Buying an apartment in New York City is already hard, and it can be even harder when you’re a foreign buyer. Here are some key things to keep in mind if you decide you want to have your own slice of the Big Apple! 

Different Down Payment Requirements

If you’re not intending to use the apartment as your primary residence, then you’re likely to face different down payment requirements from lenders. 

Most banks allow U.S. residents to purchase with 10 or 20% down. But foreign buyers may be expected to put down anywhere from 25% to 50%, depending on your intended use and how many other properties you already own. Each bank will have their own requirements, so be sure to ask!

And even if you’re intending to use it as your primary residence, you could face additional hurdles if you don’t have a pre-existing work and credit history here in the U.S. So again, ask about requirements!

Different Documentation Requirements 

As a foreign buyer, you’ll need to anticipate providing more documentation for your purchase. What kinds of documents? It varies from building to building, lender to lender and the type of property you’re intending to purchase. So be sure to ask what extra information a foreign buyer is expected to provide.

Co-ops May Be a No-Go

While owning a co-op can be great for many reasons, they may not be the best choice for a foreign buyer hoping to purchase in New York City.

Some co-ops don’t allow pied-a-terres (i.e. “vacation” homes). So if you’re not purchasing it as your primary residence, you may be out of luck. 

Co-ops also have stricter financial requirements, including things like a debt to income ratio requirement. So if you have more than one home and your housing costs would exceed that threshold, you may not qualify to buy in one.

Finally, they often impose greater restrictions on your ability to rent out the apartment. Co-ops tend to want as many full time residents as possible, not investors. So their sublet policies are geared towards helping people out in a tough sales market, as opposed to those looking to have an investment property. 

Now all this being the case, there are co-ops out there which are very receptive to foreign buyers. So don’t count them out entirely! Just be sure your agent (perhaps me 🙂) knows your situation. 

FIRPTA and Other Tax Consequences

There’s a whole host of additional tax considerations you’ll need to take into account if you’re hoping to snag an apartment in New York City as a foreign buyer. And chief among them is FIRPTA – the Foreign Investment in Real Property Tax Act. You can learn more about it here – FIRPTA Withholding (IRS)

You’ll also need to be mindful of things like taxes and other fees payable at closing (especially when it’s time to sell or if you’re buying in a new development). 

To learn more about what to expect, check out these handouts that give a rundown of typical closing costs:

Co-op Closing Costs
Condo and Townhouse Closing Costs 

While it’s great to do your own research, it is highly recommended that you consult with tax and legal professionals who are familiar with the ins and outs of foreign purchases. They can help advise you on the best way to proceed and the best way to structure your transaction so that it makes the most sense for you.  

So, now that you know some key things to expect…

If you think that purchasing a home in New York City is the right choice for me, then go and download my FREE first time buyer’s guide. You can get it by signing up for my monthly newsletter. Get it here.