Despite its free and open image, the United States can be a very bureaucratic place to move into as an overseas property investor. If you want to live there, the green card process is notoriously long and problematic. However, as OPP’s American correspondent Cindy Fauth explains, there is another option … if your client is prepared to invest beyond the property itself … in creating jobs and wealth. This is how it works.
The United States is known as the land of opportunity … a nation forged with an entrepreneurial can-do spirit. It has long attracted global business investors from around the world. In a recent survey of investors by the Association of Foreign Investors in Real Estate (AFIRE), its real estate market was overwhelmingly ranked as the number one choice for investment and viewed as the best opportunity for price appreciation.
But, at the same time, overseas property investors can also be faced with a range of complexities in purchasing and using the U.S. residence they have decided to buy.
Immigration, tax, currency and financing issues all play an increasingly important role for global investors looking to move into the US residential property sector. The home of the free can be surprisingly bureaucratic.
The EB-5 visa has emerged as one important tool for those willing to invest in the U.S. as a means of obtaining U.S. residency status. Your clients need to know about it and how it works … but it is not a simple programme. Any real estate agent with clients interested in investing in the U.S. will benefit from a solid understanding of what the EB-5 is all about.
The Path to U.S. Residency
Known informally as the investment or entrepreneurial visa, the EB-5 encourages foreign nationals to invest specified amounts of money, typically $500,000 or $1,000,000, in commercial enterprises or development projects that create jobs for U.S. workers.
In return, they receive conditional permanent residency. While other types of visas may have waiting periods or long delays in processing, the EB-5 has no waiting period after approval.
The US government is authorized to grant 10,000 EB-5s per year, but has never met its quota.
There are many scenarios under which the EB-5 might be the right answer to an international investor’s visa-related residency issues. For example:
- Individuals, couples and families that prefer to live and raise their children in the U.S.A;
- Foreign nationals on long waiting lists for other visas;
- Entrepreneurs who want to start a U.S. business;
- Affluent buyers looking for a second home in the U.S. and more flexibility to use it.
Two Paths to Residency
Today there are two ways to apply for the EB-5 visa:
- Under the original program as an individual investor/entrepreneur; or
- Under the Regional Centre Pilot Program, contributing to an investment pool.
Individual EB-5 requirements:
- Invest at least $1,000,000 in a new commercial enterprise, an existing business reorganised as a new enterprise, the expansion of an existing business, or a troubled business; lowered to $500,000 if the investment is in a Targeted Employment Area.
- Set up a new business, create 10 jobs for U.S. workers, not including the immigrant and his or her family;
- Help a troubled business, maintain the pre-investment level of jobs for at least two years;
- Directly manage the business or formulate business policy.
Regional Centre EB-5 requirements:
- Invest at least $1,000,000 or $500,000 into an investment pool funding a new commercial enterprise or troubled business within or affiliated with a Regional Centre, depending on the TEA status of the region;
- Create at least 10 new full-time jobs either directly or indirectly through capital investment;
- The investor becomes a limited partner in the venture, freeing him or her to live anywhere in the U.S.
Qualified advisors are important
Under either path, the U.S. Citizenship and Immigration Services (USCIS) requires extensive documentation to be submitted with the visa application on the commitment of required funding, lawful source of funds, and viability of the business plan and job projections.
An immigration attorney specializing in EB-5 law and a financial advisor can help an investor navigate the complex process.
An EB-5 attorney can provide a list of well- established Regional Centres into which to inquire about investments, and provide guidance on legal matters. A financial advisor can examine the fit of the investments to the applicant’s needs.
“There are two kinds of risks in the EB-5,” says Ron Klasko, immigration attorney and founding partner with Klasko, Rulon, Stock and Seltzer LLP in Philadelphia, and Chairman of the EB-5 Committee of the American Immigration Lawyers Association (AILA).
“As immigration attorneys, we deal with issues of immigration risk. We insist that investors have their own financial advisors conduct due diligence on the Regional Centre and the project to address the financial risk.”
Once the EB-5 visa is granted, the individual and his family become conditional permanent residents. After two years the visa holder must petition for removal of conditional status by submitting proof that the original requirements for the visa were met.
The role of Regional Centres
EB-5 investors who are not interested in starting and managing their own business can invest in projects associated with a government-approved Regional Centre. Regional Centres exist in almost every state. (See Regional Centre map.) And, as defined by the USCIS, a Regional Centre is any USCIS-approved public or private economic unit involved with the promotion of economic growth, improved regional productivity, job creation, and increased domestic capital investment in a specific geographic area.
Most Regional Centres are in Targeted Employment Areas with $500,000 investment requirements. Their activities include:
- Looking for local projects that can benefit from foreign investment and will meet USCIS requirements for job creation;
- Marketing projects in their geographic region to foreign investors;
The benefits of Regional Centres to EB-5 applicants include:
- Projects associated with Regional Centres have less restrictive job creation requirements, and jobs created indirectly count toward the quota;
- Much of the business documentation required for the application is provided by the Regional Centre;
- Most projects are structured as limited partnerships, meaning investors can live anywhere in the U.S. and meet USCIS requirements for management.
Partly because Regional Centre EB-5 requirements are less restrictive and somewhat easier to meet, Regional Centre investors now account for more than 90% of EB-5 applications.
There are currently over 100 Regional Centres in the U.S.A, with many more applications in the pipeline.
Regional Centres must meet ongoing reporting requirements to maintain their designation. If they fail to do so, they are dropped by USCIS. For an updated list, go to uscis.gov and enter Immigrant Investor Regional Centres in the search box.
For most immigrants, the road to permanent residency via the green card can be long and complicated. However, there is a shortcut for those with significant financial resources—the EB-5 visa.
Make sure you are well educated on this topic so you can help your clients pursue their goal of investing in the United States.