What do the Chinese Real Estate Market and EB-5 have in common?
By: Cory A. Richards
There are many avenues a Chinese immigrant investor may take when deciding where to obtain the required funds for the source of their EB-5 investment. The possibilities include, but are not limited to, the sale of property, mortgage loan, shareholder profit distribution, shareholder loan, income, or savings. To be clear, no one source of funds is superior another. However, one in the bunch seems to be more prevalent for Chinese investors: mortgage loans.
The reason behind this is simple: the China real estate boom. According to the National Bureau of Statistics, the value of new homes sold in China in 2013 rose 27 percent from 2012. Further, new-home prices from December 2012 to December 2013 climbed 20 percent in both Guangzhou and Shenzhen, 18 percent in Shanghai, and 16 percent in Beijing.
With an unprecedented growth in the real estate market, comes an unprecedented increase of a property owner’s equity. As a result, Chinese immigrant investors’ property values are worth substantially more than the required capital amount for their EB-5 investment, making a mortgage loan an enticing option as their source of funds.
Mortgage loans are acceptable as a source of funds so long as the investor can provide the following:
- If the property was acquired less than 7 years ago, then the investor must show where they earned the funds used to purchase the property;
- A contract showing the investor’s purchase of the property;
- If the investor obtained a mortgage for the initial purchase of the property, then either they must provide evidence of the amount of the mortgage outstanding or that the initial mortgage has been settled;
- A real estate certificate, deed tax payment certificate, and invoices regarding the purchase of the property;
- The mortgage contact showing the property as collateral for the source of funds mortgage loan;
- The loan contract detailing the terms of the loan;
- An appraisal certificate showing the home’s value at the time of the mortgage loan;
- Evidence that the loan proceeds were disbursed to the investor.
Providing the above evidence is helpful in delineating an investor’s source of funds analysis for USCIS review. However, it is vital that an immigrant investor work with a highly qualified immigration attorney to prepare their EB-5 petition.