What Are Some Common Risks Or Problems People Run Into In EB-5?

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What Are The Most Common Misconceptions People Have Regarding What Due Diligence Should Look Like Involving EB-5?

What people really want to know is they like to have someone recommend a project. And if they go to an agent and the agent recommends the project, then a common misconception is that’s good enough; or if in the hopefully unlikely event that an attorney recommends, which they should not be doing, but if that should happen, unless you have something from an independent source, again, the misconception is that if an agent says it’s good, then it must be good.

So, let’s say roughly 80 per cent of all applications, then that is the biggest misconception out there.

What Are The Most Common Mistakes People Make In This Whole Process?

There are two. One has to do with due diligence; and one has to do with source of funds.

On the due diligence side, the most common mistake is by not doing a due diligence, or by thinking that they are sophisticated enough to do it on their own or who take the regional center’s words for their project. In other words, say you have somebody, who isn’t going through an agent, but they have done research and they are looking for a wind energy project and think that’s a good venture or they want a hotel project and they find out options on those two choices that they want to make.

Then they contact the regional center who of course are specifically trying to sell. It’s even more so than the agent. The agent potentially has done their own independent due diligence; a regional center is supposed to do it for themselves, but they are really trying to sell you. So, it’s to take the word of the regional center alone.

On the source of funds, it is to fight the lawyer on documentation saying, “Well, I really can’t get there”, and so the lawyer says, “Well, we’ll go with the best you couldn’t get”, and the best is to present everything that you can and to go that extra mile to get everything that’s out for, and maybe that’s something isn’t available but if it is what you’re just being not wanting to go that extra step to get it, then that is counterproductive.

What Are The Risks Someone Runs If They Are Not Going To Be Practicing Due Diligence?

The biggest risk is that it’s really sort of a house of cards that the project is underfunded; that if you are one of the first investors and they can’t get anybody else and then ultimately you may get the I-526 approved, you may get the conditional Green Card, but it’s the project that’s dead in the water because you find out they haven’t been able to raise enough money and the project doesn’t happen.

There are risks on being the first and there are risks on being the last.

So, again, that’s where you look at the picture as a whole have they done other projects, the regional centers have done 30 projects and they’ve funded everyone, so to be the first on that is not a problem. If you are doing someone’s application and it’s a first time regional center, then you have to at least be pretty convinced that it’s going to work.

If you want information regarding Some Common Risks Or Problems People Run Into In EB-5, call the law office of Mark Ivener for a free initial consultation at (310) 477-3000 and get the information and legal answers you’re seeking.

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