Can H1B Visa Holders Buy Commercial Property? | The Wandering Nerds (2024)

Most times, when people think about investment possibilities, one of the main options they consider is buying a commercial property. For those living in the U.S. with an H1B visa and are looking for alternative means of making side money, they also look to investing or buying commercial property. But the question is, can H1B visa holders buy commercial properties?

People living in the U.S. with an H1B visa can legally purchase commercial property. However, after the purchase, the H1B visa holder cannot actively take part in the business in order not to violate his/her visa restriction.

Commercial properties commonly refer to buildings that house businesses. In the rest of this article, we will provide you with useful information about how H-1b visa holders can buy commercial property. Let’s delve in!

Rules and Restrictions That Apply to H1B Visa Holders With Regards to Owning a Commercial Property?

There are no direct rules or restrictions when it comes to purchasing or owning a commercial property while on an H1B visa permit other than the apparent law that states that you must not violate your visa restriction. This restriction is placed on the visa by your employers as they are the sole sponsors of your H1B visa. What this implies is that if you are going to own a commercial property while actively working for your employer, you can, therefore, not work vigorously on your retail property business as it would be a clear violation of your visa restriction.

In order to purchase a commercial property while on an H1B visa, you would have to be able to afford it or, at least, make a 20% down payment on the property. There are, however, some loan options you could consider in the event that you can not outrightly afford the property.

While on an H1B visa permit, owning a commercial property is considered a passive income and a great way to build one’s wealth. While this is also a lucrative business, it is also a business you would have to study correctly, taking into account or consideration, all the possible risks associated with this kind of investment.

After your purchase, running a commercial property can earn you an annual income of 6-12% of the price of the purchase, depending on the location of the property. However, note that you would have to employ a property manager to control and run the business since you cannot be directly involved.

Can H1B Visa Holders Own Multiple Real Estate Investment Properties?

According to Rented, an estimated 700,000 immigrants living in the United States own an H1B visa permit, and in 2015, they were responsible for $100 billion purchase of real estate properties.

When you are on an H1B, you are to work solely for your sponsor employer, and you can do whatever you wish with your income. So yes, you can invest in several real estate properties. But what you cannot do is quit your job to focus on the real estate business or quit your job to start one. You would be violating your visa restriction, and that could result in deportation and a ban from returning.

H1B visa holders are free to invest in as many real estate properties as they can, making income from them. But to avoid an active role in the business, you would need to employ a property manager who would run the business on your behalf. The extra advantage of this is that even when you leave the country, your property manager can oversee the business for you, so you can virtually manage the property from your home country or from anywhere else.

Do H1B Visa Holders Need an LLC For Owning Commercial Properties?

For an H1B visa holder who owns a commercial property, setting up a Limited Liability Company (LLC) would be a brilliant move.

An LLC combines the elements of a sole proprietorship, partnership, and corporation. It is a compound business entity rather than a corporation, and it offers owners a list of notable benefits that may not be provided by other types of businesses.

There are some compelling benefits an H1B visa holder can enjoy from setting it up. We’ll look at them below:

• Setting up an LLC for your commercial property will shield you from personal liability that can occur if someone gets injured on your property. If this happens, they can sue you for medical costs that might be above your limit. But if you’re with an LLC, you are protected.

• Setting up an LLC for your property would prevent you from filing other tax returns. Any profit or loss made will be filed on the owner because the LLC is treated like a partnership or sole proprietorship, so general regulations apply.

• Setting up of an LLC is beneficial if you want to or would like to purchase a commercial property with someone who will be a business partner.

Commercial Real Estate Loan Options For H1B Visa Holders?

Sometimes, when we intend to invest in individual businesses, we do not have unlimited funds to do so, and it is for the reason we take loans. Loans are meant to assist a borrower purchase a new commercial property.

Real estate loan works like mortgage loans for H1B visa holders. However, there are some main difference to note:

• According to Investopedia, the Loan-to-value (LTV) ratio is used to determine how much money you can be loaned. It is calculated by dividing the requested loan amount by the value of the property.

• For getting a commercial real estate loan or mortgage, the lender will have to use the property as collateral for the loan. In other cases, it might require a guarantee.

There are various real estate loan options available to H1B visa holders. We’ll be taking a look at them below:

• Permanent Loan: This is the first loan on a commercial real estate property. It is similar to a mortgage loan. You can get this loan from any commercial lender, but this type of loan is not available for a short term need. It is prescribed for up to five years or more.

• Bridge Loan: This type of loan is short term and usually comes with a repayment option that ranges from 6 months to 3 years. These loans are used mainly by small business owners and can be used by real estate investors for short term business.

• SBA Loan: This loan is called the Small Business Administration loan. It is designed to provide guarantees for real estate loans. However, there are two types of loan options that you can get real estate loans from – the SBA 504 loan and the SBA 7a loan. Real estate investors are however not eligible for these.

• Hard money: This type of loan is usually issued by private companies and individuals. It is generally used by real estate investors. A hard money loan is a form of short term loan that lasts between 3 and 36 months.

• Owner financing: This type allows only people interested in buying homes – real estate investors. But it can be used by anyone to purchase the house and then pay the seller rather than getting a mortgage loan.

Tax implications for H1B visa holders on profit from real estate

According to Sprintax, H1B workers in the United States are expected to pay around 20-40% of their wages in federal, state, and local taxes. These taxes usually include federal income tax, local and state tax (depending on where they live), federal social security, and Medicare tax also known as FICA. Others may include property tax, sales tax, estate tax, capital gain tax, transfer tax, and gas tax.

The tax implication for H1B visa holders on profit made from real estate is that they have to pay the federal income tax. As an H1B visa holder staying in the United States, you will be taxed on all the money you make while staying there; your real estate included (if you have one). The rate is the same as that of actual U.S. citizens.

It is your duty to submit your tax return. However, you can’t claim the same reduction as that of U.S. citizens unless you become one, then you will have access to it but you will also be charged based on your worldwide income, which would include your real estate.

The FICA tax is a pension and healthcare tax. About 6.2% of your total income would be subtracted for social security and about 1.4% for Medicare. This is, however, sometimes dependent on the treaty with your home country.

When it comes to tax matters, the amount of income you make from all the legal sources of income that you have is what determines your tax rate, and it ranges from 10 – 40%. Also, note that the United States has a progressive marginal bracket. So most H1B visa holders pay from 20-35% of their wages and income.

Real estate investments generally are the most secure form of investment and you will never go wrong by deciding to buy a commercial property even while on the H1b visa. However, you should consult experts to make sure you understand all the legal stipulations.