411

Hi all,
In the last 2+ years I have saved $500K (£300K) from 8 of my 10 rental properties mainly due to low interest rates. I could invest in an EB5 but the $40K admin fee and poor yield points me to invest in a good E2 business which i could refinance then pay for an EB5. I have a partially completed MBA in Construction in Real Estate and love the idea of running a real business rather than just collecting rent which is all I do right now. My question is which one of these two business will be a better case for an E2 visa and all round investment.

1. Mixed use property 6 apartments and 3 business units $975K. There is an accounting firm in one shop and a computing repair shop (I have an accounting degree and a masters in computing) both on month to month lease. There is also a spare house on the lot which I could live in. Total yearly return is $95K. The seller is offering 6% finance over 10 years so I will need to put down 50%. After paying interest I would come away with $30K every year. My attraction to this business is that if the leases on the businesses were not renewed, I could just reopen my own computer repair shop and accounting firm and hire people to run it.


2. The second opportunity is a 9500 SF Land opportunity with a tear down house. $170K. I have estimates and it will cost me no more than $330K to build 6 1 bed apartments each giving $1000 pm. The zoning of the land permits it to be used as a guest house, convalescent home etc which if used in this manner almost doubles the yield sufficiently to pay for two housekeepers. Its 4 miles from an international airport so there should be no shortage of short lets at $100 per night. Initially I would have 1099 contractors for the build process which should take no longer than a year including getting the permits. The sale price will also be in the $800k region thus giving a net profit of about $300K.

Thanks for your opinions.

cranston

Hi

Firstly, I have a strong feeling you will do well which ever way you go as you seem a very smart person.

Personally, I would go with #1 rather then spend time trying to get permits.

What city are you thinking of?

411

Thank you, both are in Los Angeles but option 2 has the benefit of being in a TEA zone which helps towards an EB5 at the reduced amount. However I am trying to look from the Embassies point of view.

Option 1 lacks employees!!! I heard that strips malls like this are qualified for E2 investments but I do not know the justification. The accountant or computer guy wont actually be working directly for me unless I do a mini take over!

Option 2 may be a drag waiting for permits but there should be no doubt in the embassies mind that the contractors will be out on the site doing the work - soon. However operations need to be eminent for the embassy to approve the Visa.

So 1. suffers from marginality issues and 2. suffers from real and operating issues. Does one appear to have a better chance over the other?

cranston

I suggest you speak to a decent lawyer about what a realistic timeline for getting permits would be (option 2). I suspect that your expected timeline is way to optimistic.

sir_eccles

Some people consider getting a Greencard a fairly good yield from their investment in an EB5.

411

family of five EB5 @ $500k = Very Good Yield
single person EB5 @ $500K = Very Bad Yield

411

Thanks, I just called the city public works division and they said the permit is a same day process and has to be done in person!!!

scrubbedexpat099

I would forget the visa aspect and go with the one that is the best business proposition.

411

Very True

srefre

I think you need to think carefully about where your areas of expertise lie, and which businesses you fully understand, as well as the visa.

So far you have been interested\highly qualified in:
B&Bs
Construction
Real Estate
Computing
Finance and Accounting
Film and Movies

No offence intended, but although diversification is good, you can't be an expert and highly qualified in absolutely everything, otherwise you end up going down the route of "Jack of all trades, but master of none."

411

The E2 visa does not require you to be highly qualified in anything, the H1B does. Unless I am missing something from the Foreign Affairs Manual I don't think diversification of my interests will hurt my E2 application which will focus on just one business, so far as the business I propose will help the US economy. If you remotely understood or have an opinion of either of the businesses I have highlighted feel free to share it!

GeoffM

So an EB5 is poor yield now, but after a few years of an E2, it will suddenly become good? Strange logic.

So basically you'd become a landlord. What is the job exactly? Is $30k suitable income for an E2?

I believe you said this was in a deprived area. Putting it bluntly, is that another way of saying you will build six gold nuggets in the middle of a slum? Will they really generate that much income in such a deprived area? There are plenty of places where you can get a good 1-bed apartment for less money in nice areas. Might be worth telling the folks here what area this is so they can tell you what it's really like.

Again, what is the job here? Yes, you're investing, but you could say that about those with multiple holiday homes in Florida that don't qualify for a visa. Bear in mind those very viable B&Bs that have been refused E2 renewals recently.

Okay, so you might have 2 housekeepers. For six 1-bed apartments? Hotels get their housekeepers to turn around a room in 20 minutes typically. Even if you generously gave them an hour per apartment, that's still only 3 hours per day each.

How do you get from an E2 to an EB5? Do you have to have the investment ready in cash form (rather than equity), maybe in escrow? If so, that says to me you have to sell the E2 business, put the money somewhere safe, and then live in limbo while you go through the EB5 process. Maybe you can fast track it to only a few months. Is your E2 visa still valid during that window?

Yes, I've been overly harsh on you. I'm just trying to look at it critically, and I could well be wrong on several points. An E2 was one of the visas I was considering so I did some legwork on the subject, and I can't see where your idea fits in with that visa. Maybe I'm missing something.

411

GeoffM, first off I want to thank you for taking the time to dissect these business options, I hope your questions are not rhetorical as I have answered them all

Locking up $500K today for 5yrs to eternity to give me a green card 2 years from now is not putting my funds to best use now. If I can first use those funds to get a business off the ground then I would happy to refinance the business to extract $500K to give away for a green card.


Effectively yes, this is the weak point of this business unless I take over the businesses already running in the premises, then they would be employed by me. I don't know the details of how buying business premises could be presented for an E2 visa but I here it has been done.


Yes its in Targeted Employment Area. A city needs to be at 14% to qualify but with todays unemployment rates that does not mean it is a slum! Making this assumption means everyone who invests $500K for an EB5 is investing in a slum, which they most likely are. This years figures for TEA zones in california can be found at this link
http://business.ca.gov/Portals/0/Add...Web%202011.pdf

The Job. First I will employ a project manager to oversee tearing down the existing house on the land and employing contractors to build six units. It will take no more than 6 months to do this because I am in touch with a modular multifamily manufacturer, erection of the modular units takes just 2days, but its the engineering, foundation, electrical etc that could take time. So I could show on the business plan, that every year. I would buy a new piece of land and do the same all over again. However I do want to keep the going concerns when each one is complete. Should an E2 renewal be required I may have to show a different business formula to the initial construction one. It has crossed my mind to get an B2 visa because of how quick the modular process is.

I do like the hotel route for the 6 units, at 20mins per room I would be down to just 1 part time staff, I dont think that will fly for a E2 renewal. I have considered it for a care home for the elderly. The zoning of the land permits the use of the land in this way. That will be my only justification of a full time staff or two. I worked out a yearly income of $219K for a 6 unit care home at the going rate of $100 per night so there will be no marginality issues.


Thats in second paragraph. There is a magic formula to calculate Employee counts with the EB5 they dont have to be 10 employees daily on an EB5 project - I dont know what that is yet. There is also an additional option of the EB1C which is also a green card route. My income from the UK properties will also be maintained so affordability of where I live wont be dependent on the success of my E2 business.

Not at all this is the exact type of grilling that I seek...

GeoffM

Doesn't matter either way to me! Maybe some of the more experienced users here can say whether some of my points are valid or not.

I know you can employ contractors for the visa but these are very temporary in nature, are they not? Will the project manager be full time (I know some PMs who would say so but in reality...)?

Okay, so it's a rolling cycle of development. That sounds more promising than build the six and wait for the red carpet visa treatment.

Is a modular home worth as much as a traditionally-built home? Might be different in the US but in the UK such homes don't tend to be durable, don't last as long as traditional bricks'n'mortar, and are worth far less.

If I read that correctly, the money for your EB5 would be either tied up in buildings, or you would get a loan, while it's going through? Is that allowed? (I don't know)

411

PMs and 1099 contractors are all temporary to be fair but their has been legal cases that have been made for contractors being qualified as employees


Yes a painful but profitable rolling cycle!

They are valued the same by the banks insofar as they are secured to the foundation. They are actually now considered more energy efficient and better build spec.


Any form of money is allowed for an EB5. The only funds that are disallowed is a loan secured on the EB5 project itself. Otherwise it is perfectly ok to get a loan secured on your house or other business. Also the additional funds that are not acceptable for an EB5 are illegal funds and funds that have not been declared on a tax return. Fortunately, I have painfully paid my taxes .

To clarify, once I use my $500K cash on my build project, I would either see if the project itself can be upgraded to an EB5 or EB1C project or refinance it and send off $500K to a Regional Centre like Jay Peak. I wont sit and wait to see if my E2 would be renewed!