EB-5 Visa Program Big Picture

March 8th, 2011   •   No Comments   

It is so easy to get caught up in the details of the EB5 visa program and the many rules and requirements that it defines.  Foreign investors also have a hard time understand how these rules and requirements really affect them and how they can best go about participating in the program. Here is a big picture look at the program and some key things to look for.

First, this program is about mutual gain. The US government supports eb-5 visas because we need the investment.  Foreign nationals enjoy the program because it allows them to obtain permanent residency in the US.  The truth behind both these positions is that the US desperately needs funding on a local level to spark economic output while the investor might be looking for ways to diversify their investments and wealth away from their home country.

Second, there are only a few major rules. The rest of this is all steps in a process.  The major rules is that you must invest either $500,000 or $1,000,000 into a new or existing business and hire ten full time employees within two years.  That’s it.  You can participate through a regional center or on your own.  This method will include different rules and advantages, but essentially, the EB-5 visa program is all about ten jobs in two years.

So what does this mean for you?
This whole program means that an investor must find an attorney to help them with the immigration process and an investment.  On the investment end, an investor needs to find a eligible EB-5 visa project that will (1) create ten full time jobs and (2) be sustainable enough to support those jobs. 

This also means that an investor must find a reputable and ethical regional center to invest through or they must find an business to start.  The bottom line is this business needs to create ten full time employees within two years.

There are two reasons why it is so important to understand the EB-5 visa projects.  The first is because it must sustain the ten jobs.  Second, it is important to understand what model the regional center is using (unless you do it on your own) because it will dictate the nature of the exit strategy.

Answers to Common Complaints

March 1st, 2011   •   No Comments   

The reality of the EB-5 visa program is that not all regional centers are created equally.  There are many established and reputable regional centers that provide investors with great projects and well run processes.  But like business in general, not everyone runs their business as well or as ethically as they could.

More and more regional centers are qualifying for operation in the program and this creates a situation where there are many different levels of quality.  While the operate in a similar fashion, not all the regional centers use the same arrangements, agreements, and methods of business.  It is important to review each one when considering investment for eb-5 visas.

We do get a number of complaints though in certain areas and we can look at them here.

Complaint 1 – I Don’t have control over the project
Many investors feel like they lose control over the management of their project. This is true in almost every regional center project.  Investors usually become limited partners in a new venture created between the investors and the regional center.  Together, they create the new entity that either owns the project or lends money to another entity to complete the EB-5 visa project.  Investors do have a right to vote on major decisions, however, they do not have a right to manage the project.

Complaint 2 – I can’t get my money out after two years
The nature of the EB-5 visa program and investment projects requires that funds stay in the business for five years.  The business requires cash flows to operate the venture and to create and sustain the required number of jobs.  Also, some projects involve accepting investors during the actual business operation and in order for later investors to get their jobs, the venture must have enough money to keep the doors open.

Should I use a Regional Center?

February 22nd, 2011   •   No Comments   

Many investors ask us this question when they consider participating in the EB-5 Visas Program.  The reality is that the program itself can be hard to navigate, but the investment portion can be even harder.  There are a number of factors that must be considered when deciding on the best route to take with regard to the actual business investment.

The value we provide is in helping an investor understand the difference between regional centers and the regular path and to help them decide which route makes more sense. Also, we help investors evaluate regional center projects and provide analysis on how the project is structure legally and to understand the small details that can impact an investor.  There are so many regional centers and it must be realized that not all are created equal.

Regional Centers

Investors can participate in a regional center or they can opt to invest in their own business.  Regional centers are entities that provide EB-5 investors with resources and benefits that might exceed participation on their own.  For example,  regional centers may have more favorable methods for counting the necessary jobs because they can benefit from indirect and induced jobs.  They also have an easier time assigning a given area as a TEA, which reduces the investment minimum to $500,000 USD.   Another benefit is that participation in regional centers removes the necessity to participate in the business that receives the EB5 investment.

Regular Path

Investing in your own business has different advantages, but not all of these advantages will appeal to everyone.  For example, investing in your own business gives you more control.  In some situations, regional centers can participate in the projects and the revenues.  In equity models, they own the project business along with the investors, and therefore have a stake in the business.  Some investors might not like the fact that other people are making decisions that could impact their project. Also, investing in a project on your own can allow you to capture all the gain that might be created.

The regular path also has disadvantages. Mostly notable, in creating jobs.  Individual projects are required to create 10 direct full time jobs.  That means, each employee must be a w-2 individual working 35 hours a week. Also, the regular path requires that investors actively participate in their EB-5 Visa Project. This can be difficult if the husband or male must still work overseas or they are retired.

California Real Estate Double-Dip

February 5th, 2011   •   No Comments   

US Real Estate Double-Dip

Real estate investment opportunities in Southern California are at a record for buyers and investors as home supplies continue to rise, foreclosures are increasing, and property values stay low.  Jim, our real estate expert, has been quoted as saying that never before has an investor had the opportunity to obtain a property and be cash flow positive from the start. 

This article provides commentary on an article in the Wall Street Journal about the possibilities of a double-dip recession in the US Real Estate market, and particularly in California. Of course, this is relevant to our real estate and EB-5 Visa program clients as it provides unique opportunities for foreign investors.

The article proposes that there is a significant probability that the US real estate market will experience another significant decline. We support this theory based on the fact that multiple factors are converging and should drive prices down. The most notable factors are:
- increasing supply of homes due to increasing foreclosures
- the end of tax credits for first time home buyers
- jobs have not increased at a rate that can sustain new home purchases
- middle class Californians are leaving for other states
- families that experience foreclosures must wait 2 years before buying again

These factors suggest that we are either in or are starting a double-dip in the California real estate market. We are reporting this information not to discourage investors, but to highlight this incredible opportunity. Here are more highlights from the article.

All numbers paint a picture that the rebound in home buying and home prices was artificially propped up by incentives from the Federal Government. First time home buyers could saving thousands on their first home purchase. But this program has ended, and the demand should fall to it’s true level, driving home prices down in California. Housing markets in California’s most desirable locations saw an increase over the last year. However, the Inland Empire and Central California regions are still hurting, and will be for some time. Altogether, there was a 3.8% decline in median home prices in California in December, making it the third consecutive year over year decline.

The matter is made worse by the fact that homeowners, the banks, and the government, do not want to take the hit on foreclosures. All the lost equity has made it impossible for homeowners to consider upgrading. Even worse for others, it has caused the foreclosures and bad damage to their credit. These individuals cannot just go buy another home, especially in a time where loans are very difficult to get for those with good credit. So long as homeowners, banks and the government are fighting to pass the hit to another party, the housing market will not recover. The reality is that someone must take the hit, and until they do, the home cannot be revalued and sold to a ready buyer.

The result is home prices are falling in many areas. The foreclosures are adding to the supply at record levels. Eight months of homes were reported to be available for sale after being previously owned on a national level, in the month of December. This is on top of record homes already on the market.

While this is a sad reality for many homeowners, it is also an opportunity for investors that comes only once in a lifetime. This market gives real estate investors the opportunity to be patient and give low offers for homes. The supply and the time horizon for any rebound give the leverage to the buyer. In the words of Jim, our real estate expert, “In the forty years I have been in Real Estate, this is by far the best investment opportunity I have ever seen.” We are uniquely position to help our clients take advantage of this incredible opportunity that could provide investment returns that could change their lives.

EB-5 Visa Program Funding

January 9th, 2011   •   No Comments   

EB-5 Visa Program provides funding when other sources have run dry

There is a very interesting article in the Wall Street Journal about the role the EB5 Visa Program has been playing in the startup and funding business. The last few years have made it very difficult for startups and established business to gain access to capital, cash or equipment, in order to launch or grow. The banks have serious liquidity issues and the economy has made it difficult for business plans to earn optimism. The EB-5 Visa Program and the investment it provides into local economies has provides new sources of funding for these types of projects and is helping the US economy when it cannot help itself.

The EB-5 Visa Program requires that foreign investors make investments of $500,000 or $1 Million into startups or established businesses in exchange for permanent residency and a green card. The EB5 Visas Program has gained a lot of momentum recently, despite being a rather old and established program. The reality is that capital was much easier to obtain during the last few decades so the program was not as integral to the startup world. The article highlights this growth, citing that there were 486 applicants in 2006 and 1,995 investors last year. These investors, many of which are from China, seek to investment in projects approved by the Federal Government. The EB-5 Investment projects span multiple industries and businesses. They can include real estate development, manufacturing, retail, hospitality, restaurants, and tourism.

The Great Recession has made this program a central focus for those looking for investment capital, especially in real estate. The real estate crash has made it nearly impossible for developers to obtain capital through traditional sources. Major hotel projects across the country are actively looking for funding through EB-5 Investors. Some businesses are even traveling to China and India to recruit investors. The article also mentions that the EB-5 Visa Program has been a way for Congressmen and women to create economic activity in their districts, creating jobs and curbing unemployment.

The EB-5 Visas Program does have its requirements. The foreign investor only obtains immigration status for two years. If the project does not create ten full time jobs required by the program, the foreign investor will not get a green card. The article also suggests that if a project does not work, the investor can stand to lose their immigration privileges and their investments. The article failed to go any further into that point, only mentioning that investors can lack the regional experience to evaluate the viability of a project. This is the most important item we found in the article. The reason EB-5 Investors should consider involvement with a firm like EB- Visa Projects.com is because we provide the US regional experience to determine the profitability and sustainability of these projects. We help investors understand the risks and the opportunities. This is the most difficult part of the program and the area where we provide a real value to our clients.