A meaningful share of the buyers and sellers we work with in Downtown LA are not US citizens or residents. The real estate fundamentals — location, tenancy, lease structure — are the same for everyone. What is different is the paperwork: US tax withholding rules, financing terms and entity structuring all work differently for foreign nationals. What follows is a plain-English overview. None of it replaces advice from your own CPA and attorney; it is meant to help you ask them the right questions.
FIRPTA: the withholding rule every foreign seller should know
Under the Foreign Investment in Real Property Tax Act, when a foreign person sells US real property — commercial buildings included — the buyer is generally required to withhold 15% of the gross sales price at closing and remit it to the IRS, on Forms 8288 and 8288-A, typically within 20 days.
This is not an extra tax. It is an advance payment against whatever capital gains tax you actually owe, and any excess is refundable when you file a US return. It catches sellers off guard because it is calculated on the full sale price, not on your profit, so it can tie up significant cash at closing even on a break-even sale. Reduced-rate exceptions exist for lower-value residential purchases, but they generally do not reach commercial transactions.
Sources: TurboTax and the National Association of Tax Professionals, on FIRPTA withholding when a non-resident sells US real estate.
Financing as a foreign national
Foreign buyers can finance DTLA commercial property, but terms run more conservative than they would for a US-resident borrower. Expect:
- 20–30% down on standard foreign-national loan programmes, and 30–40% on larger or jumbo commercial transactions.
- 12–24 months of reserves held in a US bank account.
- Documentation of income or assets from your home country.
If the property will generate US-source rental income, you will need an Individual Taxpayer Identification Number to file the required US return, Form 1040-NR. An ITIN is separate from a Social Security number and does not require US residency.
Source: America Mortgages, on foreign-national mortgage down payment requirements.
Entity structuring: LLC, direct ownership, or foreign corporation
Most foreign investors do not hold US commercial property in their own name. Common structures are a US LLC, a foreign corporation, or a layered structure combining both. Each carries different implications for liability protection, for US estate and gift tax exposure — which can apply differently to non-resident aliens holding US real property directly — and for how income and eventual sale proceeds are taxed.
There is no single right answer. It depends on your country of residence, your treaty position and your long-term plans for the asset. This is a conversation for your CPA and attorney before you make an offer, not after.
1031 exchanges for cross-border reinvestment
A 1031 exchange lets you defer capital gains tax by rolling proceeds from a sold investment property into a new US property of like kind. The mechanics are strict and they do not bend for international logistics: 45 calendar days from closing to identify replacement property in writing, and 180 calendar days total to close. Both deadlines run concurrently, and neither pauses for weekends, holidays or the time it takes to move money across borders. We have written about that clock in more detail in the 45-day rule.
One limitation matters especially for international investors: the replacement property must also be US real property. You cannot 1031-exchange a US commercial building into property outside the United States.
Sources: IPX1031 and CPEC1031, on the 45-day identification and 180-day closing requirements.
Who manages the building while you are not here
Most of our foreign clients are not local and do not want to be involved in day-to-day building operations. K2 provides full-service property management alongside brokerage — leasing, maintenance, tenant relations and financial reporting — so that owning from abroad does not mean managing from abroad.
Work with a firm that does this regularly
K2 Investment, Inc. has structured, closed and managed transactions for international buyers and sellers in Downtown LA for three decades. Contact us before you make an offer — the earlier your CPA, attorney and broker are aligned, the fewer surprises at closing.
This article is general information, not tax, legal or immigration advice. Talk to a qualified CPA and attorney about your own situation.