Every EB-5 investment carries a degree of risk because no project, reliable as it may seem, is a guaranteed success. The EB-5 program’s guidelines require that all invested capital remain at risk during the entirety of the investor’s conditional permanent residence. Therefore, the regional center in charge of the project cannot guarantee that the investor will obtain their permanent Green Card or have their capital returned at the end of the investment process.
Still, investors can minimize their financial and immigration risk by thoroughly researching their potential projects, regional centers, and developers.
To reduce their financial risk, investors need to consider the following factors:
1. How will the investor’s capital be released to the developer?
Many reliable project developers arrange for part of the investor’s capital to be released once their I-526E petition is submitted. The rest of the capital is released after the I-526E petition is approved. This system is known as the hybrid escrow release structure.
2. When and how will the investor’s capital be returned if their I-526E petition is denied?
The most trustworthy developers guarantee that they will return all of the EB-5 investor’s capital within 60–90 days of the I-526E denial. This is known as a denial refund guarantee. Still, investors must make sure that the developer has the assets to follow through on this guarantee. They should also find out if the administrative fees will be returned as well.
3. How promising are the developer’s reputation and history?
Investors should find out how much experience the developer has, how many projects it has completed successfully, how much equity capital is at risk, and whether the developer has already done business with the lenders or banks involved in the project. If the developer is involved in serious litigation or has previously defaulted on loans, it may not be trustworthy.
Investors should consider the following factors related to immigration risk:
1. Can the project be completed even if the full amount of EB-5 capital is not obtained?
The safest projects are prepared for possible contingencies and will be completed even if they fall short on capital. This is the most important issue related to immigration risk. Other factors such as the project’s construction completion guarantee will also determine the project’s reliability.
2. Will the project create the required number of jobs?
Reliable projects will aim to create more than the required number of jobs from construction alone. Investors should also examine the total construction cost spent by the project before it receives EB-5 capital.
