Why Are Foreign Buyers Interested in Investing in Orlando Real Estate?
Florida has emerged as one of the hottest markets for real estate investors. People are looking for investment property in Orlando and throughout central Florida because of the strong economy, the business-friendly environment, the landlord-friendly laws, and the growing population in the sunshine state.
A lot of people are moving to Florida from other parts of the country. That creates a large pool of tenants.
Only helping to make this market more attractive are rising rental rates. Investors here have a lot of opportunities to earn some serious returns and even some positive cash flow.
Not only has this caught the attention of local investors. Foreign investors are also interested in what Florida has to offer when it comes to real estate. We’re seeing more and more buyers come into the market from outside of the country.
What does that mean for the Orlando real estate market and how does it impact rental property here?
It means that if you’re selling a property, a foreign investor may be your best buyer. They’re known for paying above asking and appraisal prices. They’re likely paying in cash.
It means that if you’re buying a property, you can expect some serious competition from these real estate investors.
Here’s how we see the situation as an Orlando property management company that works with buyers, sellers, and investors from all over Florida, all over the country, and all over the world.
Local Property Management Enables Foreign Investment
Buying an investment property in central Florida from outside of the area is easier than ever, but it still comes with risk. Foreign investors need to partner with a local property management company that has the technology, data, and resources to allow for successful investing from outside of the area. Local boots on the ground will be needed to help with:
- Identifying the right investment opportunity
- Preparing the rental property for the market
- Pricing the property accurately
- Marketing, leasing, and tenant placement
- Maintenance responses
An investor from outside of the country will not have the resources to find vendors and contractors. They won’t be able to show the property.
And yet, it’s still worth it for them to buy in the Orlando market. They know that whatever they have to spend in professional property management fees will easily be recouped with their high performing investment properties.
Local Laws and Rental Requirements
Foreign investors have unique tax filings that need to be managed when they own property here.
There aren’t any immigration or residency requirements for a foreign investor to own and operate rental property in Florida, but they will be expected to file federal taxes. This will require an Individual Taxpayer Identification Number (ITIN). The person taking on the title of the property will need to apply for this. A property manager can help.
An ITIN is a tax-processing number assigned to Foreign Nationals. An ITIN can be issued by the IRS or by a Certified Professional Accountant approved by the IRS. The necessary form is a W-7, which can be completed in either English or Spanish. The investor will need to identify a valid basis for the application. Depending on the country that the foreign investor lives in, a passport may be required as well as additional photo I.D. or a driver’s license.
No rental proceeds can be paid to foreign investors without an ITIN. This process takes time, and investors need to be prepared for that.
Those are the federal IRS requirements. There are also some requirements specific to Florida.
For investors from outside the country, there are certain filing requirements for anyone wanting to purchase real estate in Florida. Any property owned by a foreign business entity must have a Florida registered agent and Florida office on file with the Florida Department of State.
A local property manager is essential. Not only can we act as the registered agent for a foreign investor, we can also make sure that the owner and the property are compliant with:
- State security deposit laws
- Federal fair housing laws
- Eviction laws
It’s easy to make a mistake, even for local investors with a lot of experience. An investor’s best resource is often their property management partner. This is especially true for foreign investors.
Why Foreign Investors Buy Orlando Investment Property
We’ve talked about the fact that Orlando is an excellent rental market for any investor. The rents are high and property values are climbing. Plenty of people and money are flowing into the state, and everyone, it seems, wants to live here.
The Florida rental market isn’t highly regulated. There aren’t any rent control laws in place and it’s not difficult to evict a nonpaying tenant. There isn’t even a state income tax.
It’s still far more regulated than real estate markets in other countries, and foreign investors like that. It provides them more protection and their investments feel less risky.
How Homevest Management Works with Foreign Investors
We work with investors from all over the world. Our clients come from Australia, China, Russia, Cuba, Guatemala, Hungary, Portugal, and South America countries like Brazil.
When an investor is not geographically close to their rental properties, the risk of owning these homes can seem magnified. You cannot respond to maintenance emergencies from afar, and you’ll have a hard time showing the property, inspecting it, and communicating with tenants when you live in a different state.
Good property management is essential, and when you’re looking for the right management partner, make sure they can respond to all of your concerns. In our experience managing homes for both local and distant investors, we’ve noticed that these are the five main concerns for owners when they’re outside of the area.
Outside of the legal and logistical support we can provide foreign investors, we also do a great job of protecting their property from all the same concerns that local investors have.
- Avoiding Long Vacancies
Vacancies are expensive, and it can be frustrating to have a rental home left unoccupied for long stretches of time. Without the consistent rental income an investor expects, the entire financial picture is disrupted. Our local property management allows us to:
- Price a property effectively.
- Market a rental property strategically
- Show properties responsively
- Screen and place high quality tenants
Avoiding expensive vacancies and turnover is important to all the investors we work with, including investors from outside of the U.S.
- Collecting Rent on Time
It’s hard to collect late rent when a property investor is living thousands of miles from their rental home.
Working with a good property manager allows foreign investors to know that a reliable and consistent rent collection process is in place. The rent received is timely. An Orlando property manager will let investors know when to expect rental deposits and can assist with the reporting of that income for federal tax purposes. With the right technology in place, all rent collection and rental payments are done electronically. Mailing a rent check to a foreign address simply does not make sense. Foreign investors will benefit from online access to rental payments and accounting statements.
- Lease Enforcement
Landlords living out of the country might be concerned that their tenants will leave before the lease ends. Broken leases are expensive and frustrating. A local property manager needs to be prepared to enforce your lease agreement and hold your tenants accountable.
There’s a big difference in what international investors expect.
We work with an investor from Hungary who told us that over there, tenants can be charged for just about anything when it comes to rental properties. For example, if a tenant hangs a picture on the wall, the owner can charge the tenant to repaint the entire wall.
That’s a lot different from the way things are done here. In Florida, those small nail holes will be considered wear and tear. Hungarian investors will not be able to charge their tenants for those tiny nail holes in their walls.
We can also tell you from our experience that foreign investors do not buy and hold their investment properties as long as local investors. The average is about seven years. International investors time their purchases and their sales carefully. They’ll be watching the market and their strategy is different.
If you’re an international investor who is interested in the central Florida real estate market, contact our team at Homevest Management. We’d be happy to help you navigate the requirements of investing in an American property – specifically a property in Florida, which continues to be one of the most profitable real estate markets in this country.
If you’re a local investor wondering how to compete with foreign investors, contact us at Homevest Management. We can help you craft an investment strategy that ensures you aren’t left behind by these well-funded, cash buyers from outside of the country.
We provide expert Orlando property management, real estate, property rentals, and HOA management, serving all of Central Florida, including Winter Garden, Doctor Phillips, Baldwin Park, Winter Springs, and Windermere.