Do EB-5 Investors Get Their Money Back?
As an EB-5 visa investor, you have put a great deal of money into a Regional Center project. In return, as long as the requisite 10 full-time US jobs are created, you receive a permanent Green Card, and so does your spouse and minor, unmarried children. For most EB-5 visa investors, receiving a Green Card was the primary goal of the investment, but it’s natural to want to know whether you will also get your money back from your investment.
To qualify for the EB-5 program, the investment must remain at-risk of loss during the entire immigration process. That means the Regional Center cannot guarantee an investment return. In fact, if a Regional Center did guarantee an investment return, it is in violation of EB-5 requirements.
While the timeframe for the at-risk investment may last approximately five years, that does not mean it takes that long to receive a Green Card. Most people receive their permanent Green Card roughly two years after receiving their conditional Green Card, once the government approves the application to remove conditions. For the average EB-5 investor, the immigration process from beginning to end takes between four and five years.
EB-5 Visa Investment Return
As with any investment, it is critical that potential EB-5 investors perform their due diligence before putting their $500,000 into a Regional Center project. That includes investigating the background of those involved in the project and their real estate development history, the business plan, careful review of the offering package, and the project’s overall financial strategy and its exit strategy. Some Regional Centers include plans to buy out investors after five years, if the funds are available. Above all, make sure the project will create the required 10 full-time American jobs, or there is no permanent Green Card. The viability of the project heavily determines whether there is a potential EB-5 investment return.
Consider all possible risk factors. Look at the project’s total debt, and not only its EB-5 debt. If there is a first mortgage on the project, know that it is paid in full before EB-5 investors receive funds. Keep in mind that should a project go bankrupt, not only has the investor lost their money but they also aren’t receiving a permanent Green Card.
The Five-Year Promise
Many developers tell EB-5 investors that they can expect to receive their money back within five years. Unfortunately, that is often an unrealistic timeline. Much depends on whether the EB-5 investment is loan-based or equity-based. With the former, the EB-5 investor’s money is placed into an LLC or limited partnership, with that entity loaning the money to the real estate developer. The EB-5 investor serves as a lender and owns the particular lending entity, but has no actual ownership in the project. When a loan is equity-based, that means the EB-5 investor puts their money in the entity owning the project.
When a project is loan-based, funds are tied up for the length of the loan. This is generally between four to six years, and if it is a longer loan it cannot meet the so-called five-year promise. The loan term starts when the funds are loaned, and some Regional Centers may hold these funds in escrow until the EB-5 investor’s I-526 “Immigrant Petition by Alien Entrepreneur” is approved. The loan term does not begin until escrow funds are released. Other Regional Centers may immediately loan these funds to the project developer, starting the loan term clock ticking.
When an EB-5 investor goes the equity route, it is hard to tell when they may receive their EB-5 investment return. That is because investors receive money when the project is sold, and much depends on the current real estate market, interest rates and other variables.
For some EB-investors, the five-year promise comes true. For investors looking for a more guaranteed return, it is wiser to invest in a loan-based project. Even if the investor must wait more than five years, they should receive repayment, as long as the borrower does not default on the loan. With an equity-based loan, it is impossible to tell when or even if a project will sell. Unless an EB-5 investor is willing to make a long-term commitment, avoid equity-based loans.
If you are seeking a better life in the US for yourself and your family, Lightstone can help. The EB-5 investor visa is one of the easiest ways for qualified investors to obtain permanent US residency for themselves, their spouse and unmarried children under age 21. Lightstone currently has US $6 billion in assets under management and development and over US $400 million raised in EB-5 capital for top projects in major real estate locations, including New York City and Miami Beach.