The EB-5 Immigrant Investor Program aims to stimulate economic growth by using foreign investment to create jobs. In exchange, investors can obtain permanent residency status in the United States—often referred to as a Green Card.
Getting a permanent Green Card isn’t the only benefit of the program, though. Many foreign investors also want to know what kind of financial gain they can get from their investments.
Rates of return depend on a number of factors. However, investors should expect to earn a much lower rate of return on an EB-5 investment than they would on, say, a diversified index fund investment.
The typical regional center EB-5 project that employs a loan-based model might earn 1% to 2% annually. In contrast, the rate of return on an investment in the S&P 500 index has averaged out to about 10% per year. Wild fluctuations do occur with index fund investments or stock purchases from year to year, of course.
In this article, we will explore the financial and non-monetary returns an investor can receive under the EB-5 program.
Factors That Influence EB-5 Project Rate of Return
When Do EB-5 Investors Get Their Money Back?
Shuaib’s Story
Other Returns on Investment
Partner With EB5AN to Protect Your Returns
Factors That Influence EB-5 Project Rate of Return
The Management Model
Every EB-5 investor funds a new commercial enterprise (NCE). An NCE is a lawful business that fulfills EB-5 program requirements.
One of the first and most important questions an EB-5 investor must answer is this: should I invest in an EB-5 NCE project directly or via a regional center?
Let’s look at what each of these options involves in detail.
Direct Investments
Only a few EB-5 investors choose to invest in a project directly. Direct investors have more control over how their funds are spent and can make riskier investments with the potential to create higher returns.
However, this approach often requires a great deal of time, effort, and relevant experience to be successful. Direct investors shoulder much of the burden of day-to-day management for their EB-5 investments.
This higher-risk option can reduce the likelihood of obtaining a Green Card in a timely manner.
Regional Center Investing
Most EB-5 investors would prefer to get their Green Card than put it at risk for the sake of higher returns.
The vast majority of them decide to work with regional centers, which offer relatively modest but stable financial returns. Regional centers purposefully work with low-risk projects to help investors get their Green Cards and not lose their capital investment.
Since a regional center pools investment capital from multiple investors, it can finance large-scale project development with greater ease than individual investors.
The United States Citizenship and Immigration Services (USCIS) has approved each EB-5 regional center. Regional centers are subject to USCIS oversight and have to abide by the agency’s regulations. They also need to uphold their reputations to stay in business.
The regional center program offers several advantages. It’s the right choice for nearly all investors who prioritize immigration goals over financial goals.
The Investment Structure
Prospective investors should also understand the differences between loan-based investments and equity-based investments before allocating funds to a new commercial enterprise.
Neither of these options is objectively better than the other. You should pick the approach that is best for your goals and risk tolerance. Below, we will take a closer look at each.
EB-5 Loan-Based Investments
When an EB-5 project or a different company that invests the money into a project has borrowed an investor’s funds, it’s a loan-based EB-5 investment. The project runs on this borrowed money. These funds must be repaid with interest by a certain date, called a maturity date.
In general, an EB-5 loan-based investment offers more safety and predictability, but with lower returns on investment.
EB-5 Equity-Based Investments
When an investor’s money is used to buy interests in an EB-5 project, it’s an equity-based EB-5 investment. The invested money usually gets paid back after a project sale or refinancing instead of by a particular date.
In general, an EB-5 equity-based investment offers higher annual returns, but with a greater risk of repayment being delayed.
When Do EB-5 Investors Get Their Money Back?
As previously mentioned, investment model choices will shape when an EB-5 participant can get their investment capital repayment. The timeline also depends on the individual project.
Most importantly, an EB-5 investor must fulfill the requirements of the EB-5 program to get repaid and get their Green Card(s). To do this, you must:
- Keep your funds invested in the project (also called keeping them “at risk”) for at least two years.
- File all of the required forms accurately and on time.
- Create at least 10 full-time jobs for American workers.
Most investors leave their money invested for longer than two years because of the following factors:
- Project requirements: It takes time to create or preserve at least 10 full-time jobs that last for at least two years. You must prove that those jobs were created.
- Project delays: An EB-5 project’s completion date may not coincide with the two-year anniversary of your initial investment date.
- Form processing delays: During the final 90 days of the two-year conditional permanent residency period, an EB-5 applicant must file Form I-829 to remove conditions on their Green Card. It can take a long time for USCIS to adjudicate this form, during which your conditional Green Card holder status is automatically maintained.
Regardless of which EB-5 option you select, it’s a good idea to perform thorough due diligence. Learn about the track record of the people and companies you’ll be working with to minimize associated risks before you make a sizable investment.
Shuaib’s Story
The experience of India-born Shuaib provides a great example of how an EB-5 applicant can get the best of all worlds by working with EB5AN.
Shuaib started his immigration journey as a software engineer in the United States on an H-1B visa. Seeking to avoid the backlog of the EB-2 and EB-3 immigration categories, he realized that the EB-5 investment route was the best fit for himself and his family.
In collaboration with EB5AN and an experienced immigration attorney, Shuaib invested in the Saltaire St. Petersburg Project. This was backed by the Kolter Group, a developer with more than 25 years of experience and a perfect record of project completion.
Structured as an equity project, Saltaire gave him a generous 6% return. Over the course of four years, Shuaib received about $118,000 in financial returns off of his $500,000 investment. He also borrowed part of that invested capital at a low interest rate.
Shuaib highly recommends the EB-5 route to lawful permanent residence, as it avoids the uncertainty and long wait times of other visa routes. He advises prospective investors to study a developer’s track record of success, how realistic a planned project is, and whether the market is suitable before making an investment.
Other Returns on Investment
As previously mentioned, the main reason to invest in an EB-5 visa is to get your Green Card.
A Green Card offers a variety of advantages connected to lawful permanent residence in the United States. If you receive one, you’ll be eligible for immigration benefits such as:
- Location flexibility: Live anywhere in the United States.
- Job options: Work nationwide without an employer sponsorship requirement, or stop working and enjoy retirement, if you prefer. Your family members will have improved access to job opportunities, too.
- Travel freedom: Travel in and out of the United States when you choose, and as often as you wish, as long as you stay in the United States for at least six months of the year.
- Healthcare opportunities: Gain access to the U.S. healthcare system.
- Social programs: Access Social Security and other benefits programs.
- Educational opportunities: Access a world-class educational system and discounted tuition rates. Students on an EB-5 visa can work, complete internships, and apply for postgraduate positions that improve their chances of securing good jobs.
- Enhanced quality of life: Enjoy an excellent standard of living in a country with a strong economy, political stability, and a stable future.
- Ability to apply for citizenship: Citizenship offers even greater benefits than conditional permanent resident status. Apply for U.S. citizenship after five years of being an EB-5 visa holder.
Other visa categories don’t always offer these benefits. Plus, thanks to the EB-5 Reform and Integrity Act of 2022, it’s also easier than ever for eligible EB-5 applicants to make a safe investment in an NCE, and enjoy the benefits of a Green Card even before they receive one.
But you’ll need to choose the right guide for your journey.
Partner With EB5AN to Protect Your Returns
The typical foreign investor participates in the EB-5 program to get a Green Card.
While the financial returns on an EB-5 investment are often modest, the other returns—in terms of improved access to life, work, and other opportunities—are enormous.
With so much at stake, you don’t want to leave your EB-5 application to chance. It’s never too early to consult with a professional EB-5 consulting firm and an experienced immigration attorney if you’re thinking about this pathway to immigration.
Book a free call with us today to find out how EB5AN can turn your dream of U.S. lawful permanent residency into a reality.
