Factors to Consider Before Making an EB-5 Investment

There is no doubt that the EB-5 Immigrant Investor Program has helped thousands of local businesses across the United States. The EB-5 investment industry thrives due to its ability to help foreign nationals become eligible for U.S. residency. However, just like with any other government program, the EB-5 program undergoes periodic changes. Two such amendments in 2021 were the repeal of the EB-5 Modernization Rule and the suspension of the EB-5 Regional Center Program.

Before becoming an EB-5 investor, it is important for foreign nationals to familiarize themselves with the technicalities of the program. Potential investors must also study and understand the program’s regulations set by United States Citizenship and Immigration Services (USCIS). This article outlines the main factors a potential investor should consider making an EB5 investment.

Immigration Risk

While the EB-5 program is commonly thought of as a path to U.S. residency, making an EB-5 investment does not in itself guarantee a U.S. green card. This immigration risk is due to the fact that all EB-5 investment petitions are meticulously examined by USCIS. Any incomplete, inaccurate, or misleading information in the visa petitions may lead to a denial. Visa petitions must also provide evidence of complete compliance with the applicable regulations.

For example, Form I-829 petitions must provide evidence that at least 10 full-time jobs for U.S. workers were created. If the EB-5 project fails to create this number of jobs, the foreign national’s petition will be denied.

Sources of EB-5 Funds

EB-5 program regulations allow an investor to use any legal source of funds. For example, savings from salary payments, a loan from a bank, capital from a real estate sale, or an inheritance would all be acceptable sources. However, the foreign national making the investment needs to prove the legality of the EB-5 capital.

This can become a very challenging part of the process because some funding sources are quite difficult to document. In Form I-526, investors need to trace the capital back to its original source. For a real estate sale, for example, it would not be sufficient to provide proof of the sale of the real estate. The investor would also need to prove that they purchased the real estate with legal funds and provide supporting evidence of how they acquired those original funds.

Other Expenses

When considering an EB-5 investment, interested foreign nationals will be aware of the minimum threshold for the investment itself, which is $500,000 for projects in targeted employment areas (TEAs) and $1,000,000 for non-TEA projects. However, investors have to pay additional expenses, such as the following.

  • Fees related to filing USCIS visa petitions;
  • Immigration counsel fees;
  • Relocation costs when granted conditional permanent residency.

It is important for a prospective EB-5 investor to be prepared for these extra expenses, in addition to their investment capital.

These factors are crucial when a prospective investor is deciding whether to make an EB-5 investment. Investors will have to face risks regarding their investments, comply with strict requirements, and pay additional fees associated with becoming an EB-5 investor. Because of these factors, the EB5 investment program may not be suitable for all potential investors. Nevertheless, for those who can fulfill these requirements, an EB-5 investment is an accessible route to permanent U.S. residency and even citizenship.