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The location of the regional center and the center’s proposed projects is often (mistakenly) thought to be irrelevant to EB-5 regional center investors. It’s easy to make that assumption, because unlike the standalone investment investing in a regional center means that you have the freedom to live anywhere in the United States, as far away or as close to your investment project as you like. Regardless of where you have your heart set on living, the location of a regional center and its projects does still have a definite impact potential on your investment and visa success. There are a couple of reasons why this is true.
First of all, the location of the center, and more specifically the particular project that you are investing in, matters because the amount of your required qualifying investment depends on that location. We’ve discussed this before as you’ll recall, your minimum investment will be either $500,000 or $1 million depending on the location of the project. The lower figure applies only to Targeted Employment Areas and designated rural geographic regions.
It is imperative to make a distinction between the location of the regional center and the location of the project itself. It is entirely possible that projects within a given regional center will have different investment minimums depending on where the money is actually invested. You cannot assume that just because a center’s offices are located in an area that meets lower-level investment minimums that the project funds will be invested there. You can also not assume that just because the last project was invested in a TEA or rural area that the next project will take place in a similarly qualifying area. The investment minimum for visa approval could vary quite easily from one project to the next.
These are the most basic reasons to consider the location of a project, but there are reasons that go deeper. These are the more in-depth considerations that an impartial advisor will research to determine how they apply to your situation. Let’s expand on that.
A regional center can be greatly influenced by their location and the location of their investments. There are many tangible and intangible influences of the region where your center operates that may come into play. Factors like business climate, property markets, workforce, local and state support of the project, and the presence or absence of worthwhile investment recipients can all make or break a project that sounds very good on paper. Add to this the more fluid factors like public perception of the center, its projects, and even immigration and the EB5 program itself, and suddenly something that looks very good as a business plan can be much more tenuous as a dual-purpose investment and immigration vehicle.
Another very important consideration is the proposed exit strategy for the project. The location of a center can have a tremendous impact when it comes time to try to exit your investment at a profit. This is one of the areas that centers often gloss over. Your impartial advisor, however, will not take them at their words, and will explore and discuss with you all the potential impacts of location for both now and the future.
Often the only way to know how a regional center’s location may impact upon its investments and investors is to take a lot of time getting to know the region, its potential, and its personality “quirks”. Actually physically visiting these regions is the only way to get to know the pros and cons of the particular area, and to know what other factors need to be looked into further. Taking that time can bring critical issues to light that would not come up through paper research. This is one area where impartial advisers can prove their particular worth, because as we’ve already established there is no possible way for a single investor to undertake this kind of travel and physically present due diligence on his or her own.
The next blog will take a look at the best way to choose where to invest, who to trust.
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