The End of a Funding Source

Today is another episode that is tracking the initiatives coming from the White House. There is a lot to report on. In fact way more than we can cover in a single episode. Even the mainstream  media is struggling to keep up and quite frankly, the reports I’m reading in the media are extremely superficial. 

On today’s show we are looking at the end of an investment vehicle that brought about $9B in new investment funds annually to many real estate investors. I’m talking about the EB-5 investor visa. This program has been plagued with problems over the past few years. The idea behind the EB5 program is that an investment in an EB5 fund that generates 10 jobs for every $900,000 in investment would fast track an individual and their family to landed immigrant status in the US in six months or less. 

However, during the pandemic, the backlog of EB5 applications grew to such a degree that the wait times were similar to other visa programs. The is an annual quota of 10,000 visas under the EB5 program. Since each investment requires spending a minimum of $900,000 and in some areas $1.8M and the guarantee that the investment creates a minimum of 10 jobs which must be audited at the 2 year mark and the 5 year mark in the investment. These EB-5 investments were not particularly useful for real estate development projects because they didn’t drive enough employment at the 2 year and 5 year audit points in the program. Where these programs did see fairly strong adoption was for investments in thing like hotels that hire a lot of staff. Now you can wonder about the quality of jobs created by a hotel. But a hotel does create jobs. We also saw a lot of EB-5 funds going into gas stations that also have a McDonalds counter, or a Dunkin Donuts counter. A single gas station with a fast food counter could employ easily between 15-20 people. The metric for the ROI on the visa was job creation. 

Now the White House is talking about ending the EB5 program. What replaces it will go directly into government coffers.

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