Part 5 of a series on creative Real Estate
financing.
A developer financing method returns - IRS provides clarity on the
use of historical rehabilitation tax credits
Using Crowdfunding to finance real estate projects
Using New Market Tax Credits to finance projects
Let the Purchaser do the Financing
E5-B visas are another growing source of liquidity in the real
estate and construction world.
The Immigrant Investor Program, commonly known as the EB-5 Program,
is a federal immigration program run by the U.S. Citizenship and Immigration Services that
gives foreign nationals a tempting proposition: invest at least
$500,000 in a U.S. business in an economically depressed area and
obtain an EB-5 visa for themselves and their families. At the end
of a two-year period, if the investment creates 10 new full-time
jobs, the investor and accompanying relatives obtain permanent
residency in the U.S. The Program applies to projects in
non-economically depressed areas as well, but the minimum required
investment is increased to $1,000,000.
Originally launched in 1990 to little fanfare, the EB-5 Program has
boomed in the past seven years, in part due to Chinese nationals
looking to invest in the U.S. real estate market and avoid the
regular green card lottery. It's quite possible another surge
in applicants is on its way, this time from Russia.
The Program is proving to be very popular with hotels and franchise
owners looking for new franchisees. The Wall Street Journal reports
that Marriott International Inc., Sony Pictures Entertainment, and
the developers of the Barclays Center, home of the Brooklyn Nets,
are some of the larger companies that have funded projects using
EB-5 visas.
Investors typically see a low rate of return on their investment -
around 1 to 3% - which can be very attractive to developers looking
to borrow at low cost. EB-5 Program funds also are considered more
flexible because they usually do not carry as many restrictions as
loans from a traditional lender. The dependence on USCIS approval,
however, can create timing issues in the development process.
Additionally, there have been some concerns of fraud and the SEC
has recently been involved in multiple investigations.
The Program's growth will likely continue as long as the
lending market remains tight and any substantial immigration reform
remains tabled in Washington.
This article is presented for informational purposes only and is not intended to constitute legal advice.
