Investing in US Commercial Real Estate as a Non-Resident: Best Markets?

I am looking into diversifying my portfolio by purchasing commercial real estate in the US, specifically retail or small office spaces, but I'm unsure about the current market conditions. As a foreign investor, what are the most stable states or cities to target for steady capitalization rates right now? Also, are there any specific legal hurdles or tax implications I should prepare for before initiating the property search?

As a non-resident, your biggest hurdles will be setting up an LLC, obtaining an ITIN, and dealing with FIRPTA withholding when you eventually sell. For stable cap rates in retail, I'd look at secondary markets in Texas like Dallas or San Antonio rather than gateway cities.

Before you pull the trigger, you might want to review market timing considerations because interest rates are still putting pressure on commercial valuations right now.

Small office spaces can be risky right now given hybrid work trends, but neighborhood retail strip centers in the Southeast (like Charlotte or Atlanta) are holding up really well with steady foot traffic.

Make sure you consult a cross-border CPA immediately. You'll have to deal with U.S. federal tax returns, potential state-level taxes, and withholding agents if you repatriate rental income.

If you are comparing regions globally, you might also find it useful to check out this discussion on global investment destinations to see how US cap rates stack up against other markets.

Florida is another popular destination for foreign capital, especially Miami and Tampa, but insurance costs have skyrocketed lately, which drastically eats into your net operating income for commercial properties.

Financing as a non-resident is tough. Most traditional U.S. banks will require at least a 40% to 50% down payment for commercial loans if you don't have an established U.S. credit history or track record.

Sunbelt states generally offer better cap rates than the Northeast or West Coast, but property taxes can vary wildly depending on the specific county and municipality you target.