10 Top Tips for Non US Residents Buying a Vacation Home in the USA

If you are considering purchasing a vacation home in a resort area of the USA, you are certainly not alone, in fact ownership of US vacation homes has never been more popular with investors from around the world. Many times, investors will look to purchase a residential home in a sunny beach, ski, mountain, or other resort area to use when on holiday. It is common practice to then rent the property out to other vacationers or holiday makers when not in use by the owners, it’s kind of the best of both worlds really, enjoy your own home and then rent it to help support the cost. There are certainly many factors to consider when looking at this kind of arrangement so here are just a few to help you begin.

1. Find a local Realtor who specializes in working with International clients and resort properties – not all local Realtors do and you need the expertise of a seasoned pro.

“Foreign real estate buyers have a variety of questions and concerns that require specific expertise and knowledge. A well versed International Realtor will connect international clients with an entire network of locally esteemed and highly specialized professionals to ensure that they are well guided through the buying process.” – Casas na Florida

2. Type of Property – Identify your needs and intention with this purchase. There are no rights and wrongs but be clear and realistic with yourself and your Realtor about your expectations. If you intend to use the home to holiday or vacation in, it is unlikely that you will get rich on the rentals but you should look at this potential income to offset your expenses instead. If you are simply looking for an income producing property, then be clear and understand that it maybe a different type of property. Commercial buildings can also be considered.

3. Mortgages – Consider if you will need financing in advance as non US resident mortgages are not always easy to obtain – again, this is about expertise as most mortgage brokers, lenders and banks will not offer these mortgages as they are considered a niche within the market – Let your local, seasoned Realtor guide you here as they will know who does them and help you connect early to get pre-qualified.

4. Property Rental – It all goes back to the Realtor – You need to understand the rules regarding rental of the home – many areas have specific rules about how short a term you can rent your home for while some allow it almost as a hotel would. You need a Management Company that specializes in short term rental.

5. Currency Exchange – How do you bring your money over? They say cash is king but not in this scenario, all funds must be in the bank and adequately sourced in their journey to the US. You can choose your bank to do the exchange or alternatively work with a specialised currency exchange company.

“Billions of dollars of currency per day moves around the globe and although the majority of that is still directed through banks, increasingly foreign exchange companies are becoming a very popular alternative. A currency exchange company offers numerous options for the clients making the process cheaper, faster and just as secure as bank. It’s not unusual for a client to save up to 5% over using a bank when it comes to transferring money internationally” says Simon Plumb, Head of US at Currencies Direct.

6. Bank Accounts – Yes you should have one and by now, hopefully you are beginning to see why you need a very strong and experienced local team. Some banks are more accustomed to working with International clients than others and these are issues that you don’t want to deal with from thousand’s of miles away.

7. Consider pros and cons about buying a resale home and one that is new construction – sometimes you can get a price break on an older home but make sure that you are aware of any pending upkeep or replacement items that might be coming of age. A new air conditioner or a leaky roof in the middle of summer is a big pill to swallow and a costly one at that. New homes come with warranties and can often be designed according to your taste.

8. Tax considerations – Remember the old adage ‘An ounce of prevention is worth a pound of cure’ – Again you need to consult a local professional who specializes in taxation for Non US Residents – It is not expensive nor should it be a reason not to proceed and the best ways to manage your situation will depend on the amount of money you are investing. It is wise to meet a tax accountant / CPA and if you are making considerable investments, a tax attorney to help structure the purchases may be a good idea – Your Realtor should be able to make introductions to these professionals as well.

9. Immigration – Many Non US resident real estate investors have questions about immigration. It is worthwhile consulting a very good immigration attorney especially in the current environment with many changes afoot. This does not affect your real estate purchase however and also worth noting that you cannot get an immigration status just by purchasing real estate. If this is a consideration in your mind, I would suggest seeing an attorney early in the process even if you don’t plan to make a move yet. Allow them to help guide you appropriately and you may save money, time and frustration in the future.

10. Enjoy – Don’t get so caught up that you make this stressful. Your initial research goes into choosing a Realtor and a team of professionals, let them do their work to make this an enriching experience and then enjoy the process. After all, this is a home that you intend to escape to!

The Role of Islamic Finance in Economic Stability and Social Justice

One of the most distinguishing times for the U.S. Islamic home financing industry began in February 2007. The Federal Home Loan Mortgage Corporation (Freddie Mac) sent out a press release announcing that it would no longer buy the most risky subprime mortgages and mortgage backed securities. Two months after the announcement, a leading subprime mortgage lender filed for Chapter 11 bankruptcy protection. Three months after that bankruptcy filing, nationwide financing entities warned of “difficult conditions” ahead. Manifestations of such difficult conditions appeared on the horizon of the financial market when once well-established mortgage companies suddenly began to file for Chapter 11. Similar circumstances reached the U.K. as the Bank of England cleared an authorization to provide liquidity support to Northern Rock, the country’s fifth largest mortgage lender. Five months later, Treasury of the United Kingdom became the owner of Northern Rock.

Up until that point, the gravity of these “difficult conditions” was not fully understood by most of the populace. Late in 2008, the Federal Reserve Bank of New York was authorized to lend $85 billion to the AIG. This was the beginning of the most serious recession in the United States since the Great Depression. What followed was a chain reaction that led to an unprecedented global financial crisis, as the world suffered from rising unemployment, rampant foreclosures, and severe skepticism of financial instruments.

This led to a renewed spotlight on an unfamiliar market segment that appeared comparatively more stable and, more importantly, far more ethical: the Islamic financing sector. From the financial centers in Malaysia to the Middle East, spanning across over seventy countries, Islamic finance in the U.S. increased from $5 billion in the 1980s to $1 trillion in 2010. This phenomenal growth caught the attention of global investors who were seeking to safeguard their investments through more ethical and reliable financial instruments. When financial sector workers realized that these Shariah-compliant instruments avoided many of the worst effects of the global financial crisis, it became an attractive investment vehicle to support a more diverse portfolio. The Shariah-compliant financial sector has avoided investment in predatory lending businesses and overly leveraged financial instruments due to the strict ethical nature of the Shariah governance system. News and media outlets started to cover this ancient yet unfamiliar industry in hopes of learning from the mistakes of the conventional banking sector.

The concept of the modern Islamic financial services industry is rooted in the principles of Islamic legal jurisprudence that deals with financial transactions, a branch of Islamic jurisprudence called Fiqh Al Muamalat. Fiqh Al Muamalat is a framework under Islamic Law that charts the conduct of Muslims in commercial or economic endeavors. Islamic finance products and rulings are based on specific injunctions from the Quran that prohibit certain features of financial transaction models and related economic activities.

The Quran forbids interest, also called usury or riba. The underlying reasoning is that Islam considers lending to be a charitable act to help another member of the society in his/her time of need – therefore, profiting from someone’s hardship is strictly forbidden. In the conventional banking system, when interest is charged on a loan, the risk of that transaction is transferred to the borrower while the lender gains profit from the interest-based transaction. There is no consideration for the hardships endured by the borrower in the event they undergo any loss from the transaction.

By its nature, Shariah law prohibits unethical financial practices. It also promotes wealth distribution among all people to reduce poverty and inequity. This is manifested in the prohibitions of activities such as excessive speculation, gambling, and investing in products that are harmful for society as deemed by Islamic law (alcohol, pornography, etc). The structure of Islamic financial products and services, especially its prohibition in speculative transactions, has helped the industry escape most of the adverse effects of the global financial crisis. The governance model of Islamic financial institutions has been praised as an ethical alternative by institutions such as the International Monetary Fund and the World Bank. Economic experts have suggested that Islamic financial principles can be leveraged to promote financial inclusion that uplift the quality of life in developing nations. Islamic financial principles can also contribute to financial stability and economic development around the world.