If you and your family are interested in obtaining U.S. Green Cards through the EB-5 program, you likely have two distinct goals: immigration success and financial success.
Immigration success means getting U.S. Green Cards for yourself and your dependent family members. Green Cards will allow you to access expanded career and academic opportunities while enjoying the United States’ high standard of living.
Financial success means getting a timely return on the funds you invest in an EB-5 project.
To apply for EB-5 Green Cards, you will have to invest at least $800,000. Like most investors, you probably want to be repaid within a reasonable period and recover the entire invested amount.
Of course, it takes significant research to find an EB-5 project that will help you get U.S. Green Cards as well as repay your funds.
There are numerous EB-5 projects on the market today, and you will have to examine many aspects of each potential project: the terms of the EB-5 offering, the reputations of the regional center sponsor and project developer, and more.
As a result, selecting an EB-5 project can seem very complicated at first.
However, you can simplify the research process by focusing on the single most important factor in an EB-5 project: its business success.
More than any other factor, your immigration and financial goals depend on your EB-5 project’s financial success.
If an EB-5 project is economically successful, it will most likely provide you with U.S. permanent resident status and return your invested funds on time.
In this article, we provide a simple, step-by-step guide to assessing an EB-5 project’s potential for business success. You can use this process to do research on any EB-5 project before investing.
First, we explain in more detail why your immigration and financial success depends on your EB-5 project’s business success.
Why an EB-5 Project’s Financial Performance Is Crucial
How to Evaluate an EB-5 Project’s Business Potential
Comparing Business Feasibility Across Various Projects
EB5AN’s Commitment to Sponsor Financially Successful EB-5 Projects
Further Resources for Selecting an EB-5 Project
Why an EB-5 Project’s Financial Performance Is Crucial
Immigration Success
For you and your family to receive permanent U.S. Green Cards, the EB-5 project you invest in must create at least 10 jobs per EB-5 investor. This is USCIS’s main requirement to qualify for an EB-5 Green Card.
If your EB-5 project fails to meet the job creation requirement, USCIS will ultimately deny your application for permanent U.S. Green Cards.
Importantly, an EB-5 project’s job creation depends directly on its financial performance.
Qualifying EB-5 jobs are either standard full-time positions or are calculated based on a project’s construction spending.
In either case, an EB-5 project needs to make enough money to reach its construction spending projections and create at least 10 jobs per EB-5 investor.
If your EB-5 project does not make enough money to reach its construction spending projections and create enough jobs, you and your family will not get U.S. Green Cards.
Financial Success
After you make an EB-5 investment, the EB-5 capital is transferred to your regional center’s investment fund. Then, the investment fund either loans the capital to the EB-5 project or uses it to buy equity in the EB-5 project.
Once the EB-5 project has generated enough revenue (and created the required jobs, as explained above), it repays its EB-5 investors.
Many reputable EB-5 projects offer a five-year repayment term for investors. Other projects offer a faster repayment term. However, a faster repayment term doesn’t guarantee that the project will repay its investors within the timeframe—or repay them at all.
The project needs to be economically successful to repay its EB-5 investors.
Also, keep in mind that EB-5 funding generally does not hold the highest priority level in an EB-5 project’s repayment structure. The EB-5 funds are usually repaid after the project’s senior lender and other funding sources.
This means that, before repaying your funds, your EB-5 project will first have to repay its senior lender.
If the project fails financially, it will still have to repay the senior loan, and it may not have enough capital to repay the EB-5 funds. Should this happen, you could even lose your entire investment amount.
What This Means for EB-5 Investors
Regardless of what real estate class your EB-5 project is in—such as a hotel, condominium, or manufacturing plant—if the project’s business activity is successful, you will likely both get U.S. permanent residence and have your funds repaid.
But if the project fails to sell enough units, operate successfully, or otherwise generate enough revenue, your funds and immigration goals will be in danger.
How to Evaluate an EB-5 Project’s Business Potential
You can use the following procedure to determine an EB-5 project’s likelihood of succeeding financially.
The best way to reduce risk is to invest in an EB-5 project that is already profitable. In this case, the project simply has to continue to execute its business plan and remain profitable.
The best EB-5 projects are already selling property units and keeping investors up to date with monthly or quarterly sales reports. An EB-5 project should be willing to provide you with regular sales updates if it has already started to sell units.
Assessing Market Feasibility
For projects that are not yet profitable, you will have to review the project’s market feasibility.
Is there a proven demand for the project in the local area? For example, an EB-5 project may be the second or third phase of an established project that is already successful.
Is the project located in an area with a declining population—or is the area’s economy declining? For an example of how to analyze an area’s real estate potential, see our overview of recent real estate trends in the California Bay Area.
What is the track record of the project’s developer? Has it ever failed to complete a project? Has it executed projects in this industry or area before?
A key question to answer is whether the project has already secured the necessary financing to reach completion. The best projects have already secured a senior loan and do not depend on future EB-5 funding to reach completion.
Generally, projects that are in the earlier stages of construction are riskier. The riskiest projects have not begun construction or even secured the needed funding.
Is the EB-5 Project in a Low-Risk Industry?
Risks in Energy and Operations-Based Projects: Steel, Mining, Oil, and Manufacturing
EB-5 projects in energy and operations-based industries are generally riskier. These industries include steel, mining, oil, and manufacturing.
Unlike traditional real estate, it can be much more difficult to determine whether these projects will be profitable.
Unpredictable Price and Demand Projections
Energy and operations-based projects rely on future price and demand projections. But actual prices and demand may turn out to be significantly different once the project is completed.
The pricing of raw materials, energy, and intermediate goods can change quickly because of geopolitical events, changes in trade policies, and shifts in supply and demand dynamics.
For example, political instability in oil-producing regions can lead to sudden increases in oil prices. This can cause the prices of other commodities to change as well.
In the World Energy Outlook 2023 report, the International Energy Agency warns about the unpredictability of energy markets.
And if a project’s demand projections are inaccurate, its facilities will either be underused or unable to keep up with demand.
For example, a sudden decline in demand for specific commodities—such as during the 2008 financial crisis—can result in overcapacity, leading to financial losses. During that crisis, many manufacturing industries experienced excess capacity as demand fell.
In addition, technological changes can quickly affect manufacturing industries. Advances in technology might cause previous manufacturing methods to become obsolete or introduce new product types.
An outstanding example of this is the rise of renewable energy, which has harmed traditional fossil fuel projects.
All of these dynamics make these industries much less predictable—and therefore riskier for EB-5 investors.
Energy and Operations Facilities Take Years to Generate Revenue
In addition, energy and operations-based projects generally take many years before they start to generate revenue.
This timeline increases investors’ exposure to unexpected economic shifts during the project’s construction. If a recession hits or if technological changes occur during this period, the project may no longer be competitive once it starts operating.
Critically, these projects cannot pre-sell units before construction begins, and they cannot adjust the pace of construction as demand rises and falls.
Therefore, it is highly unlikely to find an energy or operations-based EB-5 project that is already profitable.
For a more detailed analysis, see our comprehensive reports on risks in EB-5 energy projects:
Traditional Real Estate: The Safest EB-5 Project Category
Unlike operations-based projects, traditional real estate generally offers a higher level of safety and predictability for EB-5 investors.
Many traditional real estate categories can become profitable relatively quickly. It is also easier for EB-5 investors to assess these projects’ market feasibility and make an informed investment decision.
EB-5 investors can use publicly available information on an area’s real estate market to gauge a project’s feasibility by doing research on recent trends. For example, they can find out whether the project’s business model has already been successful in the area, and they can see what comparable constructions have been sold for.
If the project category is flourishing in the area and there is a high demand from the project’s target demographic, it will likely be a safe choice for EB-5 investors.
Single-Family Home Developments
Within the real estate industry, single-family home developments can be a particularly safe option for EB-5 investors.
Single-family home projects can adjust the pace of construction according to the current housing demand in the area—without relying on future projections. This flexibility allows developers to slow down or accelerate construction projects as needed.
By aligning the construction schedule with buyer demand, these projects can avoid both overproduction and failure to meet demand.
Additionally, single-family home developments often pre-sell units with non-refundable deposits, making it easier for the project to create revenue, even during the early stages of construction.
Pre-selling allows projects to secure part of their revenue upfront, which reduces the need for extensive borrowing and interest costs. This approach also enables developers to adjust their marketing strategies and home specifications in advance of actual construction.
Historical real estate data shows that single-family homes remain one of the most predictable asset classes. During economic downturns, residential real estate tends to recover faster than other sectors.
And with continuous population growth in many areas, new single-family home projects are constantly in demand.
In particular, single-family home communities for active adults have experienced a recent surge in popularity in the Southeast United States, an area that has seen a significant population influx of retirees.
Comparing Business Feasibility Across Various Projects
When you begin to compare EB-5 projects, the variety of available options may seem overwhelming.
You may initially find several projects that seem economically viable.
It’s possible that more than one of the available projects will turn out to be successful—but which project is more likely to become profitable quickly and repay its EB-5 investors?
The best practice is to carefully compare each project’s risk profile and choose the safest option.
As you evaluate each project’s economic feasibility to answer this question, avoid relying only on a project’s claims and projections.
A project in the early stages of construction (or that has not begun construction at all) may promise high returns and seem like a good option.
However, the safest option for EB-5 investors is to choose projects that are already profitable and have already created the necessary jobs for their investors to obtain permanent resident status.
EB5AN has developed a detailed list of questions that you can use to compare EB-5 projects efficiently.
Once an EB-5 project provides you with written answers to these questions, you will have a good understanding of its risk profile.
DOWNLOAD EB-5 PROJECT SELECTION QUESTION LIST
EB5AN’s Commitment to Sponsor Financially Successful EB-5 Projects
EB5AN has helped over 2,300 EB-5 investors find low-risk, financially viable EB-5 projects.
We are aware of the significant immigration and financial commitment that EB-5 investors make—and we believe that EB-5 investors deserve institutional-quality projects that will repay them promptly and help them qualify for lawful permanent residence.
Therefore, we only sponsor EB-5 projects that clearly demonstrate their ability to succeed financially and create the required jobs.
Many of our projects have already created all required EB-5 jobs and are already profitable.
EB5AN has never sponsored an energy or manufacturing project, such as the types mentioned above. We believe these industries, with their highly volatile and unpredictable changes in price and demand, represent a high risk for our investors.
We prefer to sponsor traditional real estate developments. As described above, our investors can easily research these projects and verify if their financial projections are realistic—they can even visit them in person to see them for themselves.
In these cases, investors simply need to answer questions such as “Is the project likely to sell this number of homes in this location at this price point?” If the answer is yes, then the project is likely a good investment.
Unlike other EB-5 operators, we do not sponsor EB-5 projects that offer higher returns but put investors’ funds at risk. Instead, we only sponsor projects that we would feel comfortable investing in ourselves.
EB5AN has prepared a number of resources to help EB-5 investors evaluate projects, ask the right questions, and ultimately protect their immigration goals and hard-earned funds.
We invite you to schedule a free consultation to learn more about the best practices for selecting an EB-5 project. By focusing on an EB-5 project’s business feasibility, you will likely be able to get a return on your funds and obtain U.S. Green Cards for yourself and your family.
Further Resources for Selecting an EB-5 Project
- EB-5 Investment Transparency: A Guide to Understanding Risks and Identifying Red Flags
- Before You Invest in an EB-5 Project, Check Its Financial Statements
- EB-5 Investments No Longer One Size Fits All: Faster Green Card vs. Higher Return vs. Shorter Investment
- Check These 4 Key Factors to Avoid Losing Money in an EB-5 Investment
- EB-5 Investor Bill of Rights: 10 Rights Every EB-5 Investor Should Have
