Learn how to identify high-risk rural projects to protect your immigration and financial success.
Rural EB-5 projects have experienced a surge in popularity since the EB-5 Reform and Integrity Act of 2022 (the “RIA”) was signed into law. Under the RIA, EB-5 visa applicants who invest in rural projects enjoy two main benefits: set-aside visas and priority processing of Form I-562E.
For Indian and Chinese investors, set-aside visas allow them to avoid years of additional wait times for their EB-5 Green Cards.
There are three categories of set-aside visas: rural, urban, and infrastructure projects. Of the three, rural projects get by far the largest supply. The rural set-aside category gets 20% of the total yearly number of EB-5 visas. On the other hand, the urban set-aside category gets only 10% of the EB-5 visa supply. Infrastructure projects get 2%.
Clearly, rural EB-5 projects offer many benefits. However, they also come with a unique risk profile. EB-5 investors looking for rural projects are advised to research each option carefully. This will help them to increase their chances of immigrating successfully and getting their money back.
In this article, we explain how EB-5 investors can choose safe rural projects with solid financials. Investing in a profitable EB-5 project makes it more likely for investors to get their Green Cards and a return on their invested money.
When a foreign national applies for an EB-5 visa, they are not guaranteed to obtain a Green Card or a return on their money.
Rather, USCIS only grants Green Cards to EB-5 investors whose money is used to create at least 10 jobs. Most EB-5 projects calculate job creation based on the amount of money they spend on construction.
An EB-5 investor’s chances of getting their money back depend on whether the project they invest in is financially successful.
One of the most common investment mistakes in the EB-5 market is to rely solely on a project’s future revenue projections or other promises. Future demand and revenues may be significantly lower than projected.
EB-5 applicants do not have to take this risk.
Rather, the best practice is to invest in an EB-5 project that is already profitable and demonstrating its financial viability. The project’s financial statements should prove this.
EB-5 investors should approach project selection with a mindset of “Don’t tell me—show me.”
Investing in a project that has already demonstrated financial success could make the difference between losing your $800,000 or getting a timely return.
Common Financial Risks in Rural EB-5 Projects
To qualify as rural, an EB-5 project must be located in an area with a population of 20,000 or fewer. In addition, rural projects cannot be located within metropolitan statistical areas (MSAs).
Businesses in rural areas often face financial risks due to their small population. Rural EB-5 projects are no exception.
Early-Stage Rural Projects
One of the main issues with rural EB-5 investment projects is that they are generally early-stage. This means that construction has recently begun or is yet to begin. Unlike established businesses with a track record of success, early-stage projects have not yet generated revenue. This makes it difficult to gauge their potential for profitability. This lack of information can result in a higher level of uncertainty for investors. They must rely on projections and estimates to determine the project’s viability.
Another challenge in evaluating early-stage rural EB-5 investment projects is the unpredictability of construction costs and timeframes.
Construction projects, particularly in rural areas, can be subject to unforeseen complications.
These include weather-related delays, labor shortages, and fluctuations in material prices. These factors can substantially affect the project’s overall cost and timeline, making it more challenging to assess the financial stability of the project. Investors may be hesitant to commit funds to a project with unpredictable costs and completion dates.
Riskier Financing and Economic Uncertainty
A significant challenge associated with rural EB-5 investment projects is their difficulty in securing financing. The smaller market and higher risks inherent in rural projects may make major banks reluctant to provide financing.
One of the main reasons why rural EB-5 investment projects are harder to finance is the lack of collateral and guarantees that banks look for.
Banks and financial institutions often require collateral or guarantees as a form of security to minimize their risk. However, rural projects may not have the necessary assets or strong guarantors to satisfy these requirements, making it difficult to secure loans or attract investors.
Rural areas are often characterized by economic uncertainty, which can make financing more challenging for rural EB-5 projects. Factors such as a declining population, limited job opportunities, and volatile market conditions can lead to concerns about the long-term viability of the project.
As a result, banks and other lenders may be less inclined to provide financing for projects in these regions, further increasing the risks for EB-5 investors.
In addition, today’s high interest rates pose further challenges for rural EB-5 investment projects seeking financing. Higher interest rates can make borrowing more expensive, which can impact the overall financial viability of the project.
The hesitancy of major banks to finance rural EB-5 investment projects often leaves developers with limited options for alternative funding sources. While there are some private lenders and non-traditional financing options available, these alternatives may come with higher interest rates or less favorable terms.
Additionally, rural projects may struggle to attract investors due to the perceived higher risk profile and uncertain returns.
Twin Lakes Georgia: A Profitable Rural EB-5 Investment Project
Based on publicly available information, Twin Lakes Georgia, an EB-5 investment project by EB5AN, stands out as the only large-scale rural EB-5 project in the market that is already profitable.
While most rural projects are attempting to recruit investors into a project that is hoping to obtain all financing, create jobs, and become profitable, Twin Lakes has already achieved these milestones. This significantly lowers the financial and immigration risk for EB-5 investors.
With millions of dollars in profits and over 500 homes sold, Twin Lakes represents a unique and attractive investment opportunity in the rural EB-5 market.
A Profitable Rural EB-5 Project
One of the most distinguishing aspects of the Twin Lakes Georgia project is its profitability. In contrast to many rural EB-5 investment projects that are still in the early stages of development and seeking financing, Twin Lakes has already generated millions of dollars in profits for its equity holders.
This financial success demonstrates the viability of the project and provides a solid foundation for further growth and development. By investing in a project that is already profitable, EB-5 investors can significantly reduce their financial risk and increase their chances of a successful outcome.
Strong Sales Record
Another factor that sets Twin Lakes apart from other rural EB-5 projects is its impressive sales record.
As of July 2023, 536 homes had been sold in the development, showcasing the project’s attractiveness and demand in the market.
In 2022, Twin Lakes experienced an average of 14 home sales per month.
A strong sales record not only indicates the project’s ability to generate revenue but also provides confidence in the project’s management team and their execution capabilities. This successful track record can be particularly appealing to EB-5 investors looking to minimize their immigration and financial risks.
Low Immigration and Financial Risk
Twin Lakes’ profitability and strong sales record contribute to a lower immigration risk for EB-5 investors. A key concern for investors participating in the EB-5 program is ensuring that their investment leads to the creation of the required number of jobs to secure permanent residency in the United States.
Twin Lakes has already met its job creation targets for all EB-5 investors. Therefore, investors can have greater confidence in the project’s ability to satisfy the EB-5 program’s requirements, thereby reducing their immigration risk.
Experienced Developer
The Kolter Group, one of the largest residential real estate developers in the Southeast, is developing the Twin Lakes project. Their expertise in managing and developing single-family home communities has been crucial in driving the project’s growth and profitability. This experience can provide assurance to EB-5 investors that the project will continue to be well-managed and have a higher likelihood of long-term success.
All of EB5AN’s and Kolter’s projects have received approval from USCIS. The Kolter Group has never failed to repay a loan or failed to complete a project since its inception in 1997.
To get a U.S. Green Card and their invested money back, EB-5 investors must carefully evaluate each investment opportunity. This is particularly important with rural EB-5 projects.
