If you are considering applying for an EB-5 visa, you will have to make an important decision early on in the process:
Whether you will make a direct investment or invest in an EB-5regional center.
While both options are valid, and can lead to a successful outcome, your decision will depend on your individual investment goals.
This guide will explain EB-5 Regional Center investments.
When you are finished reading, you should better understand which type of investment is best for you.
Overview of What we will Cover:
What is a Direct Investment?
What is an EB-5 Regional Center?
What are the Differences Between Regional Centers and Direct Investments?
How Do I Find a Good Regional Center to Invest In?
What are the Benefits of Investing in a Regional Center?
What are the Cons of Investing in a Regional Center?
Conclusion
What is a Direct Investment?
A direct investment is any EB-5 investment that is not made in a regional center.
Examples of direct investments include:
- starting a business
- investing in an existing business
- purchasing an existing business
What is an EB-5 Regional Center?
A regional center is a business organization, designated by the United States Citizenship and Immigration Services, that sponsors various EB-5 investment projects.
Regional centers gather investment funds from multiple EB-5 investors to fund their projects.
Regional centers are required to promote economic growth and job creation.
The projects sponsored by regional centers are usually large-scale hotel developments and other real estate developments.
As of October 3, 2017, there are 843 approved regional centers.
What are the Differences Between Regional Centers and Direct Investments?
There are three main differences between investing in a regional center and making a direct investment. These differences center on:
- Control;
- Indirect Job Creation; and
- How Jobs Creation is Proven
Control
One of the main differences between investing in a regional and making a direct investment has to do with your level of control and involvement in the operation of the business.
With a direct investment, you are typically the sole-owner of the business, or you may have some co-owners.
With direct investments, you will typically have a lot of control over the business. This is your business, so you will likely have a lot of involvement in the day to day operations of the business. You will make decisions and have a great deal of influence over the business.
With regional center investments, you are one out of hundred of other investors. You have very little involvement in the management or operations of the regional center project that you invest in. Typically, by investing in a regional center project you become a “limited partner.” As a limited partner, you are usually given voting rights and other rights granted to limited partners.
Indirect Job Creation
Another main difference between regional center investments and direct investments has to do with job creation.
One of the main requirements to get an EB-5 visa, is that you must show that your investment will lead to the creation of 10 full-time jobs for qualified US workers.
With direct investments, the 10 jobs must be “direct jobs.”
Direct jobs are jobs the jobs where the EB-5 business (the new commercial enterprise) is the employer. These are the jobs that are directly created by the new commercial enterprise.
Regional Centers, on the other hand, can count direct jobs and indirect jobs.
Indirect jobs are jobs that are created as a result of the new commercial enterprise but are not directly created by the new commercial enterprise.
To show how this works, I’ll give an example:
Lets say you are investing in a hotel for your EB-5 investment.
If you make the investment as a direct investment: You can count all of the jobs directly created by the hotel such as the hotel staff. You will not be able to take credit for any other jobs.
If you investment through a regional center: You can count all of the direct jobs, such as the hotel staff, as well as all of the indirect jobs. So if your hotel benefits the local economy, and local businesses need to hire more workers, you can take credit for those jobs.
How Jobs Creation is Proven
Another big difference between direct investments and regional centers investments has to do with how you prove to USCIS that you created the required number of jobs.
For direct investments, you must prove that the new commercial enterprise has actually created 10 full-time jobs for US workers.
You prove this by submitting evidence such as:
- Form I-9 for each employee
- W-2 for each employee
- Other relevant evidence
For Regional Center Investments, you do not have to show that the jobs were actually created. For regional center investments, an economist will typically prepare an economic calculation showing how many jobs the EB-5 project is expected to create. You are not required to provide additional evidence showing that the jobs were actually created. You do not need to submit the W-2s and the I-9s of the hired workers.
How Do I Find a Good Regional Center to Invest In?
- Disclaimer - This is not investment advice and is not a substitute for investment advice. This is just general information for you to consider. As an immigration lawyer I am qualified to give you advice on the immigration aspects of your investment. You should consult with a qualified professional to give you investment advice.
There are literally hundreds of regional centers to choose from. Picking the right regional center and the right project to invest in are critical to the success of your EB-5 visa petition.
Here are some tips to help you select the right regional center:
1. Work with Licensed Professionals
There are two main types of professionals that are licensed and qualified to give you investment advice:
- Broker/Dealers
- Registered Investment Advisors
Both of these professionals are licensed by the Financial Industry Regulatory Authority (FINRA).
You can find qualified broker/dealers and registered investment advisors using FINRA’s BrokerCheck website.
This resource can be accessed here: https://brokercheck.finra.org/
Using BrokerCheck, you can make sure that the professional you are considering is actually licensed. You can also see how long they have been licensed, client reviews, and other valuable information.
Tip #1: In addition to checking their qualifications, make sure the professional you plan to work with has experience advising on EB-5 investments.
Tip #2: Keep in mind that some broker/dealers and investment advisors may only suggest a few projects to you that they personally work with. This is why you should follow Step 2 (below) and conduct your own research.
2. Do Extensive Research
You are making an investment to get an EB-5 visa, so you need to treat it seriously.
Conduct extensive research on the regional centers you are considering.
Check their history and their track record of success. However, keep in mind that a history of success does not guarantee future success nor does it guarantee that your EB-5 visa will be approved.
Here are some questions you should ask yourself:
- Does this regional center have a track-record of success?
While this is not a guarantee that your project will be successful, it is one of the best tools to predict future success.
- Does the project that I’m planning to invest in have an approved I-526 and I-829?
If investors have already had their I-526 (exemplar) approved, it means that the project is approvable.
Investor’s investing in an EB-5 regional center with an approved exemplar already have the majority of their I-526 petition approved.
We will discuss this more down below.
- Who are the people managing this EB-5 project? What is their level of experience?
As with any investment, you want to make sure that the people in-charge know what they are doing and have proper experience.
- How many jobs is this project projected to create? Is there a surplus of jobs per investor?
As we mentioned, one of the requirements to get an EB-5 visa is that your investment must create 10 jobs. If enough jobs are not created per investor, some investors will not get their I-829 petition approved (to get the condition removed on their green card). This is why it is important to choose a project that is projecting a surplus of jobs.
- Is the project fully-financed?
There are hundreds of EB-5 projects out there and a limited number of investors. For this reason, many EB-5 projects have been unable to secure the number of investors that they were planning to secure. As a result, many projects do not have the financing in-place to reach completion.
For this reason, you should make sure that the project is fully-financed, and has back-up sources of financing.
- What percentage of the overall capital is coming from EB-5 investors?
For the same reasons mentioned above, the project should not rely too heavily on EB-5 investor capital.
- Do the project developers have their own funds invested in the project? How much?
Having personal funds committed to the EB-5 project shows a commitment to the success of the project. For this reason, you should look for projects that have funds committed by the developers themselves.
The answers to these questions will start to point you in the right direction regarding your investment choice.
You should also review potential regional center projects with your investment advisor and your immigration attorney.
Here are some additional resources to help with your research:
- This link contains a list of all approved regional centers.
- As of October 3, 2017, there are 843 approved regional centers.
- This link contains general information on the EB-5 Visa Program
What are the Benefits of Investing in a Regional Center?
There are 3 main benefits to making a regional center investment:
- Less involvement
- Deference
- Job Creation Benefits
Less Involvement
As I mentioned above, when you invest in a regional center, you have very little involvement in the management and decision making of the business.
For many investors, this is a major benefit.
With the limited management responsibilities, you are free to focus on other business pursuits.
Also, for investors with very little business experience, investing in a regional center gives them the ability to rely on the experience and competence of other business professionals.
Deference
Deference is perhaps one of the most important benefits of investing in a regional center vs. making a direct investment.
In order to explain this concept, I first must explain what an “exemplar” is.
Regional centers are given the opportunity to file a sample I-526 application to USCIS. This sample petition is called an exemplar. If this application is approved, it means that USCIS is giving its stamp of approval of the project and all the documents submitted, including the business plan, economic projections, and all other documents submitted with the petition.
By approving the exemplar, USCIS is saying that the project meets the requirements of the EB-5 visa program.
What this means is that if you invest in a project that has an exemplar approval, USCIS should rule similarly on all of the documents submitted in the exemplar and cannot re-adjudicate those aspects of the I-526 petition.
By investing in project that has an approved exemplar, the majority of your I-526 petition is already approved.
EB-5 direct investments do not have the option to file an exemplar petition. So when you file your I-526 for an EB-5 direct investment, the entire application is being adjudicated for the first time (with no deference to previous decisions).
Keep in mind:
An exemplar approval does not guarantee that your I-526 will be approved.
You will still have to prove that your investment funds were obtained lawfully. This aspect of your I-526 petition is specific to you, so it can and will be adjudicated by USCIS. An experienced immigration lawyer can help make sure that you submit these documents properly.
Job Creation Benefits
As we discussed above, another major benefit of investing in a regional center is the ability of regional centers to take credit for indirect jobs to meet the job creation requirement.
What are the Cons of Investing in a Regional Center?
Here are 3 cons of making a regional center investment:
- Lack of Control
- Administrative Fee
- Minimal Return
Lack of Control
By investing in a regional center, you have very little control over the EB-5 project. You are subject to the management and decision making of project managers.
This can be a problem for many entrepreneurs and investors if they wish to be in control of the project.
Administrative Fee
Regional centers typically charge an administrative fee for their services. This fee usually ranges from $50,000 to $70,000 as a one time payment.
The fee is in addition to the $800,000 that you are required to invest to get an EB-5 visa.
By making a direct investment, you do not have to pay an administrative fee to anyone.
For this reason, investing in a regional center is usually more expensive than making a direct investment.
Minimal Return
The returns issued by EB-5 regional centers has historically been very low.
When making a regional centers investment, you should not expect a major return on your investment. The investment should primarily be viewed as a vehicle to get US immigration benefits.
By making a direct investment, there is greater opportunity to generate high returns. By making a direct investment, the sky is the limit on how much you can potentially earn.
Conclusion
Deciding between a EB-5 regional center investment or a direct investment is one of he important decisions you will have to make, if you are considering an EB-5 visa.
You should now understand the basics of EB-5 regional centers, including:
- What is a regional center;
- The differences between regional center investments and direct investments;
- How to find a good regional center to invest in;
- The pros and cons of investing in a regional center.
If you have any questions about the material discussed in this article, you can email me directly at Michael@AshooriLaw.com
I’m very responsive to email and I would be happy to answer your questions.
Ashoori Law is a full-service immigration law firm focused on helping business professionals and entrepreneurs get visas to the United States.
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