Charter schools have become a popular type of EB-5 project for EB-5 investors to invest in, but are they safe investments? Should EB-5 investors be concerned about charter school investments?
EB-5 investors should be concerned about charter school investments because of all of the following reasons.
All EB-5 investors must place their investments into at-risk projects or projects that are not guaranteed a return on their investment, but are charter schools too risky of an investment? The answer is yes, and here's why:
The risk involved in investing in a charter school is higher than other investments. Unlike other investments that have multiple clients, a charter school essentially only has one client: the local school board. In addition, if the local school board decides to cut the charter school's funding, then the charter school can be terminated.
The majority of a charter school's funding comes from local taxpayers. In addition, oftentimes, banks are given tax breaks to invest in charter schools construction, so people have to consider why a charter school would market to EB-5 investors. Taking on EB-5 Program investors for a project requires a great amount of due diligence, a strong team, and a lot of waiting. Therefore, it's possible that a charter school must be desperate for investments if they turn to the EB-5 Program.
In order to fulfill the EB-5 Program requirements and obtain green cards, an EB-5 investor's investment must create 10 jobs. This gets tricky when counting charter school jobs. While teaching jobs may be counted in most cases, they are not actually funded by EB-5 investors, but by local taxpayers.
EB-5 investors should be concerned about charter school investments because there are significantly more risks involved. Since the primary goal of an EB-5 investor is to obtain green cards for their family, they should look to invest in an EB-5 project that has the least amount of risk and that project probably isn't a charter school.