When talking about investing in the US, one should understand that this is a diverse field that contains within it many sub-fields such as:
- Real estate investments in the US
- Investing in a business in the US
- Partnership investments in the US
- Investments in the food sector
- Establishing a start-up in the US
- And more
Investing in the US – How You Should Begin
Investing in the US usually comes with a lot of bureaucracy and regulation as well as the need to meet certain standards and initial threshold conditions.
Establishing an LLC in the US
Before investing in real estate in the US, investors must first define the state in which they want to invest and purchase a real estate property. Then, a company should be established, usually an LLC. This is because it is customary and recommended before any investment in the US to produce a separation between the individual investing in the company and the company itself. The company established for the benefit of the investment is a completely separate body from its owner and therefore it is recommended to establish a company before any investment, both in terms of taxation and the law.
Applying for a Tax ID for a Company Registered in the US
Once an investor has set up an LLC, a Tax ID must be obtained for the company, which is in fact the company’s P.C. No. and its ID number with the tax authorities in the US. Without issuing a Tax ID number, a company will not be able to open a bank account, purchase a property and make investments. Therefore, immediately after opening a company, it is advisable to apply for a Tax ID from the IRS which is the tax authority in the US.
Opening a Bank Account in the US
After a company receives a Tax ID, it is necessary to open a bank account for the company. It is usually problematic to open a bank account from Israel and therefore, in most cases it is necessary for the company owner who wants to open a bank account to physically present himself at the bank branch where he is interested in opening the bank account. For many investors this is a problem, but we usually recommend trying to combine a visit to the US with a small vacation (if the vacation is in Florida, you can generally enjoy a vacation by the sea while opening a bank account in the US).
The process of opening a bank account is usually short and takes about an hour at the local bank branch and it is necessary to bring all the company documents, passport of the company owner and account holder and sign the necessary documents. It is also usually possible to receive a debit card for the company at this stage, which makes it possible to make company payments in the future.
Once an LLC is established, a company Tax ID number is obtained, and a company bank account it set up, the investment process can begin.
Investing in Real Estate in the US
There are so many stories about Israeli investors who traveled overseas and invested in real estate. Most of us are familiar with the stories of the uncle or friend who traveled to America with a few dollars in his pocket and set up a real estate empire, or a renovation business and became a multi-millionaire. Most Israelis have a story about such a person or have heard of such a person, but the reality is sometimes different. Investing in real estate in the US is not a simple thing, it can sometimes bring economic well-being and prove to be a smart investment with a high return of over 10% even, but there are quite a few cases where many Israelis make investments in real estate in the US which later turn out to be unprofitable investments in the better cases, and in the worse cases, people lost most or all of their capital on unsuccessful investments in the US that turned out to be a mistake.
Of course, each case must be examined on its own merits and it must be understood why investing in real estate in the US is a complex area that must be seriously considered and many preliminary examinations must be carried out before making investments.
The US is H-U-G-E
The United States is a huge country. Sometimes people visit the US to travel or visit relatives and/or work and decide to travel by car from place to place; only then do they realize how big the US is. The expanses of the United States are enormous, the distances sometimes so great that for a traveler from Israel, it is difficult to initially grasp the magnitude of the distance between points on the map, which at a glance seem shorter than they are in reality.
Therefore, and due to the huge size of the continent, a situation has arisen that in the US, unlike Israel, there is a vast difference between places and places that on the face of it look like similar areas to the unassuming tourist, turn out to be vastly different, whether neighboring neighborhoods, areas or even streets. That is to say that when real estate investors come to the US to see whether an investment is worthwhile, some have been deceived into thinking that a certain area is a good investment because of other deals made in nearby neighborhoods or even one or two streets over from where they intend to invest. But in practice they are two very close but very different areas, because in one prices are only expected to rise, and in the other, due to data such as weak population, urban projects that are unlikely to be upgraded in the future, low-level schools and many other variables that characterize distressed neighborhoods in the US, investors’ money will garner no return.
Therefore, it is very important that when approaching real estate investments in the US and examining areas of demand and investment areas, one should consult with local real estate experts, an attorney and people and acquaintances who live in similar areas or close to the desired investment area, and try to get as much information as possible before investing.
Bureaucracy in the US
The US is one of the countries with the most complex and difficult bureaucracies in the world. The phrase ‘Follow Instructions’ was invented in the US, and not for nothing; many times, investors are unaware of the amount of bureaucracy that exists for everything and with the bureaucracy come the many regulations, the laws that must be complied with and the fines.
For example, in many states in the US, there are laws that apply to mowing the lawn, to ensure it does not exceed a certain number of inches, and the landowner must ensure that the lawn is cut in time to avoid being fined. In addition, many investors are not aware of the fact that any renovation and/or repair of a home requires approval from the authorities. For example, adding a power point requires a permit from the state in most US states, adding a sewer point requires a permit and more. So when, for example, a real estate investor wants to buy a property and renovate it so that he can let it or resell it at a higher price and make a profit, all the variables of issuing the appropriate permits from the municipality must be taken into account. Even if permits are the responsibility of contractors, it should be taken into account that the price for works is higher in many cases due to the fact that the contractor himself has to go to the municipality and get a permit issued.
The issue of permits in the US is not to be taken lightly because unlike in investors’ countries of origin which do not always enforce various matters, in the US building permits and other permit are thoroughly enforced most of the time. Therefore, a person who renovates his house should take into account that there is a high probability that he will receive a visit from a municipal inspector who will come to examine whether the work is being carried out with the appropriate permits, and if not, the landlord will be fined.
In addition to getting work permits, many other bureaucratic matters must be taken into account, such as high tax payments, high property taxes which in the US are customarily paid by landlords in an annual fee and not by the renting tenants. In expensive areas the annual municipal taxes can be very high and stand at tens of thousands of dollars a year.
In conclusion, the prudent investor should take into account that investing in the US and especially investing in real estate in the US, one should take into account and consider the matter of bureaucracy which usually costs money and therefore an additional investment cost should be taken into account. These are ancillary payments that can constitute a significant share and a relatively large percentage of the investment and therefore it is important to take them into account when approaching an estimate of an investment in the US.
An investment in the US does not necessarily come with a work permit
Many investors assume that their investment in a real estate property or business in the US will then provide them with the opportunity to move and reside in the US legally and in an orderly manner. But in practice this is different. What this means is that in the US, there is no law and/or regulation that says that an investor in real estate and/or any business may automatically receive a residence and/or work permit. Therefore, many investors who choose to invest in the US should take into account that the very fact that they have chosen to invest in there does not provide them with a residence and/or work visa.
But still, there are ways and one of them is to get an E2 US Investor Visa.
E2 US Investor Visa
An Investor Visa to the US is a visa that can be issued by investing a sum of money in a business in the US. The idea behind this visa is that the investor will create jobs for American workers and help develop the American economy with the help of the business he has started. It is important to note that investing in real estate is not enough to obtain an E2 visa and requires investment in a business that will provide jobs for American workers.
The Advantages of an E2 US Investor Visa
The biggest and most important advantage of an E2 US Investor Visa is that the visa allows business owners in the US to legally reside there for a period of between 3 and 5 years with the option to extend the visa from time to time, as long as the business is operational. In addition, investors’ spouses may join the business owners in the US and apply for legal employment there. Applicants’ children can also join them and study in the US legally.
It is important to note that the visa is not an immigration visa and therefore it is not possible to get a green card with this visa but it is possible to extend the visa for additional periods and stay in the US for a long period time as long as the business is operational and fulfills its purpose.
Investing in the US – Thinking Big
As we described in this article, investing in the US can be a good investment with a return of over 10% but can also turn out to be a business mistake that will not necessarily pay for itself. It is important to remember that in order to invest in the US, many variables must be taken into account, such as the state in which you want to invest, the area of the investment, the taxes to must be paid in each state and for each property, which change in accordance with the type of neighborhood, its upkeep and more. Ultimately, investing in the US opens up windows to relocate to the US temporarily or permanently and sometimes it is a dream come true for some investors so the reasons can be either purely economic or complex for other equally important considerations.
Our firm handles real estate transactions in the US, opening businesses in the US, opening companies and bank accounts in the US as well as E2 Investor Visas for relocation to the US due to opening a business.
Contact us for more details!