The goal of the EB-5 investor visa program is to generate a “win-win” scenario for all parties involved or affected. However, USCIS has made changes that will complicate the EB-5 visa process. In this episode, we discuss the key EB-5 changes and how they will impact investors and the regional center program.
5 Key Points from the new EB-5 Regulations:
Effective Date: November 21, 2019 - Any I-526 petitions filed before this date will be grandfathered under the current rules and lower investment amount of $500K for TEA projects
Dave: Hi there, welcome to another edition of OnlineVisas.com: The Immigration Show. I'm your host, Dave Kelso and with me as ever is CEO of OnlineVisas.com, Mr. Jon Velie. Jon, how are you sir?
Jon: I'm great, Dave. How are you doing today?
Dave: Well, I'm doing okay. Ever since we started doing this podcast, I find news bits about visas and immigration and that kind of thing. I've got a Google alert set up for it because it's a really important topic, and I was alerted yesterday, day before about some changes to the EB-5 visa. And now, I know that that's an Investor Visa and I know that there's quite a bit of money involved that is put into real estate investment communities and places like that. And I wanted to get your take on some of the changes that are coming and maybe we could start with, what is the EB5? Let's go from there.
Jon: That's a great place to start.
Dave: The beginning.
Jon: The beginning. So the EB-5 is a fantastic visa. It's called the Investor Visa. With this visa, foreign investors can invest either a million dollars, or in certain circumstances into what is called a targeted employment area, a half a of a million dollars. They must create 10 jobs, 10 full-time jobs for Americans or other green card holders, not themselves. So when America is out borrowing money from foreign countries, this is where foreign investors are investing money and they have to create jobs for Americans. It's a fantastic idea.
Dave: Absolutely.
Jon: But we can't get out of our own way. Now with this great idea, people have wanted to do it. Lots of Chinese have wanted to do it and the Vietnamese have wanted to do it. And so we decided we can only have so many of these visas. So we hit these caps and now the waiting timeframe for a Chinese investor has been as much as 16 years.
Dave: To invest in our country.
Jon: A million dollars in our country and creating 10 jobs for Americans.
Dave: Now, what kind of investment is a million dollar business? I mean, are we investing into chain restaurants? Are we investing into grocery stores? What kind of business does a million dollar investment start?
Jon: Well, it can be a lot of different businesses. There is another type of investor visa for our treaty-based countries where you must invest a minimum of 100,000. That's called an E2. So a million dollar investment is enough to be able to create 10 jobs and do some cool things. Now, with 10 jobs at a million dollars or a half a million dollars doesn't go very far if those are high paying jobs. But for minimum wage jobs, restaurants can be really great for that.
Jon: But how it's being used besides what is called the standalone, where someone wants to invest in a particular company, maybe they want to buy a McDonald's franchise or something like that, they will do what is called a regional center. A regional center is a predesignated area and they're usually very large, where a number of immigrant investors will come in, and there will be limited partners and they will essentially say, "Here's my money."
Jon: And that whole process takes from the time that you invested into the company and you get the first part of the EB-5 approved to the conditional green card, then they'll come into the country if they're not already here on some other visa and then after a year and a half, they can apply to prove that at two years, they've invested million dollars and 10 jobs have been created or are in the process of being created.
Dave: I would think that we would want a lot of people to come and do this.
Jon: You would think.
Dave: I would like piles and piles of million dollars so we can hire lots and lots of Americans because the million dollars is not really for hiring. It's to spark the economic engine that pays for the hiring, right?
Jon: Absolutely. It has been a very successful visa. It has created a lot of jobs, but what is happening is for some reason, immigration doesn't like it, or not just immigration. There is a senator named Chuck Grassley, and Senator Grassley decided about a decade ago that he is just against these kinds of merit-based business visas. And he is from Iowa, right? So he is not seeing a lot of these EB-5 visas. Now while there has been some degree of fraud with EB-5 visas, where people have made up their companies or whatever. But why-
Dave: Oh, and essentially bought themselves a visa.
Jon: Why throw out the baby with the bath water? There are all sorts of great projects that have been infused by this capital.
Dave: Do we have any idea what the ratio of good to bad there is? 1% of 99% or somewhere in between?
Jon: No, we don't know what that is, but it has not been significant and immigration does a great job of vetting this stuff. So you have to prove that the money that you are investing comes from a lawful source. They say no drug dealers, right? So it's called source of funds. You have to show, where the money came from. You can be gifted the money from a close relative, but not from really distant relatives. You can't just be getting it from some other person. And in some countries, it is hard to show where that money came from, because a lot of countries don't want the money leaving their countries. But they are getting it out and getting it here. But the Grassley bills have been against the L-1 and the H1-B and he's been against the EB-5 and he's been really clamoring, that the price is too low. Well, the half a million dollar investor for the targeted employment area has been really the bell cow of the regional centers. And we're talking big, big scenarios, hotels, hospitals-
Dave: And regional centers, this is where several of these investors at half a million dollars a piece, each coming together-
Jon: Hundreds.
Dave: Hundreds of them.
Jon: Hundreds of them. You may find 200 immigrant investors, and here's how it works.
Dave: With $500,000 a piece and we don't want this to happen in our country?
Jon: Here's how it works. It's a really neat program. So the initial investors will buy a piece of real estate in a big city or whatever. And maybe they're going to redo a downtown.
Dave: Sure.
Jon: Okay? And so they will buy the investment and then they will use the immigrant investors as mezzanine financing. The immigrant investor is not an easy deal for a lot of folks because it is going to take them a few years to get their green card, right? So sometimes they have to hold the money in escrow, and then it comes in once they have the green card, initial green card approved before the conditions are removed. So they will use them in the middle, and many times they won't pay a lot of interest on that because at some point, the bank is going to lend that money anyway. So it has to be lower than what a bank would do.
Jon: But on these really good ones, they have 100% approval ratings. They are good deals. They have done many projects over the years. And so people know they are going to get their money back, and they might get a few percent back over that period of time, but they know they're going to get their money back. And so the money is kind of gone for about five years sometimes and then it comes back. And there are programs that once the money comes back, they will take out a more conventional loan and pay back the cheaper money, right? So there is a program that it comes in and out of.
Jon: So what happened now with the raising of this amount of money is that it goes from a half a million dollars for the target area, which is either a rural or high employment. It is usually high employment if it is in the city, and it is usually designated by the state. That investment rate is now being raised to from 500,000 to 900,000. And so what also is happening is the USCIS wants to make those designations themselves on whether or not an area is a target employment agrea. So instead of going to the census, departments, or the state agency, they want to bring it in house, which will make it longer and it will mean less of these things get done. Now, the states are turning around in a couple of weeks because the states love it. They love that money infused into their-
Dave: Sure. Absolutely. Who wouldn't?
Jon: And so the million dollar investment's being raised to 1.8 million. So that is all the other areas. Well, so what will happen is there will be less of the lower investment properties available so it will all go. So essentially it goes from a half a million to 1.8 for a lot of different investors and delays in different countries. So what we have done is taken a really good idea and made it complicated.
Jon: Now, a couple of things. The new law doesn't go into play until November 1st-
Dave: November 1st.
Jon: So if you want to do this, this is a great time to do it. There are some really great projects. We do all of them. We do the stand alone projects. We've had a couple of hotels or motels done for some folks in India who bought a series of motels and hotels process recently. Those are standalone. We also have people that go into the regional centers and we partner up with brokers to have them advise them on the best ones and we have seen some really good ones.
Dave: So now is a great time to be doing this.
Jon: Yeah, before it gets a lot more expensive.
Dave: Before November 1st. If you want to get a hold of Jon Velie here, the CEO of OnlineVisas.com, to talk about the EB-5 visa, what is the best way to get ahold of you?
Jon: Go to OnlineVisas.com. Set a strategy appointment. Those are free. Glad to talk to you about your situation. We can introduce you to brokers. We can introduce you to the different regional centers if you want. We can talk about your own company, your own investment, your friend's company, getting a franchise if you want and doing it like that directly, or you can drop me an email at jon@velielaw.com. That's J-O-N at V as in Victor, E-L-I-E, law, L-A-W, dot com, or call us at 405-310-4333.
Dave: Now, please be sure to click subscribe if you're watching this on YouTube. Follow us on Facebook. We're also on LinkedIn. But if you need good information about visas and immigration in the United States, we encourage you to watch this podcast as often as you can. Get a hold of Jon at jon@velielaw.com, and thanks very much for watching OnlineVisas.com, The Immigration Show.
Jon: Take care.