How You Can Diversify Your Investment Portfolio With EB-5

The U.S. Congress introduced the EB-5 Immigrant Investor Program in 1990 to attract foreign capital investments and create jobs for American workers. In exchange for a substantial investment in the U.S. economy, the program grants U.S. permanent resident status to foreign nationals.

To qualify for the EB-5 program, a foreign individual must invest at least $1,050,000 in a new commercial enterprise (NCE) or $800,000 if the NCE is in a targeted employment area. The investment can be made directly or through a regional center and must create or preserve at least 10 full-time jobs for U.S. workers.

Although the primary goal of an EB-5 investment is to obtain U.S. permanent residency, it also presents an excellent investment opportunity with the potential for capital returns. This means that an EB-5 investment can be part of a diversified portfolio, reducing overall risks for investors.

In this article, we’ll look at how you can diversify your investment portfolio with an EB-5 investment and the potential benefits of doing so.

How an EB-5 Investment Fits Into a Diversification Strategy

Diversification simply means owning investments in different asset classes. The idea is to spread your investment across several asset classes instead of “putting all your eggs in one basket” by investing your entire funds in one area. By spreading your funds around, you reduce your investment risk if one asset class fails.

Diversification in its traditional sense, however, may not be ideal for an EB-5 investment because of the requirements of the EB-5 program. It is particularly difficult to meet the job creation requirement with this investment model because USCIS requires all 10 jobs to be created by one job-creating entity (JCE).

This means an investor cannot spread their $800,000 EB-5 capital across multiple TEA projects. Instead, they must choose one project to serve as the JCE. If the selected project fails and does not create the required jobs, the EB-5 investor will not qualify for their non-conditional Green Card.

While the diversification model itself does not apply to the EB-5 program, an EB-5 investment can fit within an individual’s diversification strategy. In particular, a real estate EB-5 investment is an excellent addition to a diversified investment portfolio. We’ll discuss why in the following sections.

Alternative Asset Class

An EB-5 real estate investment can be a valuable alternative asset class in a portfolio diversification strategy. Real estate is a tangible asset class that offers protection against inflation. It is also a “real” asset because your investment is tied to real land and property rather than intangible financial instruments.

In some EB-5 investment structuring, the land and property are collateral for the EB-5 investors’ funds. EB-5 offerings from reputable regional centers may also include a repayment guaranty from a well-capitalized guarantor.

Although real estate is not as liquid as traditional asset classes—such as stocks, bonds, securities, and commodities—it is less volatile than the stock or commodities market. Additionally, as mentioned earlier, real estate investments are less prone to devaluation from inflation, and they can offer potentially high returns.

Geographic Diversification

Geographic diversification is a strategic approach to investing that involves spreading investments across states, regions, or countries to reduce risk. Through this approach, if one area begins to struggle economically, only your investments in that area will follow suit.

An EB-5 regional center investment offers foreign high-net-worth individuals the opportunity to diversify their investment portfolio geographically and benefit from growth potentials in less-saturated markets. Such an investment benefits both prospective EB-5 investors already in the U.S. through other visa routes and those investing from outside the U.S.

Foreign-born investors already in the U.S. on non-immigrant routes most likely live, work, or study in urban areas. Investing in an EB-5 project within their locality may mean investing in a saturated market with decreasing demand, which can affect the chances of project completion and the profitability of their investment. It could also mean a higher investment amount of $1,050,000, as the area may not qualify as a targeted employment area.

By investing in a regional center rural TEA project, these investors will benefit from a lower-cost investment in a profitable project within a high-demand area. This increases their chances of earning interest and capital returns, and they’re more likely to meet the requirements for an EB-5 Green Card.

For prospective EB-5 investors outside the U.S., the EB-5 program allows them to diversify their investment into the U.S. market. By the time they arrive in the U.S. after undergoing consular processing, they may have already started receiving interests from their investments. These returns can then prove to be useful income, enabling them to settle in the U.S. quickly.

Mid- to Long-Term Investment

In addition to geographical and asset diversity, a diversified portfolio comprises short-term, mid-term, and long-term investments. Depending on the project finance structuring, EB-5 investment tenures usually span three to seven years, making them excellent mid- to long-term investments. Investing in a mid-term rural TEA project can also minimize the risk of redeployment.

In general, with proper due diligence and the right financing structure, an EB-5 investment can yield returns in addition to capital repayment.

Securing a U.S. Green Card in Addition to ROI

The primary benefit of an EB-5 investment is a U.S. Green Card for the investor and their dependent family members. The EB-5 program is not just an investment program—it is an accelerated path to permanent residency in the U.S. and, eventually, citizenship.

Thanks to the concurrent filing provision, qualifying EB-5 investors already based in the U.S. can file for adjustment of status, employment authorization, and advance parole along with their EB-5 petition. That way, they can start enjoying the benefits of a Green Card even before receiving one.

Once USCIS approves their I-526E petition, EB-5 investors and their dependent family will receive conditional Green Cards. After two years of conditional residence, EB-5 investors whose investments have created the 10 required jobs can file a Form I-829 to have the conditions removed from their Green Card. Once USCIS approves their Form I-829, they’ll become U.S. legal permanent residents and receive a non-conditional Green Card.

EB-5 Investment Offers Other Indirect ROI

A U.S. Green Card comes with additional benefits that are not financially quantifiable. A Green Card gives an EB-5 investor the right to live, work, and study in the U.S. permanently. An EB-5 Green Card holder can work for any employer anywhere in the U.S. without employer sponsorship. This status also opens investors to better job opportunities, enabling them to earn higher incomes—or EB-5 investors can choose to start a business or do freelance work.

The EB-5 program additionally benefits the investor’s dependent family (spouse and unmarried children under 21), who will also receive legal permanent resident status.

With an EB-5 Green Card, EB-5 investors’ children can enjoy free basic public education, improved access to world-class higher institutions, and reduced in-state tuition fees, saving thousands of dollars in international student fees. They may also qualify for university, state, and federal scholarships, grants, and other financial aid available to only U.S. citizens and permanent residents.

Partner With EB5AN for a Successful EB-5 Investment

A successful EB-5 investment starts with partnering with the right regional center. With the right EB-5 regional center, low-risk project, and financing structure, you can secure U.S. permanent residency while realizing your investment goals.

Partnering with an honest and transparent regional center will put you on track for a successful investment. EB5AN offers investors low-risk, first-rate EB-5 regional center projects with 100% USCIS approval to date. In 10+ years of practice, we’ve helped over 2,300 families from 60+ nationalities relocate to the U.S. as permanent residents. All our EB-5 project loans are in good standing or have been repaid.

To learn more about EB-5 investments, book a free one-on-one call with our expert team today.