The financial case for international high-net-worth owners of US real estate: why FIRPTA withholding, capital gains tax, depreciation recapture, and transaction costs make selling the most expensive way to access the value in your American property, and why equity release finance is almost always the more rational choice.
When an international high-net-worth owner of US real estate needs to access capital, the instinctive answer is often to sell. The property has done well. The equity is real. A sale converts that equity into liquid capital. The logic seems straightforward.
But for internationally mobile, non-resident, and high-net-worth US property owners, selling is almost always the most expensive way to access the value in an American real estate asset. The combination of FIRPTA withholding, capital gains tax, real estate agent commissions, closing costs, and the permanent loss of future appreciation on an asset with a demonstrated long-term track record makes selling a decision that needs to be very carefully considered, and in many cases, a decision that equity release finance makes unnecessary.
This article is not tax advice. Before making any decision about selling or retaining US property, consult a qualified US tax attorney. What this article does is explain the financial architecture of the sell-versus-equity-release decision in terms that allow you to have an informed conversation with those advisors.
This is Part 9 of UNLOCKED IN AMERICA, an 11-part series for international high-net-worth owners of US real estate who have built extraordinary wealth in America and cannot access it. For a full overview of how the equity release facility works, visit GMG's US property equity release programme.
The FIRPTA Reality: What Happens When a Non-Resident High-Net-Worth Owner Sells Instead of Releasing Equity
FIRPTA, the Foreign Investment in Real Property Tax Act, requires the buyer to withhold 15% of the gross sale price when a foreign national or non-resident alien sells US real property, and remit that amount to the IRS.
The critical word is gross. The FIRPTA withholding is calculated on the total sale price, not on the gain, not on the equity, not on the profit. On the entire price.
On a USD 3 million property sale, FIRPTA withholding is USD 450,000, regardless of what the property cost, regardless of how much of the proceeds represent original capital versus appreciation, and regardless of what the seller's ultimate US tax liability will be after filing their return.
The withholding is a prepayment against ultimate tax liability, not a final tax. But the refund process takes time and involves a period where withheld funds are in the hands of the IRS rather than the international high-net-worth seller. The IRS FIRPTA withholding guidance confirms that withholding certificates can reduce the amount withheld, but the application process adds complexity and time to any disposal. Equity release avoids this entirely: no disposal, no FIRPTA event.
The Capital Gains Calculation: The True Cost of Selling Versus Releasing Equity
For non-resident alien sellers, the US federal capital gains tax rate on US real property is generally 20% for long-term gains, with the additional 3.8% Net Investment Income Tax potentially applying. State capital gains taxes vary significantly. California imposes a state rate that can add a further 13.3% for high-income sellers, making the combined federal and state capital gains rate one of the highest in the developed world.
The Tax Foundation's analysis of US capital gains tax rates by state confirms that California and New York represent the most expensive jurisdictions in the country for high-net-worth property disposals, precisely the markets where international buyers have the greatest concentration of appreciated assets.
To put concrete numbers to the sell-versus-equity-release decision, consider an international high-net-worth family that purchased a Manhattan condominium for USD 800,000 in 2000. It is now worth USD 4.2 million.
Selling to Access USD 1.5 Million
- Gross sale price: USD 4,200,000
- Agent commission (approx. 6%): USD 252,000
- Closing costs and transfer taxes: approx. USD 150,000
- FIRPTA withholding at closing (15% of USD 4.2M): USD 630,000
- Capital gains tax (estimated combined federal and NY State rate): USD 800,000 to 1,000,000
- Net capital available after all costs: potentially below USD 2.5 million
- Asset: permanently gone
- Future appreciation: permanently forfeited
Equity Release to Access the Same USD 1.5 Million
- Loan amount: USD 1.5 million (approximately 36% LTV)
- Cost: Interest for 6 to 12 months, retained upfront at drawdown, known and fixed
- FIRPTA event: None
- Capital gains event: None
- Depreciation recapture: None
- Agent commissions: None
- Asset: retained in portfolio
- Future appreciation: preserved
- Capital available: USD 1.5 million in 10 to 20 business days
For long-term holders with very low cost basis, the equity release case is particularly strong. GMG's dedicated resource on equity release for long-term US property owners covers how the facility is structured for exactly this profile, where embedded gains are large and the cost of disposal would be severe.
"The decision to sell a US property to access capital is almost always more expensive than it looks at first. By the time an international high-net-worth owner has settled FIRPTA withholding, capital gains tax, agent commissions, and closing costs, a USD 4 million property might put USD 2.2 million or less in their hands, and they have permanently exited an asset that has been their best long-term investment. An equity release facility against the same property delivers USD 1.5 to 2 million in two weeks, the asset stays in the portfolio, and the future appreciation is still theirs."
— Donald Klip, Co-Founder, Global Mortgage Group and America Mortgages
When Equity Release Is Clearly the Right Choice Over Selling
The Capital Need Is Temporary or Time-Specific
If the need arises from a specific opportunity that will be resolved within 6 to 24 months and the underlying US property is a desired long-term holding, equity release is almost always cheaper than selling. The interest cost of a short-term equity release facility is a fraction of the tax and transaction costs of a disposal.
The Property Has Very Low Basis
International high-net-worth properties acquired in the 1980s, 1990s, or early 2000s at a fraction of current value have very large embedded capital gains. The longer the holding period and the larger the gain, the stronger the equity release case over sale. For families in this position, GMG's resource on education and US property equity also explains how released equity can be deployed for next-generation purposes without triggering a disposal.
The Seller Is Non-Resident and Faces FIRPTA
The 15% gross withholding at closing creates a significant and immediate cash flow impact that equity release avoids entirely. For non-resident international high-net-worth owners who need capital quickly, avoiding a USD 450,000 to 900,000 FIRPTA withholding event at closing is itself a compelling reason to choose equity release over sale.
The Property Is in a High State-Tax Jurisdiction
California, New York, and other high-tax states impose state capital gains taxes that significantly increase the total cost of a sale. These are the same states where international high-net-worth buyers have the largest concentration of appreciated property. Los Angeles, San Francisco, and New York are also the cities where GMG sees the highest volume of equity release applications from sellers who have run the numbers and concluded that selling is not rational.
The Owner Wants to Preserve Future Appreciation
US prime residential property has delivered consistent long-term appreciation. Selling to access today's equity forfeits all future gains on an asset with a demonstrated track record. Equity release preserves that future upside while meeting today's capital need. According to the Federal Reserve Bank of St. Louis, US median home values have risen consistently over every 10-year period in modern history, making long-term retention a structurally rational position for high-net-worth owners who have alternative ways to access liquidity.
Key Equity Release Parameters
- Loan size: USD 500,000 to USD 20,000,000+
- Term: 6 to 24 months
- LTV: Up to 65 to 70% of independently appraised US market value
- Interest: Retained or rolled up, the total equity release cost is known upfront, with no monthly payment obligations
- No FIRPTA event. No capital gains event. No depreciation recapture. No agent commissions.
- Security: US residential and commercial property in all major markets
- Borrower: International high-net-worth foreign nationals, non-US residents, US citizens, offshore holding entities, family trusts, US LLCs
- Timeline: Equity release term sheet 24 to 48 hours; drawdown 10 to 20 business days
Contact Donald Klip
If you are an international high-net-worth owner of US real estate and want to explore equity release or a bridging loan against your American property, contact Donald Klip directly before making any decision about selling.
Email: [email protected]
Phone: +65 9773-0273
Website: gmg.asia
America Mortgages: americamortgages.com
To receive an indicative equity release term sheet, we need only: US property address and type, estimated current market value, any existing mortgage balance, approximate equity release amount required, desired loan term, and a brief description of the intended use of funds and repayment plan.
Continue reading the UNLOCKED IN AMERICA series at gmg.asia.
