E 2 VISAS A REPORT FOR THE REAL ESTATE INDUSTRY - 2021 REPORT // PREPARED BY VERDIN LAW
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E 2 VISAS A R E PO RT FOR THE REAL E S T A TE I N D U S T R Y 2021 REP OR T // PR E PAR E D BY VE RDIN LAW
VE RD I N LAW PAGE | 02
“ WE’ RE S EE ING INCR EA SED
D EM AND FOR U. S. REAL
E S T AT E BY FOR EIG N
I N V E S T O R S SE E KI NG E 2
V I S AS.”
Isaul Verdin, Esq., Founder & Managing Attorney
F O R E WO RD
Because VERDIN international clients often inquire about navigating the E2 visa process
through a real estate investment model, this report is intended to provide general guidance
through the E2 visa process via-a-vis a real estate related company. We hope you find
this report helpful as you consider investing in the U.S. and embark on your E2 visa
journey. However, keep in mind that VERDIN is not providing individual recommendations on
specific real estate investments. Investors should retain independent counsel to evaluate
the merits of each real estate investment.
In preparing this report, VERDIN reflected on the collective experience of countless cases
dealing with E2 visas involving real estate companies. Our team has processed E2 cases in U.S.
Embassies in Europe, the Middle East, Asia, South America, North America, and Central
America.
VERDIN is prepared and excited to work with foreign real estate investors seeking E2
visas.
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CO N TE N TS
The Main Objective ...................................................................................................................... 4
The Relevant Trends for 2021 ..................................................................................................... 5
Solid Economic Fundamentals .............................................................................. 5
Housing Prices ........................................................................................................5
Federal Interest Rates .......................................................................................... 5
Top Post-Pandemic Markets .................................................................................5
U.S. Workforce Working from Home ...................................................................6
Reopening of Economy ....................................................................................... 6
Japan, S. Korea, and Canada Lead in 2020 ..........................................................6
The Strategies............................................................................................................................... 7
Buy and Rent ....................................................................................................... 7
Flipping .................................................................................................................8
Hybrid .................................................................................................................. 8
Land Development ...............................................................................................8
The Benefits ................................................................................................................................. 9
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VE RD I N LAW PAGE | 04 THE MAIN O B JE CT I V E Foreign investors continue to seek opportunities in the U.S. markets. As they develop their market opportunities, many foreign investors desire to live in the U.S. One method of achieving this objective is the E2 visa, which is a nonimmigrant visa for foreign investors of certain treaty countries who have invested or are actively in the process of investing a substantial amount of capital in a bona fide enterprise in the U.S. in any industry. One common and mature industry that attracts the attention of many foreign investors is the real estate industry; and therefore, it is the focus of this report. Importantly, the regulations require foreign investors to actively direct and develop the enterprise. Accordingly, through a carefully structured business model that shows the foreign investor as an active director and developer of the company, the foreign investorcan make a viable case for an E2 visa through a real estate company. V E R D I N L A W . COM E 2 VI S A S : A RE P OR T FOR THE RE AL E S T A T E IN D US T R Y PAGE | 04
VE RD I N LAW PAGE | 05 THE R E L E V A N T T REND S FOR 2021 Foreign investors should consider the following trends given their relevance to this strategy. Solid Economic Fundamentals. Although the COVID-19 pandemic battered the economy in 2020, one key indicator that reflects a recovery in 2021 is the decreasing unemployment rate. According to the U.S Federal Reserve, the U.S. unemployment rate may fall to 4.5 percent in 2021. In addition, leading economists forecast a positive Growth Domestic Product (GDP) rate of 6.5 percent. Housing Prices. The National Association of Realtors predicts that housing prices will rise by 8 percent in 2021, and 5.5 percent in 2022. Federal Interest Rates. The ability to borrow money from U.S. banks at low rates continues to attract real estate investors. Rates are hovering around 3 percent, and are expected to stay low through 2021. Top Post-Pandemic Markets for Real Estate. According to the National Association of Realtors, the top local real estate markets post pandemic are Dallas - Fort Worth, TX, Atlanta, GA, Phoenix, AZ, Boise, ID, Provo, UT, and Charleston, SC. V E R D I N L A W . COM E 2 VI S A S : A RE P OR T FOR THE RE AL E S T A T E IN D US T R Y PAGE | 05
VE RD I N LAW PAGE | 06 U.S. Workforce Working from Home. Given the conditions of the pandemic, many U.S. companies accommodated their employees to work remotely from home. This new reality has allowed many Americans to relocate to less expensive markets within the U.S. Consequently, the U.S. has seen strong increases in demand in the Southern U.S. states where home prices are generally lower. Although the number of employees that work from home may decrease in 2021 and 2022 because of improving public health conditions, the long-term trend will likely stay for a few years. Thus, it is likely that internal U.S. relocations will shift to the South and mountain states like Utah, Idaho, and Colorado. This trend will create opportunities for investors. Reopening of Economy. As U.S. consumers begin to feel more comfortable post- pandemic, there is pent up demand for domestic travel. Americans will travel domestically with more frequency and search for rental opportunities in vacation homes and condominiums. Japan, South Korea, and Canada Lead in the Numbers. The U.S. government starts its fiscal year in October 1 and ends the following September 30. For fiscal year 2020, Japan, Canada, and South Korea captured the most E2 visas. However, in 2021 Japan, South Korea, and Mexico are leading with the most E2 visas. Of key note, Japanese and South Korean businesses have learned to navigate around the H1B and L1 visas by shifting their strategies to the E2 because there are no cap and time filing limitations to the E2 visa. There is a reason that Japan and South Korea dominate the markets. V E R D I N L A W . COM E 2 VI S A S : A RE P OR T FOR THE RE AL E S T A T E IN D US T R Y PAGE | 06
VE RD I N LAW PAGE | 07 THE S T R A T E G I E S Buy and Rent Managing rental property as a business strategy is an active and risky endeavor. But, where there is risk, there is opportunity and a potential for favorable investment returns. Nevertheless, many foreign investors gravitate toward real estate - given its relatively stable investment attributes as compared to other investment classes. Furthermore, foreign investors appreciate the simple and direct business model of buying and renting properties. In recent years, market trends have rewarded this class of investor. Through a well-prepared presentation, the U.S. government will consider an E-2 visa packet based on a company dedicated to buying and renting properties. Before pursuing this strategy, foreign investors must conduct their due diligence and compare local market trends because all real estate is local. VERDIN will generally advise on the acquisition of two or more properties through a holding company. If the investor will acquire a significant number of properties, the prudent approach is to create two companies: a holding company that owns the properties; and a management company that leases the properties to tenants. This structure should create an extra layer of liability protection for the investor. Initially, while the investor is preparing the strategy and taking preliminary steps, he or she may travel to the U.S. on a B1 -B2 visa to research the market and acquire properties. V E R D I N L A W . COM E 2 VI S A S : A RE P OR T FOR THE RE AL E S T A T E IN D US T R Y PAGE | 07
VE RD I N LAW PAGE | 08 VERDIN recommends the use of a third-party property management company while the investor is using a B1/B2 visa - in order to comply with the terms of the B1/B2 visa. Once the E2 visa is secured, the investor can dismiss the third-party property manager; and subsequently manage the properties through the E2 enterprise. Flipping The term “flipping” refers to the acquisition of real estate property, a value-add, and then quick sale of the property. This strategy requires timing and coordination with many independent contractors. This strategy tends to favor experienced investors, but the government will consider an E2 visa packet based on a company dedicated to flipping properties. Of key note, the use of independent contractors can replace the need to hire company employees. There is a strong argument that using independent contractors will stimulate the U.S. economy, and thus establishing that the E-2 enterprise is not marginal. Hybrid Strategy A prudent strategy is to combine both buy/lease and flipping strategies. This dual pronged approach will diversify the strategies to best exploit market conditions. Again, the U.S. government will also consider a well-planned E2 visa packet based on a Hybrid Strategy. Land Development The foreign investor may also decide that developing land is a suitable strategy. This strategy requires proactive steps to demonstrate that the foreign investor has used V E R D I N L A W . COM E 2 VI S A S : A RE P OR T FOR THE RE AL E S T A T E IN D US T R Y PAGE | 08
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capital to develop the land beyond the cost to acquire the raw land. For example, the
investor may show that he or she has used funds to pay for civil engineering fees, surveys,
permits, and improvement costs.
While using any of the strategies it is strategic to also reserve the ability to conduct
consultancy services to allow the foreign investor the ability to pivot to ancillary business
services.
VERDIN is experienced in multiple E2 visa strategies involving real estate projects
throughout the United States.
THE B E N E F I T S
The E2 visa has key advantages. Foreign investors should consider some of the following
benefits:
Allows the investor to indefinitely renew his or her E2 visa.
Spouses may obtain employment authorization.
Children under 21 can also obtain E2 visa as dependents and attend public or private
schools.
Rapid processing at the US Embassies or Consulates.
Allows access to real estate markets to actively operate and expand real estate
related companies.
Permits E2 visa investors to sponsor other foreign national executives with the same
nationality as the investor owner.
Although the E2 visa is a nonimmigrant visa, there are some pathways to residency, if
carefully planned.
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