One of the largest challenges for most new real estate developers (especially, when it comes to commercial properties) is funding. Sometimes traditional places investors go to for financing real estate projects can be difficult to find. In 2008 as the usual sources for money started to dry up, many business owners and real estate developers started turning to a different source of funding for their projects. The Immigrant Investor Program, EB5 as it is also known, was signed into law in 1992, but only relatively recently has it become a tool for real estate financing.
The program is administered by the U.S. Citizenship and Immigration Services (USCIS). The program allows for foreigners with deep pockets to get a green card and become a conditional, permanent resident of America. With an investment of at least $500,000 in a qualified, for-profit business, the EB5 program can be a win-win.
There are two basic options available to “investment immigrants.” A person can invest on his own as an “individual investor” or they can pool their money and invest through an “EB5 Regional Center.”
If an investor chooses to invest on their own, they must find the property or business on their own and it should be one they can directly manage. This makes it an attractive option for people who prefer to have a hands-on style of management.
Investing through a regional center, the investor isn’t alone. Regional centers help sustain economic grown and job creation in specific areas and act like brokers who match investors and developers. As reported by Investorvisa.ae, roughly 95 percent of all visa investments are channeled through regional centers and the centers frequently coordinate multiple development projects at any given time.
The EB-5 program has expanded as more real estate developers learn of the program and see the benefit. In 2007 there were 11 regional centers nationally. Today there are over 200. The number of investors has grown as well. In 2007 there were just 775 EB5 Investor applications. Today that number has grown into the thousands.
One downside of the EB5 is the amount of time required before the money can be seen. The interval between initial application and funding can be up to 12 months in some cases, and many cases take up to a year and a half. The waiting period can be reduced if a real estate developer wants to use the capital before the visa is issued. If the visa is later denied though, the funds must be returned to the investor. Because of this, some developers ask for more capital than is actually needed for their projects.
President Obama signed into law a three-year reauthorization of the EB5 program in 2012. With the increase in interest in the program and the past success, Congress is starting to review the idea of making the EB5 program permanent. Another option being considered is lowering the minimum threshold for investment to allow more foreign investors, which would help fuel an American real estate recovery.
Arkady Bukh, Esq is a veteran New York criminal attorney who focuses on high profile white collar crime and Federal cases. Arkady is also an author published in Law360, NJ Law Journal, Daily Journal, Enrepreneur, Nolo, and many other legal media. Arkady can be reach at Bukh Law Firm, 14 Wall St, New York NY 10005, (212) 729-1632, NYCCriminalLawyer.com