EB-5 Green Card: Tailor-made to focus on foreigners seeking US permanent residency

By Sumi Rengaraj

The EB-5 visa program has demonstrated a miraculous recovery following the pandemic. This has propelled industry experts and contributors to take a bullish approach, primarily because of the increase in contributions by foreign investors, in addition to the renewed interest and demands from American developers seeking alternative funding in an otherwise cash-stripped market.

The EB-5 visa program, tailor-made to focus on foreign nationals seeking US permanent residency or green card in exchange for investment in the country, has established itself as an economic stimulus. The EB-5 requires an investment of at least $800,000, focused on creating and sustaining at least 10 full-time jobs for two years, leading to rapid economic growth, especially in high-unemployment areas.

Historically, the program has also been a huge alternative to the H-1B visa, providing 10,000 visas every year on average, along with a lucrative return on investment (ROI) to the investors.

As per the EB-5 trade association Invest in the USA (IIUSA), at least $834 million was invested in the first two quarters of 2023. The fund was used to develop commercial real estate and infrastructure projects.
However, similar to all avenues of investment, EB-5 real estate investments come with their own sets of risks and rewards, propelling investors to design innovative strategies to safeguard their interests.

A successful EB-5 real estate investment offers endless possibilities, but a lack of strategies can have dire consequences. Investors must maintain a strategic balance between risk and reward, which calls for effective strategies to garner a successful EB-5 real estate investment.

Risks associated with EB-5 real estate investments

It remains of paramount importance to understand the fundamental risks associated with EB-5 real estate investment. Market shifts, regulatory switches, and project-oriented difficulties can turn out to be detrimental to a successful investment. This is why an extensive risk assessment remains crucial, diminishing potential drawbacks.

As per the industry reports, a considerable amount of EB-5 visas are granted to regional center projects every year. This means investors must compare the success rates of projects in regional centers and direct investments. According to US Citizenship and Immigration Services, 87% of the I-526 applications, the beginning of the EB-5 process, are approved.

Risk-diminishing strategies

Before making any investment, conducting substantial research is beneficial for the success of the investment. This remains similar for EB-5 real estate investments, where investors must go through the history of the project, performance, and regulatory compliance. The assistance of legal and financial experts with appropriate knowledge of immigration and real estate regulations often provides invaluable information.

Selecting an investment model

Investors must have a clear idea of their financial condition before deciding to invest in either a regional center or direct investment. Investors who decide to invest through regional centers must scrutinize the center’s track record, project index, and regulatory compliance. Others who opt for direct investments must go through the business model, future projections, and project viability before selecting their choice.

Studies show that regional centers offer a higher rate of success when compared to direct investments, including a substantial 92% I-526 application approval rate.

Diversifying Investment

EB-5 real estate investors must look to distribute the risk associated with the investments across two or more projects. This decision can safeguard the investors with a cushion against slumps in particular sectors by adding an extra layer of security and enhancing the probability of success.

Keeping a Seamless Exit Strategy

Prior to deciding on an EB-5 real estate investment, investors must understand their preferred project’s exit strategies. A project exit strategy can be following the completion of the project, sale, or refunding. Understanding the exit strategies could enhance the return on investment (ROI) for the investors and safeguard them from unexpected challenges.

Understanding Rewards for EB-5 Real Estate Investments

Along with risks, EB-5 real estate investments offer lucrative rewards to investors. The primary focus of EB-5 investment is to grant permanent residency in the USA; however, it also offers added benefits, such as financial growth and profitable returns.

As per the US Bureau of Economic Analysis, the real estate sector in the country has been subjected to rapid growth in the past few years, making up a significant part of the GDP.

The sector has been able to outperform other asset classes, establishing itself as a financially sound option for foreign nationals looking for stability and profit. The ROI of these EB-5 real estate investments has a spectrum between 5% and 15%, with variations depending on project classifications, location, and market dynamics.

(Author is Co- Founder of Ashton Gray)