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How do equity loans work in the EB-5 Immigrant Investor Program?

Hello there. I jointly own a residential property with my parents that is worth $900,000. We have received an Overdraft/Equity Loan on this property worth $582,000. Of the received amount, my mother gifted $250,000 to my wife and another $250,000 to me. These funds were then invested via a regional center for a total investment of $500,000. Also, my mother paid off the administrative fees (totaling $75,000) on my behalf, directly to that regional center. Per our country’s laws, one cannot invest more than $250,000 per person, per year. Hence, we need to make the investment to the regional center as I stated above. I am the primary applicant for the EB-5 Program, along with my wife and son as co-applicants. Is this a permissible way to invest through the program? Also, the property on which the equity loan was taken was purchased 8 years ago from the date of filing the I-526 petition. We took out a loan to purchase that property and the rest was paid by us, but it is proving difficult to get all the necessary bank records related to this payment. We do have the bank loan statements, though, as we are still making regular payments to it. How far back in our records do we need to go to prove that the property was acquired from a legitimate source of funds? What kind of professionals can help us in this process?

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    Answered on

    The source of funds method you describe is permissible only if you, the investor, are personally and primarily liable for the debt on the property. Other records you might need would be tax statements, employment pay records, employer verification letters or even declarations. You should probably speak with an experienced immigration attorney who can help you sort through all the possible documents to prove a valid source and path of funds.

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    Answered on

    First, it is advisable to seek the services of an experienced EB-5 immigration attorney. Second, the good news is that the experienced EB-5 immigration attorney will be able to assist you in requesting required information and documentation to show the lawful source of investment funds. The facts you have stated form a good basis for authenticating a lawful source of funds. That is, real estate can be a basis for a mortgage which is considered personal funds. These personal funds can be gifted or invested.

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    Answered on

    Your scenario has multiple issues to qualify these complex series of transactions for EB-5. Hopefully, you have retained an experienced EB-5 immigration attorney before you file your case with USCIS to avoid a denial. The first issue is your jointly own a collateral asset (real estate) with your parents and your share of collateral is less in value than the requisite amount of EB-5 capital and it is necessary to determine if you, as the principal EB-5 investor, is primarily liable on the loan. The second issue is you have gift transactions. They must be properly documented with gift declarations and lawful source of funds must be tracked for the gifts to the original source of funds for the gift. Use of joint account for spouses is ok. If primary evidence is not available, sworn declarations supported by secondary evidence may work but this has to be carefully vetted by your immigration attorney.

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    Answered on

    This is a very complex question and you need to consult with an experienced attorney, preferably one Board Certified in Immigration and experienced in representing EB-5 investors. With respect to the residential property you own with your parents, be aware that even though you and your wife both received a gift of $250,000, one of you must make the minimum investment of $500,000. Thus, in order for this to work, one of you can make a gift of the $250,000 to the other. As long as one of you makes the $500,000 investment and you can trace the source of funds back to a lawful source and document the gifting process, it may be possible to demonstrate that you are making a qualified investment. In terms of how far back you need to go, you would need to go back far enough to establish a lawful source of funds and trace the funds back to their ultimate source.

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    Answered on

    Your narration started with equity loanshowever, the latter part of your story was actually a description of a gift as the source of your EB-5 investment. While it is acceptable to use gifted money as EB-5 investment funds, the source of the money must be legal. Proving the fund is from a legal source(s) requires that all documentation regarding the equity loans in this circumstance be provided. All professionals and providers of services utilized in procuring the loans must be consulted and their records should be provided, including but not limited to the attorney, the lender and the title closing company. The fact that 8 years have passed will not suffice as an excuse for not providing relevant documents. Advisably, in this circumstance, consult an attorney for assistance and he or she may coordinate the hiring of other professionals if necessary.

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    Answered on

    If your share of the property is worth less than $500,000, you have an issue as loans must be collateralized by the owner of the property and you do not have enough equity. It may be helpful to have your mother transfer her interest in the property to you as a gift and then get a new loan. Also, if you and your wife are married, it is okay that one spouse contributes money to the principal investment, as assets are jointly owned.

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    Answered on

    Each EB-5 investor must invest the requisite MINIMUM investment amount (so for investments in the Targeted Employment Area (TEA) -minimum is $500,000 orif located outside the TEA$1 million). In your scenario, you could apply as the EB-5 investor, invest the minimum required capital amount ($500,000 or $1 million) and have your spouse and son be included in the process as derivative beneficiaries so that they can all be included in your processing. You should definitely discuss your options with an immigration attorney so that you can get a better understanding of the investment structure.

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