U.S. Real Estate Foreign Investment Fairly Easy — Borrowing Against It Not So Much

Foreign investors have long been active participants in the U.S. commercial real estate (CRE) market — both as asset owners and as often indirect lenders. However, when individual or corporate lenders seek to leverage their U.S. real estate holdings through debt financing, the lending landscape becomes significantly more complex, requiring additional expertise on deal financing opportunities.

Financing Options for Foreign National Borrowers

Borrowing against U.S. CRE as a foreign national presents unique challenges. Lenders apply heightened scrutiny for several reasons.

1. Commercial properties require ongoing capital investment, operational management, and long-term commitment. A foreign owner with limited ties to the U.S. may not have the same incentives or capacity to maintain the asset, particularly in periods of financial stress.
2. Moreover, enforcing recourse provisions, guarantees, or pursuing litigation against an overseas borrower can be difficult, expensive, and uncertain.

Financing against CRE is still possible for foreign nationals, but options vary widely depending on the borrower’s profile, the use of the property, and the type of lending institution involved. Some examples:

• Owner-User Loans for Foreign Corporations: For foreign corporations purchasing U.S. real estate for their own business operations — known as owner-user loans —banks with international branches in the borrower’s home country are often the most viable option. However, leverage remains conservative. Loan-to-value (LTV) ratios typically range from 55% to 65%, lower than the 65% to 75% commonly offered to U.S.-based companies. Additionally, government-backed financing programs such as SBA loans are only available to U.S. citizens or permanent residents.
• Investment Property Loans: For foreign nationals or entities purchasing U.S. real estate purely as an investment — without operational use — the lending landscape is quite different.
  • Community banks may be willing to lend if the foreign borrower lives in the U.S., works locally, and files U.S. tax returns. In such cases, foreign nationals with legal status (such as H1B visa holders) may be treated similarly to U.S. borrowers. However, if the borrower resides overseas and holds the property solely as a passive investment, most community banks will decline the loan request due to heightened risk and enforcement challenges.
  • Conduit lenders, including CMBS and agency lenders, provide financing primarily for stabilized commercial or multifamily investment properties. These loans are typically non-recourse and highly structured, with reserves to ensure the property’s operation is insulated from ownership changes. As long as the borrowing entity and the property management team are U.S.-based, foreign ownership behind the scenes is generally acceptable.
  • Life insurance companies focus on the long-term durability and cash flow of the asset. Because their loans are less structured than CMBS loans, they mitigate risk by requiring lower leverage — often capping LTV at 50% for foreign national borrowers. They prefer stable, well-maintained assets with minimal future capital expenditure needs.
  • Debt funds operate with the broadest underwriting flexibility but tend to focus on higher-risk loans, such as construction financing or value-add bridge loans. For foreign borrowers, these lenders will require strong U.S. operational experience, a reliable local management team, and a healthy balance sheet to mitigate perceived risks.

Conclusion

Foreign investors continue to play a vital role in U.S. CRE. While purchasing assets with cash is straightforward, financing those assets as a foreign national requires navigating lender concerns around enforceability, local presence, and operational capacity. Working with a commercial real estate financing specialist can help foreign investors evaluate options, structure deals effectively, and better navigate the complexities of the U.S. lending environment.