A New York Times article recently shed light on a program that allows for immigrants to invest in real estate in exchange for green cards. And while this program has been around for decades, it has taken off within the last few years.
The federal visa program called EB-5, which was created by the Immigration Act of 1990, allows for foreigners to obtain legal immigration status in exchange for investments in big real estate projects. It is especially popular in big metropolitan cities, especially New York City where most of the case study for the NYT article came from.
The way the program works is a foreigner will invest at least $500,000 into a project that will create at least 10 jobs. After proof of funds for the invest is provided and that the funding is legitimate, the investor can apply for a green card and so can their family, including any children under the age of 21. It takes approximately up to 26 months for the immigrants to obtain full legal residency through EB-5.
In New York City, 80 percent of the applicants are from China and are investing in mostly hotels, condominiums and office towers among other projects. California makes up 22 percent of the investments that come from the EB-5 program, while New York follows behind it with investments for the 2013 fiscal year totaling $379 million.
In 2010 and 2011 combined, the total was only $327 million.year 2013, the most recent year available, investment through the visa program totaled $379 million. And the number of applicants and visas issued follow the same trend. In 2010, 1,885 visas were issued under the EB-5 program, while it jumped to 8,564 in 2013 according to public government records.
While it was originally created to “stimulate the U.S. economy through job creation and capital investment by foreign investors,” according to U.S. Citizenship and Immigration Services website, a large part of the program has taken on the role of investors solely focused on gaining green cards and not worrying as much about the ROI for the projects they put money into. For many project developers and companies, this is great because with an ROI of 5 percent or less in many cases, it allows them to not have to worry about taking out a loan and having to pay back anywhere from 10 to 15 percent interest .
While there have been instances of fraud when providing proof of funds, the EB-5 program has been proven successful in the past. The only issue that critics of the program usually mention is the location of projects where the investment money is going to. Under the guidelines, projects are supposed to be areas of “high unemployment,” which isn’t always the case. In New York, for example, many projects invested by EB-5 funds occur in Midtown or Chelsea, which to many don’t qualify as screaming “high unemployment” rates.
With the issue of immigration reform still up in the air, it isn’t a surprise that many foreigners have taken advantage of this program. But it seems that no one is complaining about the EB-5 program being on the rise, seeing that it is helping abroad as well as domestically.