It’s been a while since my last post. I didn’t stop writing, however. I have been busy lately writing articles for publication in EB-5 books, including one in the very important book “Immigration Options for Investors & Entrepreneurs, 3rd Ed.,” published by the American Immigration Lawyers Association, and edited by Lincoln Stone, Esq. It’s the “bible” for EB-5 attorneys.
So, I’ve got plenty of catching up to do on this blog. Let me talk today about a common request from investors I hear lately –“can you find me a direct investment I can manage myself for my EB-5 investment?” The desire for self-managed direct investment is a natural consequence of the Chicago Convention scandal last year. It’s an overreaction, in my opinion, because for the vast majority of EB-5 investors a regional center investment is the better choice, for the following reasons:
Fewer choices. There’s a very small supply of investments that can generate 10 jobs from a single $500,000 investment (a McDonalds franchise can’t be bought for only $500,000, a Subway sandwich store will not likely create 10 full-time jobs, to cite two ideas often suggested to us by investors). The possibilities for regional center projects are far greater because they can count indirect jobs based on an economist’s report in addition to direct jobs. When you are selecting among regional center projects you are trying to select the best from among hundreds of projects all of which are designed precisely to be as low-risk as possible because every one knows that this is what investors want. If you pick among that group, you are more likely to find a safe investment than if you go adventuring off by yourself.
Longer development time. Regional center projects come pre-packaged. The market research, business plan, environmental impact study, design work, vendor selection, and legal work have all been completed. The investor need only compile his sources and path of funds documentation to file the I-526.
Greater risk. The regional centers are far better able to select a low-risk project than is an investor who may be investing in the U.S. for the very first time. They are not only far more familiar with the business environment in the U.S., but they also typically have far greater resources to invest in project research and development because they will be able to spread the cost over dozens or even hundreds of investors.
Management responsibility. Because you will have to run the business, you will have to reside nearby and spend a great deal of time managing the affairs of the business. You might have a better idea for a startup business that doesn’t require 10 jobs or otherwise doesn’t meet the requirements of the EB-5 visa, but you probably won’t be able to start that business and the new EB-5 business at the same time.
Locked in until I-829 approval. You may have to continue managing the business for four or more years even if it is losing money because you will have to maintain the 10 jobs in order to get your permanent green card. And you may not have the option to change your business in response to market changes because this might constitute a “material change” that could lead to an I-829 denial.
We are happy to try to help you find such a direct investment if you like, but be forewarned that most of our investors who started out looking for such an investment decided that the risk and responsibilities of this type of investment were not worth it, and so they decided in the end to select a ready-to-go regional center investment.
1 Nov 2014