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What are advantages of the EB-5 regional center route other than a lower minimum investment?

Most EB-5 investors seem to invest indirectly in a regional center project rather than investing directly in a self-run business. Beyond the lower minimum investment amount, what are the advantages of the regional center route? Is due diligence performed in the same way for both routes?

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    Shahzad Q Qadri

    RC Creator
    Answered on

    Advantage is that a regional center investment, for the most part, is a passive investment, allowing the investor the flexibility to live anywhere in the country. You should conduct the due diligence in the same manner as you would for any investment.

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    Julia Roussinova

    Immigration Attorney
    Answered on

    One of the main advantages is indirect and induced job creation, which is only available through an accredited regional center.

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    Indirect job creation is the main advantage to investing in a project within a USCIS-designated regional center. The lower investment amount has nothing to do with regional centers; it is determined by the unemployment rate. In other words, you can have a direct (non-regional center) EB-5 investment for $500,000 as well, as long as it is located in a Targeted Employment Area (TEA). Any astute investor would conduct sufficient due diligence before investing, whether in a regional center or a direct EB-5 investment project.

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    Michael A Harris

    Immigration Attorney
    Answered on

    Please know that the minimum investment amount is not restricted to only regional centers. The law and regulations do not limit the minimum capital amount of $500,000 to only regional centers. The statute under the Immigration and Nationality Act Section 203(b)(5)(C) states that the lower amount is only for Targeted Employment Areas or TEAs. The regulations under 8 C.F.R. 204.6(f) also do not limit it to only regional centers. So, both direct EB-5 Projects not affiliated with a regional center and designated regional center projects can have $500,000 investment projects if they are located within a TEA. There are several pros and cons between the two types of projects. One of the main differences is how job creation takes place: a regional center project can take advantage of INDIRECT and INDUCED job creation, whereas a direct project cannot. Indirect/induced jobs are determined by a reasonable economic impact study prepared by an economist. Regional center projects are subject to some more review by USCIS as they must report annually to USCIS. But direct projects will still have to comply with the law. Also, important to note, there can be two forms of a direct project: one which pools funds together like a regional center does with multiple investors, and a direct project which is controlled and managed solely by the investor.

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    Salvatore Picataggio

    Immigration Attorney
    Answered on

    The minimum investment for any EB-5 investment is $500,000 for a business in a Targeted Employment Area. Regional center investments are better for investors who do not wish to participate in the day-to-day operations of a business, and can count indirect jobs. If you want to be involved in running the business, a direct EB-5 is preferable.

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    The advantage of a regional center is indirect job counts.

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    Ed Beshara

    Immigration Attorney
    Answered on

    Due diligence should take place whether it is a regional center or direct EB-5 project. The advantage of investing in a regional center project is the jobs to be created can be done so through indirect employment creation. In addition, the minimum investment will be $500,000 plus administration fees, while the investor will usually have to invest more in a direct EB-5 project for overhead and payroll.

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    David Hirson

    Immigration Attorney
    Answered on

    The concept that only regional center cases may utilize the lower investment amount is a FICTION created in the marketplace. The original law in 1990 created both $500,000 and $1,000,000 levels of investment. The regional center program came into being in 1992 and adopted the same two-tier investment threshold created by the 1990 law. The main difference of importance between a regional center and direct investment/hire program is that the 10 qualifying jobs that must be created for each EB-5 investor can be done under a regional center indirectly using econometric reports that apply an input-output program to show the impact of job creation by reason of the investment and the project. Due diligence must be performed in both types of case and is similar, but cannot be exactly the same, as the regional center and its history and qualifications also have to be reviewed.

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    Rohit Kapuria

    Immigration Attorney
    Answered on

    Not sure what you mean by "the lower minimum investment amount." However, if you are implying that direct EB-5 projects are only eligible for $1 million investments, then that is incorrect. Direct EB-5 projects can qualify for $500,000 levels if they are located in Targeted Employment Areas. You are correct that a majority of the EB-5 projects are regional center projects, but there are a few reasons for this. Investors in regional canter projects tend to be more passive as opposed to direct EB-5 projects, which usually require the investor to be more hands-on. Regional center projects also tend to be much larger and you can have upwards of 200 investors in a regional center deal. As a result, the discrepancy in the volume of investors between the two type of projects is evident by virtue of the deal sizes. Due diligence is key in both types of deals. No investor should ever invest without first conducting due diligence or having a professional assist with such a task. Ultimately an investor''s preference and preferred lifestyle will drive the choice between the two types of EB-5 and the third EB-5 model (pooled direct EB-5).

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    Mahsa Aliaskari

    Immigration Attorney
    Answered on

    The amount of the investment is determined by the location of the project itself, so both direct investments and those done under the regional center provisions can qualify for the lower $500,000 investment if they are in a Targeted Employment Area (TEA). One of the primary advantages of the regional center provision is the method for calculating job creation. In a direct investment, only direct full time employees will count for job creation. That means the I-9/W-2 employees of the business where the funds have been invested. Under the regional center provisions, job creation is based on economic methodologies that incorporate direct, indirect and induced job creation resulting from a specific investment into a project.

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    A Olusanjo Omoniyi

    Immigration Attorney
    Answered on

    You are right that more EB-5 investors are investing in regional center projects than self-run businesses, but this is due to a host of reasons. However, the required investment amounts are the same, thus there is no advantage in terms of amount of investments, as the requirements are the same. For instance, a regional center investment in rural area requires a minimum of $500,000, just as if the investment is a self-run business in the same location. Just as well, the minimum investment in an urban area requires $1 million regardless of whether the investment is with a regional center or self-run business. The advantages for investments through regional centers include, but are not limited to: those investments do not require direct management by the investors, as they are being managed by professionals who may be better suited to manage those investment project(s); investors does not have to live near the project, unlike a self-run business which requires direct and usually day-to-day management by the investor(s); etc. By rule of good management, due diligence must and should always be performed for either a regional center or self-run business, if for no reason but for all its attendant legal risks. Get more advice from an EB-5 attorney for some of your laudable questions and other viewpoints.

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    Karen-Lee Pollak

    Immigration Attorney
    Answered on

    There are several advantages, but whether it is advantageous to you depends on your own personal circumstances. One big advantage is that you do not need to run the business and create jobs. That is all the responsibility of the regional center, who can also rely on indirect jobs created by the investment, whereas in a direct investment you must create 10 full time jobs.

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    John J Downey

    Immigration Attorney
    Answered on

    The investment amount has nothing to do with the regional center. It depends on whether or not the project is in a TEA. The regional center is used to utilize indirect jobs. Due diligence should be performed by you and your counsel.

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    Jinhee Wilde

    Immigration Attorney
    Answered on

    Investing in the regional center does not guarantee lower investment amount, as the exception for $500,000 investment rather than $1 million is for the business located in a rural area or Targeted Employment Area. However, the benefit of investing in a regional center projects is the ability to count the "indirect" or "induced" jobs - rather than direct jobs, where you have to prove with W-2s and I-9s that you have actually created and maintained 10+ jobs in your business for four to five years until the I-829 is approved.

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