Selecting a quality EB-5 project for investment is critical for any EB-5 investor. EB-5 investments, by law, are “at-risk” and successful outcomes cannot be guaranteed. Instead, the attainment of permanent residency and the return of investment capital are the product of smart choices by the investor.
The quality of projects available to EB-5 investors has certainly improved since the EB-5 Reform and Integrity Act (RIA) was enacted in 2022, and projects with clear defects will not be approved by USCIS. However, the RIA is not a complete catch-all and investors still need to be rigorous in their due diligence.
Investors should be aware of three common mistakes that resulted in negative outcomes for investors in the past.
1. Ignoring Financial Risk and Capital Protection
Why This Matters
While EB-5 investments are made primarily for immigration purposes, they are still investments. at-risk There is no guarantee of return, and poorly structured projects can lead to total capital loss, without fulfilling the job creation requirements needed for your green card and leaving little hope of repayment.
Common Pitfall
Investors sometimes focus solely on getting a green card and overlook the financial structure of the project. Relying on promotional materials or expected returns, without fully understanding the capital stack or the project’s financial feasibility, is a major red flag.
Investors should:
- Investigate the developer’s financial commitment. How much of their own equity are they investing?
- Review the project’s capital stack to ensure EB-5 funds are adequately situated. Additionally, the presence of bridge funding while EB-5 funds are being raised is important as it allows the project to move forward before EB-5 funds become available.
- Ensure that the EB-5 capital is fully collateralized.
2. Neglecting to Research the Regional Center and Developer’s Track Record
Why This Matters
The regional center and developer play a key role in managing the investment and meeting USCIS requirements. Their experience, reputation, and compliance history can significantly influence the success or failure of your immigration petition.
Common Pitfall
Investing through a new or unproven regional center without researching its history or prior project performance is a risky move. Past denials, delays, or legal issues should be considered before investing.
Investors should:
- Ask for approval statistics (I-526 and I-829 petitions) from previous projects.
- Research the developer’s track record—how many projects have they completed on time and on budget?
- Consult independent due diligence providers or experienced EB-5 immigration attorneys for guidance.
3. Overlooking the Importance of Job Creation Viability
Why This Matters
At the heart of the EB-5 program is the requirement that each investor’s capital creates or preserves at least 10 full-time U.S. jobs. If this requirement isn’t met, the investor’s petition for a green card (Form I-829) may be denied, regardless of how much money was invested.
Common Pitfall
Many investors get drawn into projects with speculative job creation models. These often rely heavily on indirect or induced jobs, with projections based on optimistic assumptions rather than sound economic analysis. Delays in construction or changes in project scope can also derail job creation targets.
Smart Move
- Review the project’s economic impact report and have it reviewed by a knowledgeable third party.
- Choose projects with near-term job creation milestones, such as those tied to active construction or operations.
- Make sure that projects have a sufficient job cushion in case the projected job creation is not fully met.
Choosing the right EB-5 project is not just a financial decision, it’s a legal and immigration decision as well. Avoiding these common mistakes by doing your homework, asking the right questions, and seeking professional guidance can protect both your investment and your immigration future.
