E-2 Visa and Real Estate Investments
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E-2 visa is generally an excellent tool for foreign entrepreneurs who wish to come to the U.S. to invest in a business. It is a comparatively straight-forward process, since a prospective applicant does not have to file a separate petition with the U.S. Citizenship and Immigration Services (“USCIS”), but can apply directly at the U.S. embassy in their home country.
There are a lot of cases where foreign entrepreneurs have the capital ready to go, but have no idea what kind of business to invest in. As the U.S. real estate is perceived as easy and attractive investment, many foreigners enquire whether they can buy a house, rent it out and get an investor visa.
The U.S. immigration law has the following requirements for foreign investors wishing to apply for an E-2 visa:
- The investor must be a national of a country that has a commerce treaty with the United States. The complete list of such countries can be found here: https://travel.state.gov/content/visas/en/fees/treaty.html.
- The applicant must have invested, or be actively in the process of investing, a substantial amount of capital in a bona fide enterprise in the United States.
- To be “in the process of investing”, the investor must irrevocably commit the funds. Thus, for instance, a purchase of a business may be conditioned upon the issuance of the visa, but only if the funds for the purchase are being held in escrow for release only on such condition being met.
- The invested capital (funds or assets) must be “at risk,” i.e. it must be subject to total or partial loss if the investment fails.
- The investor must show that the capital was obtained through legal ways.
- The invested capital must be substantial in relationship to the total cost of establishing such a business and sufficient to ensure the investor’s commitment to the success of the endeavor. This is established on a case by case basis.
- The business must be “bona fide,” i.e. real, active and operating commercial enterprise for profit.
- The investment cannot be marginal. It has to have a present or future capacity to produce more income than necessary to provide for the investor’s family. If no current income can be shown, then the investor has to establish that the business will have the capacity to produce such income within five years. Such showing can be made by hiring U.S. workers within several years.
- The investor must be coming to the U.S. to develop and direct the business. This requirement can be met by showing of at least 50% ownership of the business or possessions of operational control through a managerial position.
The issue in the case of a real estate investment becomes whether such an enterprise is “bona fide” or whether is it real, active, and produces services or goods for profit. The business cannot be a passive investment held for potential appreciation in value, where the investor has no capacity or desire to direct the enterprise.
Keeping that in mind, it becomes clear that merely purchasing investment property to rent out or for future resale would not qualify, since it would not be an active and real enterprise. It is a purely passive investment for immigration purposes and is not recommended to potential investors.
However, if the investor plans on buying and selling multiple properties, as a business strategy, such a company might qualify for E-2 visa. Similarly, purchasing multiple properties, renovating them and then reselling would be a legitimate E-2 investment. The one thing to keep in mind is that the funds invested in such undertaking cannot come mostly from the loans guaranteed by the real estate properties themselves. They have to come from the investor’s pocket to satisfy the “substantial” investment requirement.
Additionally, a valid E-2 investment would be establishing a property management company to manage commercial property, like a strip mall, or an apartment complex. It would satisfy all the requirements, including showing that the business is active, not marginal and that the investor is in the U.S. to actually direct the company. Conversely, purchasing an apartment complex or commercial property and then hiring a separate management company to manage the buildings would not satisfy the requirement of “directing” the business, since there would be no direct involvement from the investor.
In short, if you are planning to invest in the U.S. real estate with the hopes of getting an E-2 visa, think big: multiple properties, long-term projects. Buying a rental property would not cut it.