Attracting International Investors to Commercial Real Estate
What foreign investors check before backing a property deal, and the U.S. and Canadian tax, ownership and securities rules that apply to them.
Updated & fact-checked Figures are linked to their sources at the end of the article.
Foreign money is a common source of equity for hotels, apartment buildings and other commercial property. It comes from family offices, private investors, pension funds and operating companies abroad, usually as a partner in a joint venture or as an investor in a fund or single-property company run by a local sponsor.
This article is for sponsors and owners who want to raise part of their equity outside their own country. It covers what international investors check before they commit, and the rules that apply to them when the property is in the United States or Canada. The tax and ownership rules below change often; treat this as general information and get legal and tax advice for a specific deal.
What international investors look for
A foreign investor is taking every risk a local investor takes, plus a few more: currency, distance, unfamiliar law and a second tax system. Most of the questions they ask are attempts to reduce those extra risks.
- A local partner with a record. Someone who knows the market, can show past deals with real numbers and will put their own money in alongside the investor.
- A clean structure. A single-purpose company or partnership that holds the property, with a written agreement covering distributions, decision rights, reporting and exit.
- After-tax returns in their own currency. A projected yield means little until withholding taxes, treaty relief and currency movements are taken into account.
- Regular, audited reporting. Investors who cannot visit the property rely on financial statements, rent rolls and capital spending reports.
- A known way out. When and how the property will be sold or refinanced, and what happens if one partner wants to leave early.
- No surprises from the government. Whether the investor is allowed to own the property at all, and what taxes apply when they buy, earn rent and sell.
The last point is where many cross-border deals stall, so the rest of this article covers it.
Rules in the United States
U.S. rules at a glance
- FIRPTA withholding on the amount realized when a foreign person sells U.S. real property[1]General rate since Feb. 17, 2016
- 15%
- Standard EB-5 minimum investment[2]Petitions filed on or after March 15, 2022
- $1,050,000
- EB-5 minimum in a targeted employment area or infrastructure project[2]
- $800,000
- Full-time jobs each EB-5 investment must create[2]
- 10
FIRPTA. When a foreign person sells a U.S. real property interest, the buyer generally must withhold 15% of the amount realized and send it to the IRS. If the buyer fails to withhold, the buyer can be liable for the tax.[1] For a sponsor, this matters at exit: a foreign partner’s share of sale proceeds will be reduced up front, and the closing has to be planned around it.
EB-5. The EB-5 program gives foreign investors a route to U.S. permanent residence if they invest in a new commercial enterprise that creates full-time jobs for at least 10 qualifying employees. For petitions filed on or after March 15, 2022, the minimum is $1,050,000, or $800,000 in a targeted employment area or an infrastructure project. Investments through a USCIS-approved regional center can count indirect jobs toward up to 90% of the requirement.[2] The investor’s goal is a green card, so the project has to meet the program’s job and documentation rules, not only the investor’s return targets.
CFIUS. The Committee on Foreign Investment in the United States can review certain purchases and leases of real estate by foreign persons near specified airports, maritime ports and military installations. The rule defines “close proximity” as one mile from the boundary of a listed site, with an extended range for some installations.[3] Most hotels and apartment buildings are nowhere near these sites, but it is worth checking before a foreign investor takes control of a property.
Securities law. Selling interests in a property company to investors is a securities offering wherever the investors live. Regulation S provides that offers and sales made outside the United States are not treated as offers and sales for the purposes of the Securities Act’s registration requirement.[4] The investors’ own country will usually have rules of its own.
Rules in Canada
| Rule | What it covers | Effect on a foreign investor |
|---|---|---|
| Prohibition on the Purchase of Residential Property by Non-Canadians Act | Buildings with 3 or fewer dwelling units, including condo units, in census metropolitan areas and census agglomerations | Purchases generally prohibited, with exceptions. Buildings with 4 or more units are not covered. |
| Nova Scotia Non-resident Deed Transfer Tax | Residential property with 3 or fewer dwelling units, including residential vacant land | 10% of the price or assessed value, whichever is higher, for agreements signed after March 31, 2025 |
| Part XIII tax on rent | Rent paid to a non-resident of Canada | 25% withheld from gross rent unless the owner uses Form NR6 and files a section 216 return |
| Section 116 | Sale of taxable Canadian property by a non-resident | Without a certificate of compliance, the buyer may withhold 25% (50% for some property) of the proceeds |
| Investment Canada Act | Acquiring control of a Canadian business | Notification below the thresholds; net-benefit review above them |
The foreign-buyer ban. Since January 1, 2023, non-Canadians have generally been prohibited from buying residential property in Canada. The Act defines residential property as buildings with three dwelling units or less, including semi-detached houses and condominium units, and it does not prohibit the purchase of buildings with four or more units. Property outside census metropolitan areas and census agglomerations is also excluded. A non-Canadian, or anyone who knowingly helps one, can be fined up to $10,000 on conviction.[5][7][8]
Three details matter for commercial deals. A Canadian company counts as a non-Canadian if it is not listed on a designated Canadian stock exchange and a non-Canadian “controls” it, and control starts at 10% of the equity value or voting rights. The regulations also exempt purchases of residential property “for the purposes of development”.[7] In February 2024, the federal government said it would extend the ban, originally set to expire on January 1, 2025, to January 1, 2027.[6] Justice Canada’s consolidation, current to September 21, 2026, still shows the Act in force with its repeal not yet in force.[8] Check its status before signing a deal that closes in 2027.
Nova Scotia’s deed transfer tax. In Nova Scotia, a separate provincial tax applies to buyers who are not residents of the province, including Canadians from other provinces. The rate rose from 5% to 10% on April 1, 2025, and is calculated on the purchase price or assessed value, whichever is higher, for residential property with three dwelling units or less.[9] In August 2026 the province announced changes aimed at buyers who intend to move to Nova Scotia; the rate stays at 10%.[10] An apartment building with four or more units falls outside both this tax and the federal ban.
Tax on rent and on sale. If a non-resident earns rent from Canadian property, the payer or property manager must withhold 25% of the gross rent. With an approved Form NR6 the withholding can be on net rent instead, and a section 216 return lets the owner be taxed on net income and recover any excess.[11] When a non-resident sells, the buyer may withhold 25% of the proceeds (50% for certain types of property) unless the CRA issues a certificate of compliance.[12] As with FIRPTA, a sponsor should plan the exit timeline around this.
Investment Canada Act. If the foreign investor acquires control of a Canadian business, such as a hotel operating company, the Investment Canada Act applies. For 2026, a net-benefit review is required at an enterprise value of C$2.179 billion for private investors from trade-agreement countries, including the U.S., and C$1.452 billion for other private WTO investors.[13] Below the thresholds, direct acquisitions need only a notification but may still be reviewed on national-security grounds.[14]
How to prepare before you approach investors abroad
Before the first meeting
Confirm the investor can own the asset
Check the foreign-buyer ban, CFIUS and any provincial or state rules against the property type, location and unit count.
Model after-tax, after-withholding returns
Show what reaches the investor after withholding on rent and sale proceeds, with assumptions for treaty relief stated by an adviser.
Set up the holding structure first
A single-purpose entity with a partnership or shareholders’ agreement covering decisions, distributions, reporting and exit.
Fit the offering into a securities exemption
In both countries, and in the investor’s country, before anything is marketed.
Prepare a data room
Financial statements, rent roll or hotel operating reports, appraisal, building condition report, loan terms and title.
Plan the exit mechanics
FIRPTA or section 116 withholding, certificate timing and how proceeds will be converted and paid out.
Sources
- FIRPTA withholding — Internal Revenue Service. Checked 2026-10-12.
- About the EB-5 Visa Classification — U.S. Citizenship and Immigration Services. Checked 2026-10-12.
- Provisions Pertaining to Certain Transactions by Foreign Persons Involving Real Estate in the United States (31 CFR Part 802), final rule — U.S. Department of the Treasury, Federal Register Vol. 85, No. 12, January 17, 2020. Checked 2026-10-12.
- 17 CFR § 230.901: General statement (Regulation S) — Legal Information Institute, Cornell Law School (copy of the eCFR text). Checked 2026-10-12.
- Prohibition on the Purchase of Residential Property by Non-Canadians Act — Canada Mortgage and Housing Corporation. Checked 2026-10-12.
- Government announces two-year extension to ban on foreign ownership of Canadian housing — Department of Finance Canada, February 4, 2024. Checked 2026-10-12.
- Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (SOR/2022-250) — Justice Laws Website, Government of Canada. Checked 2026-10-12.
- Prohibition on the Purchase of Residential Property by Non-Canadians Act (S.C. 2022, c. 10, s. 235) — Justice Laws Website, Government of Canada, Current to September 21, 2026. Checked 2026-10-12.
- Non-resident Provincial Deed Transfer Tax — Government of Nova Scotia. Checked 2026-10-12.
- Changes to Non-Resident Deed Transfer Tax — Government of Nova Scotia, August 7, 2026. Checked 2026-10-12.
- T4144: Income Tax Guide for Electing Under Section 216 — Canada Revenue Agency. Checked 2026-10-12.
- Disposing of or acquiring certain Canadian property — Canada Revenue Agency. Checked 2026-10-12.
- 2026 thresholds for Canadian merger reviews (law-firm summary) — Torys LLP, March 2026. Checked 2026-10-12.
- Investment Canada Act and Competition Act Quick Reference – 2026 (law-firm summary) — Osler, Hoskin & Harcourt LLP. Checked 2026-10-12.
