The End of a Funding Source

The Real Estate Espresso Podcast

The End of a Funding Source

Spotify Google Podcast Apple Podcast Subscribe via RSS Leave a Review

The End of a Funding Source

Welcome to the Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. Today’s episode is tracking the initiatives coming from the White House. There’s a great deal to report on – far more than we can cover in one episode. Even the mainstream media is struggling to keep up and, in my view, the reports I’m observing in the media are extremely superficial.

On today’s show, we’re addressing the end of an investment vehicle, the EB-5 investor visa, which brought about $9 billion in new investment funds annually for numerous real estate investors. The EB-5 program has faced multiple issues recently. Designed with the intent that an investment in an EB-5 fund generates 10 jobs for every $900,000 in investment, it was once a swift way for individuals and their families to acquire landed immigrant status in the US in six months or fewer. However, during the pandemic, the backlog of EB-5 applications increased to a point where the waiting times paralleled those of non-fast-track programs.

EB-5 investments weren’t especially suitable for direct real estate projects because they didn’t drive significant employment at the two-year and five-year audit points. Instead, they were adopted for investments like hotels that hire extensive staff. Although you might question the quality of jobs a hotel creates, a hotel does generate employment. Numerous EB-5 funds also went towards fast food chains and gas stations. A single gas station equipped with a fast food counter could easily employ 15 to 25 people. The return on investment for the visa was anchored in job creation.

Presently, the White House is contemplating terminating the EB-5 program. Funds that previously would have gone towards enhancing businesses will now go directly to the U.S. government. Based on the new proposal, the investment would be $5 million in exchange for a permanent residency visa. There’s speculation about who will invest – some believe Russian oligarchs, others suggest wealthy nationals of various countries. Regardless, it’s a fact that immigrants who bring substantial wealth tend to contribute significantly to the economy.

However, not everyone is thrilled with the proposed changes. Governments are often criticized for overstepping legislative authority or not functioning efficiently. There’s also criticism against the current administration for causing disruption and creating instability. This uncertainty discourages investors, who typically prefer stability before making investments. As investors, it’s crucial that we devote time to understanding these changes at a deeper level so that we can navigate the changing landscape effectively.

As always, go and make some great things happen. Tune in tomorrow for another episode. Until then, have an exceptional rest of your day.

Stay connected and discover more about my work in real estate and by visiting and following me on various platforms: