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Prospective investors participating in the EB-5 investment program are required to invest at least $900,000 in a business enterprise project that meets the requirements of the EB-5 program. Choosing the right EB-5 project is not a task to be undertaken lightly for investors. Although the investment must remain “at risk” and there is no guarantee that the investor will receive the capital investment back, there are still ways in which an investor can reduce the risk of losing their funds. An investor must carefully consider various aspects of an EB-5 project prior to making the decision to invest.

A prospective investor must ensure that the EB-5 project meets the requirements set by the United States Citizenship and Immigration Services (USCIS). USCIS has designated certain organizations, known as regional centers, to provide investors with investment opportunities and facilitate the funding of such EB-5 projects. As there are a number of projects from which an investor may choose when making their EB-5 investment, an investor must do their due diligence in choosing a project that is suitable, which is gravely important as choosing an unsuitable project could lead to loss of funds and could have a negative effect on the overall citizenship goal.

1. Job Creation

A key requirement of the EB-5 program is that an investor must create and maintain a minimum of ten full-time jobs for U.S. persons. The project will have two years to fulfil and maintain this requirement, failure of which may lead to immigration risk for the investor.
Investors reviewing a project’s business plan need to be certain that the project will produce and maintain the required jobs. USCIS may also look at jobs created indirectly by the project when evaluating the status of the EB-5 investor. Therefore, the investor must understand how the regional center plans to effectively utilize direct and indirect job creation to best facilitate the USCIS requirement.

2. Location

It is important for an investor to consider the location of an EB-5 project prior to investing. To benefit from the lower investment amount of $900,000 as compared to $1,800,000, investors must invest in Targeted Employment Areas (“TEAs”). To qualify for TEA designation, an EB-5 project must be in a rural area or an area with a high unemployment rate. An investor must ensure that the proper TEA certifications are in place to be eligible for the reduced investment threshold of $900,000.
Additionally, the location of a project is important as it plays a vital role in its success, which in turn is significant in relation to the chances of investors receiving their funds back from the project. An investor must evaluate whether the project is located in a desirable market and whether there is demand for the project. For instance, a hotel proiect would be most suitable for an area in which tourists and business travelers visit frequently. It would be important to analyze the business plan of the project along with other financials to determine whether the project is feasible and would remain profitable in the future.

3. Project Budget and Economy

It would be beneficial for the investor to seek a third-party evaluator who can assess the project using local economic figures and statistics and ensure that they meet all EB-5 requirements. Once the investor is able to take into account the local economy based on the budget set out they will be able to ascertain the funds the project will need. This will further aid in determining whether there is a demand for the project or whether the location of the project is at a desirable location.

4. Exit Strategy

An important factor to consider is the track record of the regional center managing the funds going into the project with respect to repayment of capital to previous investors. An investor must ensure that a regional center they plan to invest with has a good track record of managing the funds going into the projects and repaying back their investors. Aside from a track record, a regional center needs to outline specifically what the exit strategy for the project would be, the timeline, and the manner in which they plan on paying back the EB-5 investors. Generally, the two dominant forms of exit are either a refinance where a bank loan is sought after a series of years of development to pay back the investors, or the developer would sell the development project altogether and would pay off the investors upon the sale.

5. Transparency

A key consideration is whether the project provides sufficient transparency for the ease of mind of the investor. An EB-5 investor may look to whether the project site has a camera that will allow them to monitor the progress of the construction. Additionally, an investor must consider whether quarterly reporting of construction progress will be provided by the regional center. This will allow the investor to monitor whether the project is proceeding as per the agreed upon timelines. If financials are not openly shared or updates not provided in a timely manner then that could be a ‘red flag’ for investors.

Our team of U.S. licensed lawyers have years of experience in helping individuals and families apply for U.S. residency via the EB-5 program. We will not only provide you with various investment options for your EB-5 application, but also assist in choosing a suitable project. If you are ready to start your migration journey with The American Legal Center of Dubai, contact us today for more information.