Despite undergoing substantial changes in recent years, the EB-5 immigrant investor program still remains a coveted path for acquiring permanent residence in the United States.
The main appeal of the program is the certainty that it provides to immigrants, with a straightforward path, and clear criterions, unlike the ambiguity and arbitrariness that plague other forms of legal immigration.
The core objectives of the program remain the same, to attract high-quality, and accomplished immigrants to the United States, while helping spur growth and job creation in underdeveloped regions, also referred to as Targeted Employment Areas (TEAs).
Investors can also invest in non-TEA regions, but will have to bear a higher investment threshold, along with longer processing times.
Why Rural Projects Are The Future of The EB-5 Program?
While non-TEA regions might result in sturdier investments with superior returns, there are substantial benefits to investing in rural EB-5 projects, both in terms of immigration, as well as investment returns.
Despite many such projects coming under scrutiny for abuse and fraud, there are a number of reasons why rural EB-5 projects aren’t just the better choice, but the future of the entire program.
1. Lower Investment Threshold & Priority Processing
The minimum threshold for an EB-5 immigrant investor visa starts at $1,050,000, which can be through a regional center, or directly into a business that creates at least 10 permanent jobs for American workers.
However, if invested in a Targeted Employment Area, the minimum investment is significantly lower, starting at $800,000, and investors also benefit from priority processing, with 32% of visas set aside for TEA investments.
Within this 32% reservation for TEA investments, 10% is aimed at high-unemployment TEAs, 2% for public infrastructure, and a mammoth 20% for rural TEAs. Historically, the first two tend to fill-up fairly quickly, on a first-come, first-serve basis, resulting in long wait times.
However, by investing in rural projects, investors can effectively cut in line, and receive their Green Cards much earlier than others.
This provision also represents a life-line for investors from countries with high demand for visas, resulting in a retrogression.
This essentially means that for immigrant investors from certain nationalities such as China, Taiwan, and India, the cut-off dates for availability moves backward instead of forward, and investments in rural TEAs are a great way to stand-out, and receive priority processing.
2. Better Risk-To-Reward Ratio
Rural TEAs are regions with no more than 20,000 residents, currently having an unemployment rate of more than 150% the national average.
Investments in such regions, in general, go against the norms of prudent investing, however, given the low thresholds, and lower valuations, the rate of return can be higher as the region starts to develop, as against already saturated urban investments.
Of course, this depends on the viability of the project, capital structure, and over project management, and investors should perform a thorough research before settling on any project.
Most regional center projects tend to have low, or even no-returns on investment, from about 0.5% to 2%, which are just a little over CDs, but with the right due-diligence, returns in excess of 5% to 6% aren’t that rare.
3. Plenty of Opportunities
Another significant upside of investing in rural TEAs is that the number of opportunities are substantially higher.
There are a number of decaying backwaters in the American mainland that have suffered from out-migration and urbanization in recent years, looking for fresh lease of life in the form of new investments, this suits perfectly with most EB-5 investor objectives.
Up until a few decades ago, the United States was a nation of small towns, and even today there are over 17,000 towns, cities, and villages with a population of less than 20,000.
Out of these there are quite a few regions with unemployment rates in excess of the national average, giving investors plenty of opportunities to add value, and capture substantial gains as these regions develop.
With nearly 80,000 investors applying for the EB-5 program each year, and competing for just 10,000 Green Cards, investing in rural TEAs remains the only way to get ahead of the herd.
This is especially true if investors come from the four leading countries – China, South Korea, Taiwan, and the United Kingdom. All in all, rural projects are the future of the renewed EB-5 program, and it remains to be seen the kind of innovative projects that developers can come up with to cater to this demand.