Whether you know it or not, Washington state is closer to home than you think. Have you ever received a package from Amazon or logged onto a Microsoft computer? How about sipping a latte from Starbucks?
All of these businesses started in Washington. With its thriving economy, diverse culture, and breathtaking landscapes, it’s no wonder Washington has become a prime destination for international real estate investors. Purchasing a Washington investment property as a non-U.S. citizen involves navigating complex legal, financial, and market-specific challenges. This guide provides foreign investors with a comprehensive overview of the Washington real estate market, DSCR loans, and what you need to know as a foreign investor.
We are providing the following discussion to you for informational purposes only. All investments, including real estate, involve risk, and we encourage you to invest carefully. The information in this article is not intended to replace or serve as a substitute for any legal, real estate, tax, or other professional advice or service. You should consult with a professional in the respective legal, tax, accounting, real estate, or other professional area before making any decisions or entering into any contracts relating to a rental property.
Many real estate investors use debt-service-coverage-ratio (DSCR) loans. DSCR loans are tailored to foreign investors looking to buy income-generating properties.
Unlike traditional loans, DSSCR loans don’t depend on the borrower’s personal income but focus on the property’s cash flow. They offer flexible documentation and qualification requirements, making it easier for foreign investors to purchase property in Washington and other states. This option simplifies the process compared to a traditional mortgage.
Here are the key benefits of DSCR loans in Washington:
With Waltz’s DSCR loan options, international investors can bypass typical barriers to purchasing U.S. property and take advantage of the unique real estate markets across Washington.
When applying for a real estate investment loan in Washington as a foreign national, it's important to know that lenders have different criteria. Some are more flexible than others. Here’s a comparison of typical lender requirements and the options offered by Waltz:
Most lenders: U.S. income is often easier to verify than foreign income. Lenders typically require proof of U.S. income or detailed financial documentation from your home country, such as W2 forms, business income, and bank statements (possibly requiring a U.S. bank account2).
Waltz: We streamline the loan application process by gathering the right documents upfront. When we review your income it’s important to note that we do not require U.S.-based income. We also focus more on the rental income from the property you're buying rather than just your personal finances.
Most lenders: Foreign nationals typically face higher down payment requirements, ranging from 30% to 50%. Many investors choose to pay cash instead of taking out a loan due to these high requirements. Some lenders may also have reserve requirements, which means having extra funds in your account to cover property vacancy or other potential issues.
Waltz: We generally require a 30% down payment, and in some cases, as low as 25%. Depending on your specific financial situation and the property you are interested in, we may not require any reserve funds at all.
Most lenders: Lenders will ask for proof of identification and your current address. If you're applying for an investment property loan, they may require that the loan be under an American LLC, with you as the personal guarantor.
Waltz: We use your passport to verify your identity, even if you’re from outside the U.S. We focus specifically on investment property loans, so we also require that the mortgage be taken out in the name of an LLC. The difference with Waltz is that we provide an Investor Kit, which includes an LLC with an EIN and a U.S. bank account, making the entire process easier for you.
Most lenders: Many require a minimum U.S. credit score, typically around 640. Without a U.S. credit score, foreign investors may struggle to secure a mortgage.
Waltz: At Waltz, we don’t require a credit score for foreign nationals. Instead, we use alternative methods, like reviewing international credit histories or evaluating assets.
Find out how international investors have benefited from working with Waltz.
Choosing the right property type is critical for maximizing your investment. Washington offers a variety of options, including single-family homes, multi-family units, condominiums, and commercial properties. The choice should align with your investment goals, budget, and risk tolerance.
Careful research and market analysis are essential before deciding what type of property you are interested in buying.
Washington real estate offers many advantages for foreign real estate investors including:
As the largest city in Washington, Seattle offers a strong job market, beautiful recreational areas, and a diverse economy. Seattle’s population is growing fast, too – some studies predict that Seattle’s population will surpass that of San Francisco by 2040. All of these factors, in addition to the fact that home prices have appreciated 9.4% year-over-year, make Seattle a prime location for rental property investments.
Tacoma is an up-and-coming city with a growing economy and affordable real estate prices compared to Seattle. In fact, new figures show that it is one of Washington’s most populous cities– with the population estimated to be at 225,100. This is supported by a higher birth rate and more new residents.
Located in eastern Washington, Spokane offers a combination of affordability, a robust job market, and a thriving tourism industry. With an average home value of $389,697, Spokane presents a more budget-friendly option compared to other major cities in the state. The city's popularity as a tourist destination also contributes to increased demand for short-term rentals.
For investors with a larger budget, Bellevue, an affluent suburb of Seattle, presents an attractive option. Bellevue offers high-quality rental properties with strong potential for appreciation and average monthly rents around $3,300.
Not the Canadian city. Vancouver, located in Clark County, is a growing city with a strong economy and affordable housing options. It is also attracting numerous tech companies and startups that create job opportunities for skilled workers. Its strategic location along major highways and railroads enhances commerce and makes it a hub for business expansion. Its proximity to Portland, Oregon, also makes it an attractive location for commuters, especially considering median home prices are around 11.9% lower.
Washington’s unique geography and economic landscape offer both opportunities and challenges for investors. Here’s what foreign investors should keep in mind:
When refinancing a mortgage in Washington state as a foreign national, the process generally involves:
Rate-and-term refinancing in Washington lets you adjust your mortgage terms, potentially securing a better deal. Keep in mind that even with a lower interest rate, your total finance charges could be higher over the life of the loan.
Cash-out refinancing helps you access your property's equity in the form of cash at closing. Additional funds from refinancing can be used for home upgrades, debt consolidation, or a down payment on another property. This option provides cash at closing, expanding your investment opportunities.
Learn more about refinancing.
Explore your options with Waltz
Getting a DSCR mortgage in Washington as a foreign investor may seem challenging, but with Waltz, it’s easier than you think. Follow these steps:
1. Find a profitable investment: Identify a property with strong rental potential in areas that align with your investment goals.
2. Gather essential documents: Prepare documents like your passport, proof of income (foreign bank statements or business financials), and property details. You may also need proof of assets or a credit report from your home country.
3. Choose a lender experienced with foreign nationals: Look for a lender familiar with foreign investor needs, such as verifying foreign income and handling the absence of U.S. credit history. Waltz specializes in foreign national loans and can guide you through the process.
4. Set up an LLC and U.S. bank account: Most lenders require forming an LLC in the U.S. to qualify for a DSCR loan. You’ll also need a U.S. bank account for transactions. Waltz’s Investor Kit helps you set up both quickly—no months of waiting.
5. Submit your loan application: Speak with an account executive to ensure you have all the necessary documents. Once everything is in place, submitting your application will be fast and straightforward.
6. Perform due diligence: Inspect the property, get an appraisal, and fulfill any document requests from the lender. You’ll also want to review your term sheet!
7. Complete the purchase: Once due diligence is complete and your loan is approved, finalize the transaction. Sign the paperwork (possibly virtually if you're overseas), transfer funds, and you’ll own a rental property in Washington.
