Sunday, September 14, 2014

Real estate broker grouses about limits on EB-5 freebies that provide cheap money for projects

Would you believe, as Massey Knakal head Robert Knakal told First Business News, that limits on EB-5 visas--which give green cards to immigrants and their family members if they invest $500,000 in a purportedly job-creating investment--are "causing some havoc in construction schedules"?

Interest in EB-5 has doubled every year since 2009, said Knakal, who suggested that a "significant" number of projects are on hold.

Why can't these projects go after other forms of financing, Knakal was asked innocently.

The answer: they can, "and other forms of financing have been readily available, but the EB-5 financing is relatively attractive, because of the low-cost nature."

In other words, real estate developers and other entrepreneurs have figured out how to leverage a sweet deal--getting a benefit by trading an asset (entry to the U.S.) that they shouldn't control--and are frustrated that there are limits. (The investment is supposed to create ten jobs, but the regulations are quite lax.)

If our major trading partners and investors are China and Mexico, why are 85% of those using the EB-5 program from China?

"They are more up to speed on the mechanics of the program and how to access it," suggests Knakal.

Or: it's not really an investment program, it's a green card program.

Chinese millionaires want to get their families out of the country and their kids into the American education system. They don't care about a fair interest rate--they just want the visas, and their money back.

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