Many factors influence a foreign buyer’s decision to purchase residential real estate in the United States. Generally, most of these decisions tend to be driven by concerns over political and economic uncertainty in the buyer’s home country. Most foreigners do not leave their home country, family, and friends for trivial reasons.

The combination of economic and political stability, along with a stable currency and low inflation, continue to make the United States a desirable destination. Numerous non-Americans discovered this truth a long time ago. In many large metropolitan areas of the U.S., wealthy individuals and their families can live without personal scrutiny and threat to their personal freedom and security. Thus, many foreigners purchase a personal residence as an investment and a safe haven from their own countries in the pursuit of their own version of life, liberty, and the pursuit of happiness on American soil. On a different level, the major metropolitan areas in the U.S. are frequently more affordable than are other large cities around the world. A dollar denominated investment in a “hard asset” such as real estate provides an excellent hedge against inflation (as many South American, European, and Asian buyers know all too well). Also, frequently, foreigners send their children to college in the U.S., and the children frequently remain in the U.S. for a number of years after graduation. As home financing options are less available in many countries than in the U.S., many foreigners purchase the U.S. residence outright. As a result and by definition, these foreigners have substantial assets in the U.S. for tax purposes.

Originally published in Journal of Taxation of Investments on January 1, 2015.