Beware the risks of US investment visa schemes
FROM November 21, the minimum investment for a US EB-5 investor visa will increase to $900 000. Pixabay FROM November 21, the minimum investment for a US EB-5 investor visa will increase to $900 000. Pixabay
South Africans who invest in the US are at risk of losing their money if they do not investigate or understand the schemes that are promoted to them before applying for an EB-5 (green card), warns Daniel Ryan, the managing director of the Africa division of Atlantic American Partners, a US-based investment bank and private equity fund management firm.
Ryan is visiting Cape Town to explain the legalities, logistics and processes involved in qualifying and applying for the US’s EB-5 investment visa and dual citizenship.
He said currently a minimum investment of $500 000 (R7.32 million) was required for an EB-5 investor visa, but from November 21 this would increase to $900 000, and there are potential risks for those who do not fully comprehend the schemes that are attracting South African investors
“If investors do not properly investigate or understand the schemes that are being promoted to them, their money could be at risk. Several people have lost their entire investment and have also, therefore, not been successful in their green card applications. The number of people negatively affected in this way could increase as investors rush to secure an EB-5 visa at the current investment level before the deadline, when it will increase by 80 percent,” said Ryan.
He said most EB-5 projects in the US involve an investment in a single commercial real estate development asset, which is usually promoted by an individual property developer or corporation that is invariably more focused on maximising its financial gains than on protecting the financial interests of EB-5 investors.
Ryan said that in some cases where a single-asset property developer has gone out of business or run out of money, the EB-5 investor has not only lost their entire investment but has also lost the ability to apply for a green card, which is the main attraction of the EB-5 visa scheme.
Ryan said his firm has pioneered a model for the EB-5 industry whereby investors own a limited partnership in a portfolio of the assets, not only one property asset.
He said the fund has a diversified portfolio of three new commercial real estate investments, including one luxury residential apartment community, one luxury hotel, and one high-end student housing community.
“Another consideration is success rates and what ‘insurance’ options are available so that the investment is protected and that the aim of the investment is realised in terms of securing green cards and, indeed, in repaying the initial investment, plus receiving an annual return over the period of investment,” he said.
Ryan said that investors who complete the process, after the fund has been fully liquidated or sold, and all immigration approvals have been received, receive their initial investment, and during the process a return of between 1.5 percent and 2 percent annually on the principal investment amount over the period of that investment, based on net available cash flow.
He said that once the fund has been fully liquidated, investors receive a limited partnership interest capital gain of 25 percent of the net profits and after all costs.
“We believe potential investors need to be aware of the benefits and the pitfalls with the EB-5 entity/project/company and thoroughly research the options before they rush into anything before the November deadline and run the risk of either losing that investment or making it completely redundant,” said Ryan.