Why do EB-5 investors choose real estate projects? What makes them so popular?
These are 5 reasons why EB-5 investors choose real estate projects over other types of investments:
Project developers typically have an easier time securing traditional financing for real estate projects. They can obtain senior loans from banks, whereas, projects in other industries usually have a harder time securing bank loans. Projects in other industries may have to rely more heavily on EB-5 capital and that makes them riskier investments. Additionally, with real estate investments, the physical property serves as collateral for the EB-5 investors. Overall, real estate projects are less risky than projects in other industries. Examples of more risky projects include startups, restaurants, and healthcare centers.
Real estate projects tend to be larger in scope. There are two main benefits to larger projects. The first benefit: they have larger teams and advertising budgets so that they can attract more EB-5 investors who can partner on a single project. The second benefit: the financing on these projects are typically no more than 25% to 35% EB-5 funding, the rest is obtained through traditional lenders such as banks, and that means that more jobs will be created than are needed.
EB-5 investors look for projects that have large job buffers to ensure that their EB-5 Program requirements will be met. Large real estate projects also create many construction jobs that count toward the job requirements. Additionally, if an investor chooses a real estate project in a TEA through a regional center, they also have the added benefit of counting indirect jobs. Real estate projects such as hotels or condominiums create numerous indirect jobs.
In the early days of the EB-5 Program, real estate developers were the primary ones who took advantage of this little known visa program. Since then, real estate developers have continued to be the majority to utilize the program. This means that real estate projects dominate the EB-5 Program. EB-5 applicants will find more potential EB-5 projects in the real estate industry than any other industry. As a result, EB-5 agents will most likely know more about the real estate industry than any other.
The last reason why EB-5 investors love real estate projects is because it's tangible property. Investors can watch the property be built from the ground up. They can visit the site of the development and watch the project progress. If they invest in other industries such as startups, they most likely will not have the benefit of seeing their project grow and develop. They will have to trust the startup to tell them what progress is being made, and that makes it a riskier investment.
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