Common Mistakes When Buying Real Estate in the USA

Published on April 26, 2026 and written by Cyril Jarnias

Acquiring real estate in the United States can be an attractive opportunity to diversify your portfolio, generate rental income, or simply fulfill your American dream. However, this process is fraught with pitfalls for unwary foreign investors. Whether you are considering buying a second home in Florida or an apartment building in New York, it is crucial to know the common mistakes in order to avoid them. In this article, we will review the main pitfalls to navigate for a successful real estate investment across the Atlantic.

Not Researching the Local Market Enough

One of the most frequent mistakes is underestimating the importance of thoroughly knowing the local real estate market before diving in. The United States is a vast and diverse country, with very different market dynamics depending on the region and city.

Each market has its own specifics in terms of prices, rental yields, taxes, and regulations. For example, investing in Miami is nothing like buying in San Francisco or Chicago. It is therefore essential to thoroughly study the trends of the target market, promising neighborhoods, price and rent evolution, as well as local economic prospects.

Not taking the time to research in depth can lead to poor investment decisions. You risk overpaying for a property, choosing an unattractive location, or ending up with disappointing profitability. To avoid this, do not hesitate to consult local professionals, study market reports, and visit the area in person if possible before buying.

Underestimating Ancillary Costs and Taxes

Another common mistake is failing to account for all the costs associated with buying and owning real estate in the United States. Beyond the purchase price, many additional costs can significantly impact the profitability of your investment.

Among the main costs to anticipate, we can list:

• Closing costs (attorney fees, recording fees, etc.) which typically represent 2 to 5% of the purchase price
• Property taxes, which vary greatly by state and city
• Homeowners Association (HOA) fees for condos
• Insurance (homeowners, liability)
• Maintenance and repair costs
• Property management fees if you rent out the property

Taxation is a particularly complex aspect for foreign investors. Rental income and capital gains are taxable in the United States, with rates that can reach 30% for non-residents. Additionally, you must consider the tax laws in your home country and any applicable tax treaties.

Failing to properly anticipate these costs can seriously erode your profitability, or even turn a seemingly profitable investment into a loss-making operation. It is therefore crucial to budget for all these expenses upfront and to seek guidance from a tax expert.

Neglecting Legal and Regulatory Aspects

The legal and regulatory framework for real estate in the United States differs significantly from that of many countries. Ignoring these specifics can expose you to serious problems.

One crucial point concerns the ownership structure of the property. Contrary to popular belief, it is not always necessary or advantageous to create an LLC (Limited Liability Company) to buy real estate in the USA. This decision depends on many factors, including tax considerations, and must be evaluated on a case-by-case basis.

Other important legal aspects include:

• Sales and lease contracts, which can vary by state
• Local rental regulations (especially for short-term rentals like Airbnb)
• Zoning laws and use restrictions
• Rights and obligations of landlords and tenants

For example, in Florida, the law imposes specific obligations on property owners regarding pool safety. In New York, rental rules are particularly strict, especially for short-term rentals.

Ignoring these legal aspects can expose you to costly litigation or penalties. It is therefore essential to be accompanied by a lawyer specializing in US real estate law to secure your investment.

Skipping a Professional Inspection

In the United States, it is common and highly recommended to have a detailed inspection of the property done before purchase. Yet, some foreign investors, eager to close the deal or trying to save money, neglect this crucial step.

The home inspection is performed by an independent professional who examines the condition of the property in detail. It helps detect potential structural, electrical, plumbing issues, or the presence of termites or mold. The cost of this inspection (typically between $300 and $500) is largely offset by the security it provides.

Skipping this inspection can have serious consequences:

• Late discovery of major defects requiring costly repairs
• Inability to negotiate the price based on identified issues
• Safety risks for occupants due to undetected problems

For example, in states like Florida or California, moisture or mold problems can quickly become critical and very expensive to treat. An inspection allows you to identify them before purchase and avoid nasty surprises.

Do not hesitate to attend the inspection if possible, or to appoint someone to do it on your behalf. The inspection report will give you a clear picture of the property’s condition and allow you to make an informed decision.

Underestimating the Importance of Insurance

Property insurance is a crucial aspect of homeownership in the United States, often underestimated by foreign investors. Natural risks, in particular, can have a significant impact on your property and your finances.

Depending on the property’s location, different types of insurance may be necessary:

• Standard homeowners insurance
• Flood insurance, mandatory in certain zones
• Earthquake insurance in California
• Hurricane insurance in Southeastern coastal states

For example, in Florida, hurricane insurance can represent a significant cost, sometimes several thousand dollars per year. In California, earthquake insurance is highly recommended but can be very expensive.

Not taking out the right insurance or opting for insufficient coverage can have disastrous consequences in the event of a claim. You could find yourself having to finance major repairs out of pocket, or even lose your entire investment.

It is therefore essential to accurately assess your insurance needs based on the property’s location and specific risks. Do not hesitate to consult a specialized insurance broker to get the best coverage at the best price.

Neglecting Remote Management

For foreign investors, managing a property remotely in the United States can be complex and time-consuming. Underestimating this aspect is a common mistake that can compromise the profitability and longevity of your investment.

Remote management involves many tasks:

• Finding and screening tenants
• Collecting rent
• Managing repairs and maintenance
• Ensuring compliance with local regulations
• Handling tax and accounting matters

Without effective management, you risk facing prolonged vacancies, unpaid rent, or property damage. For example, a plumbing issue left unaddressed can cause extensive and costly damage.

To avoid these pitfalls, it is often wise to hire a local professional property manager. Although this represents an additional cost (typically 8 to 12% of rents), it can prove profitable in the long run by ensuring optimal management of your property.

Make sure to choose your manager carefully, checking their references and experience. Establish a clear contract defining their responsibilities and yours. Good communication with your manager is essential for the success of your investment.

Rushing into a “Good Deal”

In a dynamic real estate market like that of the United States, it can be tempting to jump on what seems like an exceptional opportunity. However, rushing into a “good deal” without doing the necessary checks is one of the most costly mistakes you can make.

The reasons why a property is sold at an attractive price can be numerous:

• Non-obvious structural or neighborhood issues
• Unfavorable zoning limiting use or development possibilities
• High or increasing property taxes
• Saturated rental market in the area
• Infrastructure projects that could negatively impact the property’s value

For example, a cheap condo in Miami might turn out to be in a building needing major renovations, with HOA fees set to skyrocket. Or, a low-priced house in Los Angeles could be located in a high seismic risk zone, making insurance prohibitive.

Before committing, take the time to:

• Have a thorough inspection of the property done
• Study the local market and long-term trends
• Verify all legal and tax aspects
• Calculate precisely all costs associated with owning the property

Do not hesitate to call on local professionals (real estate agent, lawyer, accountant) to help you with these checks. Their expertise can save you from costly mistakes.

Ignoring the Specifics of Financing in the USA

Financing real estate in the United States has particularities that foreign investors often overlook. Ignoring these specifics can lead to financial difficulties or cause you to miss out on interesting opportunities.

Here are some key points to know:

• US banks are generally more demanding with foreign buyers
• Interest rates and loan terms can vary significantly by state and bank
• The credit score, crucial in the USA, does not exist for non-resident foreigners
• US mortgages often have different structures than European loans

For example, while a US buyer can get a loan with only 3 to 5% down payment, a foreign buyer will often need to put down 30 to 40% of the purchase price. Additionally, interest rates for non-residents are generally higher.

To optimize your financing, consider the following options:

• Work with banks specializing in loans to foreign investors
• Explore financing possibilities in your home country, using your assets as collateral
• Consider alternative financing structures, such as seller financing

It is crucial to prepare your financing file well, gathering all necessary documents (bank statements, proof of income, etc.) translated into English and certified if needed.

Do not hesitate to consult a mortgage broker specializing in international investors. Their expertise can help you secure the best possible financing terms.

Conclusion: The Importance of Expert Guidance

Investing in real estate in the United States can be an excellent opportunity for diversification and value creation. However, as we have seen, many pitfalls await the unwary investor.

The key to success lies in meticulous preparation and expert guidance. Each step of your investment project, from property search to management, including financing and legal aspects, requires special attention and specific knowledge.

Do not hesitate to surround yourself with experienced professionals: real estate agent, lawyer, accountant, property manager, mortgage broker. Their local expertise and knowledge of the US market specifics will be invaluable for avoiding common mistakes and maximizing the chances of success of your investment.

Finally, keep in mind that real estate investment in the United States is a long-term commitment. Take the time to clearly define your goals, study the market, and structure your project. With the right approach and the right support, you can fully leverage the opportunities offered by the US real estate market.