involved and should only invest funds that they can afford to lose .
The federal government is also working to make the EB-5 program safer for investors . For example , the government has implemented new regulations that require greater transparency from project developers and regional centers . Additionally , the government has increased oversight of regional centers and imposed stricter requirements for project approval .
No matter how wealthy they might be , no investor wishes to lose money . Therefore , they should do their due diligence before committing to invest . Consider three ratios to form an objective opinion on the capital structure . They are :
1 . EQUITY AS A PERCENTAGE OF THE TOTAL PROJECT COST :
This ratio should be as high as possible , indicating significant skin in the game by the developer . If the developer has a high stake in the project , chances are higher that they will pay attention to the project and make it successful .
2 . LOANS AND EB-5 TOGETHER AS A PERCENTAGE OF THE FORWARD APPRAISAL OF THE PROJECT :
This ratio should be as low as possible , indicating that , once completed , the project value will cover the liabilities .
As a sub-category here , let ’ s look at another ratio , by definition , smaller than this one . That ratio is senior loan as a percentage of the forward appraisal of the project . Make sure that these two ratios are close . The senior loan-to-forward appraisal ratio is significant because senior lenders with expert lenders thoroughly study the project viability before committing to the loan . Therefore , if their ratio is , for example , 60 %, the ratio for the EB-5 exposure should be 70 / 75 %, and that senior lenders must have had internal models mandating sufficient buffers to mitigate their risk . 3 . EB-5 AS A PERCENTAGE OF THE FORWARD APPRAISAL AFTER REPAYMENT OF SENIOR LOAN
This ratio should be as low as possible , indicating that once the developer repays the senior loan , the remaining value of the completed project will be able to cover the EB-5 capital comfortably . The lower this ratio , the higher chance that the EB-5 capital will be safe .
While associated with investing in EB-5 projects , there are risks , and investors can take steps to mitigate these risks . They can increase their chances of a successful investment by conducting thorough due diligence and working with reputable regional centers and service professionals . Still , they should only invest funds they can afford to lose . Additionally , Congress and the federal government have taken steps to make the EB-5 program safer for investors by implementing new regulations and increasing oversight based on the RIA of 2022 . While recent bank failures have highlighted some of the risks associated with EB-5 investments , it is essential to remember that many successful projects have provided investors with a path to permanent residency and returned their capital . Ultimately , whether or not to invest in EB-5 projects is a decision each investor must make based on their own risk tolerance and financial goals . By taking a cautious and informed approach , investors can minimize their risks and potentially reap the benefits of the EB-5 program .
Marko Issever , the founding CEO of America EB5 Visa , leads EB-5 capital-related activities at Riverside Management Group , connecting international investors with EB-5 issuers . He recently launched CBP Invest , a global immigration company advising clients in second-country citizenship in countries like Grenada , Turkey , Portugal , Spain , Malta and Greece . Previously , Issever was a managing director at BNY Mellon , leading the firm ’ s financial institutions derivative sales business globally . Issever speaks Turkish and Ladino Spanish fluently . He earned his MBA in finance from The Wharton School of the University of Pennsylvania . He is a graduate of Bogazici University and Robert College , located in Istanbul .
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