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EB5 INVESTORS MAGAZINE
Understanding EB-5 investments : key financial insights and risks
How to fully understand your EB-5 regional center investment from a financial analytical perspective and the risks .
By Chris Foulger
FFrom the glitzy skyscrapers of New York City to single-family homes in San Diego , and everything in between , EB-5 investors face a dizzying amount of real estate projects in the marketplace vying for their trust and investment dollars . Although most individuals with $ 800,000 to allocate to a green card program are financially sophisticated , they may not have the U . S . -specific real estate experience to evaluate the risks and rewards of these complex investments fairly . This article hopes to guide investors as they navigate these waters and try to determine if a proposed project is appropriate for their situation .
Though there are a great many variables to consider , all should agree that an investor ’ s two primary goals are : 1 ) to receive their green card , and 2 ) return on their $ 800,000 investment . With these goals in mind , below is a primer on some fundamental factors to consider when comparing EB-5 opportunities .
A project may be financially successful but fail to create the required jobs .
Examples of direct jobs include the construction jobs associated with building a project or the employees who work at a hotel once completed . Indirect jobs are those created from the economic activity generated by the project .
Regional centers use an economic model such as Rims II to determine the number of direct and indirect jobs created . A project ’ s economic success ( or failure ) does not necessarily determine whether the job creation requirement has been fulfilled . A project may be financially successful but fail to create the required jobs . Alternatively , a project could fail financially but still achieve the requisite job creation purely through project construction . Because USCIS allows for bridge financing , some projects have commenced construction and , therefore , created the requisite jobs even prior to receiving EB-5 funds . This unique scenario can completely remove the risk of job creation for an EB-5 investor .
Job Creation for EB-5
Each EB-5 investor must create at least 10 jobs through their investment . The U . S . Citizenship and Immigration Services ( USCIS ) recognizes two types of job creation through regional center investments : direct and indirect . Direct jobs are those created from the EB-5 project itself .
EB-5 in the Capital Stack
The capital stack is the term used to describe how the total cost of a project is divided among the various investor groups providing the necessary capital . Job creation can only materialize after the sponsor has the capital stack committed and the project gets built . A prudent capital stack is
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