. Currently, investors part of Majestic investment group comprises of investors coming in from USA, Canada, India and Germany :) we are going global!!! 

Please consult your own CPA, Tax, Legal, Financial advisors before making decisions as each investor’s situation needs to be evaluated based on their personal circumstances and international laws can vary widely. Below is a suggested way there might be a better customized way for others and it is not financial, tax or legal advice.

Below, I have outlined a general guide for participating in US-based real estate private equity investing for international (non-USA) investors.

1. Incorporate US-based LLC / Corporation. Wyoming state offers privacy for LLC vs some other states. 
2. Apply for EIN (Employer Identification Number) and Register the LLC with Various Required Agencies
3. Execute an Operating Agreement Among Partners or spouse.
4. Apply for ITIN (Individual Taxpayer Identification Number) or Social Security Number.
5. Open US-based Bank Accounts
6. Filing the LLC US Tax Returns (Federal, State and City) and Personal Tax Returns for all Partners
7. Tax Treaty Benefits Are Available

#1 – Incorporate US-based LLC / Corporation

To get started, foreign investors need to create an entity to invest with. For foreign investors, two structures are available: LLC or corporation. The former – LLC – is preferred as it avoids double taxation and offers the most tax efficiency.

#2 – Apply for EIN (Employer Identification Number) and Register the LLC with Various Required Agencies

Once the LLC is incorporated, the investor must apply for an EIN (Employer Identification Number) and register the LLC with various agencies. Although this sounds daunting, our preferred CPAs and lawyers have extensive experience in this area and can help you set this up in under a day.

#3 – Execute an Operating Agreement Amongst Partners

Next, you must draft and execute an operating agreement amongst all partners of the LLC.

#4 – Apply for ITIN (Individual Taxpayer Identification Number) or Social Security Number

It is not uncommon to find overseas investors who already have a social security number, if they have lived in the US for work. However, if you don’t have one, you will need to apply for an individual taxpayer identification number (ITIN).

Each individual partner in an LLC needs to apply for an ITIN. This can take up to 60 days. Our experience indicates that most clients are able to get their ITIN within 4-6 weeks.

#5 – Open US-based Bank Accounts

Once the EIN, operating agreement and ITIN are available, a foreign investor can open a US-based bank account. With our extensive banking relationships, we can help you in opening the right bank accounts with global banks that have exceptional customer service and online access.

#6 – Filing the LLC US Tax Returns (Federal, State and City) and Personal Tax Returns for all Partners

The LLC needs to file returns as well as partners have to file personal tax returns. The K-1 (tax return for syndicate partner) often has significant deductions that results in paper losses each year, while you keep making cash flow, before a sale occurs, say in 5 years.

Hence, those losses can be offset against future gains to reduce the tax bill.

Investors need to consult with their local professionals to determine tax and related disclosure requirements. For US legal structures – asset protection strategies – US-based legal professionals can provide the best advice.

#7 – Tax Treaty Benefits Are Available

These vary country by country and can dramatically alter the net returns that investors get from their investments. It is advisable to consult with your CPA.  Some countries have treaty to avoid double taxation.

Conclusion

In summary, commercial real estate has proven its resilience and has continuously been one of the top-performing asset classes. Investors should understand their constraints before investing and seek professional advice. Our preferred advisors have extensive experience and can help make the entire process smooth and efficient.

Majestic Investment Group's diversified asset classes

References:

Forbes: Why Foreign Investors Still Love U.S. Real Estate

https://www.forbes.com/sites/forbesrealestatecouncil/2021/03/24/why-foreign-investors-still-love-us-real-estate/?sh=1860be3c126b

US - INDIA double taxation avoidance 

https://cleartax.in/s/dtaa-between-india-and-usa#:~:text=The%20Double%20Tax%20Avoidance%20Agreement,to%20pay%20taxes%20multiple%20times.&text=DTAA%20also%20reduces%20the%20instances%20of%20tax%20evasion.

https://www.irs.gov/pub/irs-trty/india.pdf

USA - Canada double tax avoidance

https://turbotax.intuit.ca/tips/using-the-united-states-canada-income-tax-treaty-to-reduce-double-taxation-6229#:~:text=U.S.%20withholding%20taxes.-,Double%20Taxation,taxed%20on%20their%20world%20income.

https://www.irs.gov/pub/irs-trty/canada.pdf