So you want to own Miami real estate and believe you are doing things correctly when the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) launches an investigation on you for owning premier real estate. That’s right and as of March 1st, 2016, Miami & Manhattan real estate buyers are to be investigated by our very own Uncle Sam after being reported on by the Title Company delivering your property free & clear.
Why is this? Cash purchases have made up more than 60% of all luxury property transactions in Miami, so new federal regulations are aimed at removing their secret identities through the use of an LLC. The select properties over $1M will require a new form, disclosures and processing from Title to the U.S. Treasuries Department to explain who you are. No more hiding behind the LLC’s for liability protection and tax benefits as dirty money has somehow just made its way to Miami-Dade. Ever heard of the Cocaine Cowboys? Dirty money has fueled Miami since the 70’s. Nothing new under the sun yet the government now wants to see where your cash comes from, and they will soon have your identity under the microscope. I’ve personally never been aware of handling dirty money transactions but looking at it from a different light, Jorge Perez put it as, “it’s a killer for Miami!” and for a valid reason.
“It’s a killer for Miami — not because we’re afraid of drug buyers, you have to remember that a lot of wealthy people, particularly in South America, are very, very shy about disclosing their wealth.”
…. the Treasury Department should find a way to make sure buyers “tell the truth about where their money is coming from” without forcing them to make a public disclosure.
“Remember, in their countries, they are afraid of being kidnapped, they are afraid of being killed, so privacy is a huge thing,” Perez said. “They don’t want the press to say in Colombia, ‘This guy buys $20 million condos.”
Here is the Official FinCEN Notice
I by no means endorse dirty money purchases and do see some good in this new law but at the end of the day, your real estate investment shouldn’t be scrutinized when purchasing in an LLC by honest means, especially when the utmost in privacy is required. If you have nothing to hide, then disregard all of the above and do know the LLC is still the preferred means to buy and hold Miami investment properties. If you are foreign and have dirty money to buy Miami real estate or have purchased with dirty money, you should now be ‘in the know’ of what’s to come.
Precious metals maybe?
Here are the Top 10 waterfront property deals for JANUARY 2016 to own that are priced well and below the $1M threshold =).
- Avanti #187-6 Miami Beach (NoBe)
- Spear at Aqua #102 Miami Beach
- Bentley Bay #1514 South Beach
- The Waverly at Surfside #1226
- Cielo on the Bay #1501 North Bay Village
- Regatta Indian Creek #509 Miami Beach (NoBe)
- Bel Aire on the Ocean #1508 Miami Beach (NoBe)
- The Collins #502 Miami Beach (NoBe)
- 2080 Ocean Drive #511 Hallandale
- La Perla #2405 Sunny Isles Beach
Final Notes of Investigation and Clarification:
- A trust might be excluded from FinCEN’s look at “legal entities” used as shell companies. A trust is not considered a separate legal entity under common law in several states.
- The rate of cash deals in Miami is twice the national average primarily due to the volume of international buyers, according to the National Association of Realtors. About 27 percent of all U.S. housing sales were cash deals compared to about 55 percent of Miami sales in November 2015. About two-thirds of Miami condominium and 40 percent of single-family home sales were cash.
- “We are seeking to understand the risk that corrupt foreign officials or transnational criminals may be using premium U.S. real estate to secretly invest millions in dirty money. Over the years, our rules have evolved to make the standard mortgage market more transparent and less hospitable to fraud and money laundering. But cash purchases present a more complex gap that we seek to address.” – FinCEN Director Jennifer Shasky Calvery
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