Recent changes to domestic real estate policy are intended to curb overheating in the real estate market by limiting mortgage loans and discouraging investment by "young-kul" (meaning "young-kul tribe"). However, using collateralized loans to purchase real estate has been a common investment strategy even for those not in the "young-kul tribe," and this is not good news for investors who do not want to tie up most of their available cash in real estate.
Accordingly, overseas housing without mortgage loan restrictions and without disadvantages for multiple homeowners,
Among them, there are many inquiries about American houses, so I would like to compare them.
rental yield
Domestic housing rental yields are low, ranging from the late 1% to the 3% range, making it difficult to pay interest. Conversely, US housing yields are around 6%, allowing for substantial profits even after paying interest. However, interest rates, which have been elevated since the COVID-19 pandemic, remain high and are gradually decreasing, but have yet to recover to previous levels.
Home Purchase Loan
In the US, multiple homeownership also impacts lending. However, unlike in Korea, where there are stricter restrictions like a loan ban or a six-home cap, multiple homeownership requires more stringent screening and potentially higher interest rates.
Currently, there are cases where the entry barrier to banking is high for foreigners, but some foreign banks operating in the U.S. provide mortgage loans using Korean income verification documents, so there is no significant difficulty in purchasing a home.
Home Purchase Process
In Korea, it's common to sign a contract through a licensed real estate agent, though some acquaintances or family members may negotiate directly. In the United States, both the transferor and transferee appoint a licensed real estate agent, who then goes through procedures for checking for building defects, repairs, and purchasing insurance, lasting from one to three months. This period is known as the "escrow period," and during this time, a separate escrow company is appointed to transfer the contract deposit, interim payment, and balance to this escrow company.
If a defect arises within one year of the transaction, there's a system in place to cover after-sales service through the insurance policy the seller has signed up for. While the acquisition tax waiver reduces the burden on purchasers, annual property taxes are still required.
Maintenance
In Korea, landlords are responsible for maintaining rental housing. In some cases, landlords who have commercialized their business and rent out dozens of units may provide assistance through related businesses, particularly real estate agents.
In the United States, property management companies are more active than in Korea. They can assist with everything from finding tenants, collecting rent, managing facilities, repairs, mediating legal disputes through lawyers, and even filing income taxes through accountants.
Investing in the domestic housing market is challenging, so even if you're interested in overseas real estate, you should carefully consider the pros and cons. Issues like tax settlement, exit, and asset transfer can be more complex than expected. Those considering investing in overseas real estate are advised to consult with a professional before proceeding.
Introduction of the writer
The principal tax accountant at Startax, a tax law firm, provides consulting services to high-net-worth individuals and professional businesses like hospitals and clinics on matters such as business succession, overseas real estate investment, in-house employee welfare funds, and standard workplaces for the disabled.
Based on our many years of consulting experience and expertise in operating tax services, we are collaborating with various consulting firms and recently, we are working with like-minded entrepreneurs to help the socially disadvantaged enter the workforce.
Tax law firm Startax, 1509, Saenggak Factory Desianplex, 49 Achasan-ro 17-gil, Seongdong-gu, Seoul, 02-423-7110
