How To Select The Right EB-5 Project

WRITTEN BY

EB-5 Insider Team

A group of professionals with years of experience helping people immigrate to the US

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Note: This article is for informational purposes only. We are not providing legal advice or selling securities. The articles and content on this site are of a general informational nature only and should not be relied upon for individual circumstances.

Not all EB-5 investment projects are the same, so it is crucial to understand how a certain project will impact your investment.

By now, chances are you already know about most of the benefits an EB-5 investment offers, along with the basic program requirements, costs, etc.

If you are not familiar with EB-5, I suggest you start with our complete guide to understand the benefits of an EB-5 investment and if you will qualify.

Overview of EB-5 benefits and requirements

So, you’ve probably already spoken to an immigration attorney, and you’ve already realized the following: (1) the investment amount is a minimum of $800,000, plus additional fees, (2) the timeline is roughly 3-6 years, and (3) dependent on USCIS processing times, per country visa caps, as well as the type of project you choose.

We have an entire article written on Rural vs HUA TEA vs non-TEA and what type of project is right for you, which will help you better understand the pros and cons of each type of EB-5 project.

Importance of due diligence and project selection

Now that we have all of that out of the way let’s jump right into project selection and project diligence.

Also, as we’ve stated before (but cannot emphasize enough), this is an investment, as required by the program, and thus, there is no guarantee of capital return. If a project guarantees your money back, RUN! Guaranteeing a return of capital would disqualify the project from being approved by USCIS as a qualifying project. In other words, there needs to be a potential for loss, i.e., this is a true investment.

Does this mean it is a risky investment? Well, the short answer is no. It doesn’t need to be, so long as you know what to look for in both the project and the company offering it.

Evaluating project viability and job creation

Project selection is key and a hugely important part of the process. But just like buying a home or a car, you are not necessarily looking for the perfect project, but one that meets your main requirement(s)—whether it’s safety, length of investment, location, etc.

This task always seems very daunting to investors, and for good reason: there’s a ‘ton’ riding on this decision, and the last thing you want to do is get it wrong.

However, there’s some good news: the EB-5 program has been around for many years, and there are many operators out there who have a track record of delivering and executing on their promises, so it is not a matter of ‘I hope I picked the right one,’ as there are many good and viable projects out in the market, and they are being structured and managed by companies with a track record of doing this successfully for hundreds if not thousands of investors before you.

Aligning investment with personal objectives

It comes down to arming yourself with the knowledge and tools so that you can make informed decisions that align with your goals and maximize your chance of success.

Also, it is important to keep in mind that USCIS processing times are not under the control of the regional center or the immigration attorney.

If USCIS decides to process fewer cases this year vs. last year, that is out of your control, as is anyone else other than USCIS. However, there are steps your immigration attorney can take, like filing a mandamus suit, but there’s also no guarantee this will work either.

If your country reaches its visa cap per year, this is also out of the project’s control as it comes down to the program’s mechanics. Therefore, it could impact your overall EB-5 timeline, as immigration is the reason you are doing this in the first place.

Regional Center Selection

  • Most investors jump right into project selection without even considering the person or company that created the structure and project.
  • What is their track record in this type of project?
  • What is their track record in doing EB-5?
  • How many projects have been approved/denied?
  • How many investors have been approved/denied?
  • How many investors have completed the process successfully?
  • How many investors have been repaid (in whole)? How many have not?
  • How many projects have they done within this type of asset class? Within this geographic location?

Also, it is crucial to understand all these metrics as they relate to the person putting the project on, not the regional center the project is going through. Some smaller operators tout the success of the regional center, but they may rent it out for other developers/operators to use, so the success of those investors has nothing to do with the developers/operators themselves.

Many larger players own and operate their regional centers, though, with the introduction of rural, they may also rent as regional center applications take years to get approved, but it is important to understand these metrics as they relate to the person who is managing the project, your capital and the success of your immigration petition. In other words, make sure you are making an apples-to-apples comparison, and don’t be fooled by the “cell phone network” play of words: “largest network, “fastest network, or “most reliable network.”

Going back to the car example, even Ford or Toyota have millions of recalls on any new model of vehicle. Therefore, it is important to see how they have handled problematic projects how they handled this with investors, and whether they mitigated all of the immigration risks.

Factors to Consider When Selecting an EB-5 Project

1. Project and Market Viability

Do your due diligence on the project to ensure its soundness. Review the business plan and the operator and ensure a clear and viable exit strategy.

Evaluate the market and review the comparables to ensure the market can take on a project of this type. Look at market demand and competition and review the risks. For example, if this is an apartment building, check occupancy rates, tenant retention, and new projects coming online.

Ensure the company putting on the project has a track record of completing and exiting this type of project. A track record is key in real estate. In EB-5, a track record is essential on both the immigration side and the project side.

2. Job Creation

Make sure the project qualifies, the project is already approved, and/or the company has a strong track record of past projects being approved. If the project is denied, there will be no immigration benefit.

Make sure the project will create sufficient jobs to satisfy each investor. These days, most projects have a substantial job cushion to ensure this requirement is met. But again, it comes down to the operator’s ability to execute. Therefore, as we’ve stressed before, you should look for projects being put in by experienced operators with a track record of delivering on what they promised from the beginning.

3. Project Timeline and Exit Strategy

Review the project timelines and see if they align with immigration timelines.

Under the current and most recent USCIS guidelines, the sustainment period is now tied to the last dollars into the project. With this, you can roughly see the sustainment period starting around construction completion. The sustainment period is two years, so you should look for projects that satisfy the sustainment period while also having a viable exit strategy.

It is also important to consider the extension options, as most real estate projects have extension options built into the investment timeline. This could mean a 5-year project could now be 7 years if it has two 12-month extension options. Here, it is important to discuss this with the operator and see what their track record is on exits. In other words, won the projects within the same type, how many were repaid within the initial loan period, and how many have been extended? If they do not have a track record of repayment, understand the project could take longer than what they are marketing it will take.

Under the current program requirements, you should not need to redeploy unless the initial project does not satisfy the sustainment period of two years following the capital being moved into the project and spent on construction. However, as redeployment was common practice in the past for EB-5 investors, largely due to immigration timelines, this could impact your repayment if the law were changed and there’s no “grandfathering.” The good news here is that it looks unlikely that redeployment will return to the program.

Ensure the project is being undertaken by a seasoned and reputable team, as well as any third-party vendors, including the economist who is calculating the job creation.

Scrutinize the offering materials, the private placement memorandum (PPM), the Limited Partnership Agreement (LPA), the risks and disclosures, as well as any immigration considerations.

5. Investor Preferences and Objectives

Make sure whichever project you are considering satisfies your objectives and have a good understanding of what your priorities are whenever reviewing projects.

All investors want to ensure immigration risks are low as the primary objective with any EB-5 investment is the immigration benefit. If the project does not qualify, there’s rarely any upside to the investment.

Once you feel confident the immigration benefit is there, it comes down to individual objectives, whether it be faster processing times (i.e., rural projects), shorter investment period, pre-approved projects, jobs already created, or a higher potential return and risk profile.

Capital preservation or potential returns is completely up to you as there are projects that offer a higher potential return, but it almost always comes at a higher risk level.

Look for projects and operators who align with your values and interests, as you have been tied to this company for many years, and the fate of your immigration and investment lies in their hands. With the immigration attorney, you can always switch attorneys during the process, and it is not uncommon. However, if you are looking to change projects, it is almost too late and the capital is no longer available/liquid, and you would most certainly need to start the immigration process over from the beginning.

Ultimately, when selecting EB-5 projects, you can decide what you want from a project based on your personal preferences, risk tolerance, investment objectives, and immigration goals.

Summary & Takeaways

Project selection is a critical step in the EB-5 investment immigration process. You need to ensure not only that the project is structured properly to receive an immigration benefit but also that the project is structured with a clear exit to ensure capital return (plus interest) at the end of the investment period. Thorough due diligence is crucial and there are no shortcuts here other than reading through all the offering materials. If you are not savvy, hiring a 3rd party to assess project viability may be money well spent. This could also be done by your wealth manager, depending on their familiarity with private placements.

Through careful planning and research, you will save yourself from headaches along the way and ensure your investment journey is exciting and stress-free as you navigate toward permanent residency in the United States.

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