There is a 35 year old tax rule that is changing that could result in overseas investors to buy more US real estate in the coming years.
Bloomberg Business reported December 18th that the measure signed into law by President Obama eases the 35-year-old tax on foreign investment in U.S. real estate. The 1980 Foreign Investment in Real Property Tax Act (FIRPTA) – Congress’ response to a wave of foreign investors’ acquisition of vast farmlands in the 80s- essentially imposed a tax barrier to foreign investors. Foreign sellers had to pay 10% of gross proceeds from the sale of U.S. real estate plus other state and federal taxes. The tax was not limited to farms – it was for all types of real estate.
During the world financial crisis, foreign investors have flocked to the U.S. real estate market as a safe haven to park investment funds. Most have invested in commercial real estate and have contributed greatly to higher commercial real estate prices. With this new law, foreign pension funds that were restricted to own real estate can now buy as much as 10% of a U.S. Real estate investment trust (REIT) which was 5% previously (source Bloomberg news, December 18th).
Foreigners have made 16% of U.S. property purchases in 2015. This will likely go up with the new law as more foreign private capital will flow into commercial real estate and infrastructure projects. Strange but true: Out of 17 new construction homes, which are the preference of the foreign investor buyers, sold in Brentwood and Santa Monica in 2015, only 1 was bought by a foreign investor.
New Listing this week – not yet in the MLS
302 16th Street – 5 bedrooms (plus detached guest bedroom) + 4.5 bathrooms. $3,795,000. Charming Spanish. Bright and light. Original narrow board hardwood floors throughout. Lovely living room and formal dining. 3 bedrooms up and 2 bedrooms down plus office/study (could be converted to 6th bedroom. Huge master suite with huge balcony overlooking beautiful backyard with mature landscaping and fruit trees. Spacious detached guest bedroom and bath. Last sold in April 1990 for $935,000.
New Sales this week
515 22nd Street – 4 bedrooms + 3 bathrooms. $3,195,000. A very well-priced 2-story traditional with a great layout/ floor plan. 3 bedrooms upstairs and 1 bedroom downstairs. Formal living room, kitchen area, spacious master suite and large master bath. The family room leads out to private backyard with pool, spa and built-in barbeque. Needs updating but with tear downs selling for over $3 million.
There were no Closed Sales this Week
Call me for a couple of upcoming attractions that are not yet listed in the MLS, priced from $1.9 million to $6 million. And….here are a few that we have listed in the MLS:
24142 Malibu Rd. – 3 bedrooms + 3 baths $7,488,000
464 25th St. – 6 bedrooms + 7.5 baths $7,495,000
902 25th St. – 5 bedrooms + 5 baths Price Upon Request
12127 Dorothy St. #101 – 5 bedrooms + 5.5 baths $2,095,000
12127 Dorothy St. #102 – 6 bedrooms + 6.5 baths $3,095,000
802 San Vicente Blvd. – 3 bedrooms + 2 baths $3,300,000
2404 Hill St. – 4 bedrooms + 5 baths $2,995,000
Search for more homes, see real time analytics and learn about the North Santa Monica / North of Montana Avenue community on our North of Montana blog. Add your comments (scroll down to the “Add Your Comment” section) and read other blogs. And please call my mobile phone (310) 924-4014 with any questions.