There are several risks of investing in EB-5 projects that investors should be aware of. While it may sound tempting to get a Green Card and permanent U.S. residency, understanding the risks involved in investing in EB-5 projects will help immigrant investors to make informed choices.

Some of the risks involved are as follows:

Denial of I-829

This can occur due to several reasons, such as:

  • The foreign investor does not invest the entire amount
  • The investment did not create the 10 full-time jobs for American workers, as indicated in the business plan
  • The investment in the project did not create the jobs as mentioned in the economic impact analysis
  • The jobs were not created within the time frame mentioned in the business plan
  • The job were created outside the identified Targeted Area of Employment

The capital invested is not returned to the investor either in full or part

This can happen due to four main reasons:

  • The commercial enterprise goes bankrupt and hence, does not come into existence
  • The commercial enterprise is not completely operational
  • The realized assets of the enterprise has low market value compared to the principal amount invested
  • The commercial enterprise has low capital reserves and thus, cannot repay the investor
  • The commercial enterprise closes door within a period of 2 years (during the conditional residency period), thereby causing the investor to lose the entire principal amount

The investor may not benefit much

Since the immigrant investor is not involved in the day-to-day operations and management of the business and the business enterprise is a Limited Liability Partner, the investor does not benefit. Usually, it is the general partners of the business that benefit.

Huge capital investment

Investing $1,800,000 plus the processing overhead cost, legal and filing fees can be risky and too large a sum.

Compliance with law important

If the commercial enterprise formed through the regional center is a Limited Liability Partnership, it should comply with the federal as well as state laws when dealing with securities. If the EB-5 visa project does not comply with the laws, it can cause the regional center to fail, thereby sinking the entire capital investment of the investor.

Hence, whether the investor is investing $1,800,000 or $900,000 plus the processing overhead cost, legal and filing fees in a regional center project or as an individual, it is important to thoroughly investigate and do due diligence of the regional center and the project before investing the sum. There are risks involved and understanding these risks will help immigrant investors to choose the best project to invest in.