Friday, July 5, 2013

EB-5 visa through direct investment businesses: Would you pay $1,000,000 for 15% equity in a restaurant when you can get 100% equity?

I saw a really funny ad by Mr. John Shepherd, soliciting a $1 Million investment in his restaurant. The link to that ad is

What Mr. Shepherd neglects to tell readers is what is the actual purchase price of the restaurant and what is he investing, and what will his share of the equity and profits be? Failure to disclose material facts such as these is termed as securities fraud in the US.

Besides the fact that this solicitation is ILLEGAL and in contravention of US Securities laws, there is also the little matter of common sense: Who in their right mind would invest $1,000,000 for only 15% equity of a startup restaurant in an unproven franchise, when they could deploy the same amount to own 100% of their own restaurant in a proven franchise such as 5 Guys, KFC, Subway, etc. and get a solid ROI in the region of $220,000 to $400,000 annually?

Does Mr. Shepherd think that people who have USD 1Million are stupid? In my opinion, it would be an act of sheer stupidity to invest even a penny in this startup when they have safer and more profitable options such as auto dealerships, blue chip franchises, family entertainment centers, liquor stores, etc. available to invest in.

EB-5 visa seekers need to remember that they should avoid partnerships as these are just regional center business models in disguise. EB-5 visa seekers get the best results when they own and control their own Direct Investment Business, preferably in a blue chip franchise ranked within the top 3 of their business (i.e. Subway or KFC or McDonalds or 5 Guys, etc.) or a solid business such as gun stores or auto parts stores or family entertainment centers, as they not only get  significantly higher ROI but also offer easy exit strategies and the ability to avoid the conflict of interest and fraud that is widespread in partnerships and regional centers. EB-5 visa seekers should always demand notarised affidavits affirming full disclosure of all material facts by the regional center / partnership promoter + CEO + CFO, and avoid those who refuse to furnish these affidavits.

In case you need further information, please feel free to contact me for assistance.

Mohammed Shaikh, MBA, CFE, Licensed Business & RE Broker (CA & FL)

Wednesday, July 3, 2013

EB-5 visa seekers: Ask not what your money can do to enrich others, ask what your money can do to enrich YOU! An objective comparison between Direct Investment Businesses versus partnerships and RC's.

I was contacted by a "Partnership / RC" promoter who wants to raise $6 Million in EB-5 funds for a $ 10 Million restaurant she wishes to start in Orlando. She'd pay half a percent annual ROI to the EB-5 investor and to also charge them $45,000 in administrative fees, on top of the fees charged by the immigration attorney and other junk fees. This promoter wants to use a $4 Million bank loan + $6 million from the EB-5 investors and won't invest a penny of her funds, and wants most of the profits. To this, I say, BS!

EB-5 visa seekers are NOT stupid to give their money to someone who won't invest even a penny of their own funds, and wants most of the profits.

The following is an objective comparison on the pros & cons of Direct Investment Businesses versus Partnerships & RC's.

1. Freedom from fraud and conflict of interest. Business Brokers like me owe a fiduciary duty to clients, and are required to disclose all material facts to clients, which is why I'm willing to offer notarized affidavits to clients confirming that I've disclosed all facts. Partnership / RC promoters usually refuse to offer notarized affidavits to EB-5 visa seekers stating that they've disclosed all material facts and conflicts of interest to investors. EB-5 visa seekers should not trust such people or deal with them. We always advise EB-5 visa seekers to request CPA audited financial statements in order to avoid fraud.

2. Easy exit strategy: With Direct Investment Businesses, the EB-5 visa seeker has 100% control over the business and can access their funds whenever they want, while partnerships & RC's usually lock in funds for 5-9 years or more. While the funds are locked, it is the promoters that get most of the profits.

3. Capital gains & losses: It is common for EB-5 visa seekers to experience loss of all or part of their capital if they invest in RC's or partnerships, while in 9 years I've yet to see my clients in direct investment businesses lose their capital. EB-5 visa seekers should demand CPA audited financial statements of the promoter's past and present projects to check if prior investors have experienced capital losses. Promoters who refuse to furnish CPA audited statements may be committing fraud. In contrast, those who buy Direct Investment Businesses usually have solid capital gains.

4. Mitigation of visa loss risk: USCIS statistics clearly show that those who invest in partnerships & RC's have an approximately 42% chance of getting their EB-5 visa, while 100% of my clients have successfully obtained their EB-5 visa and in the process have also successfully earned annual profits above 15%, and exited with capital gains in an easy and transparent manner. The chances of getting the visa are higher when EB-5 visa seekers own their own business.

5. Ease of management and absentee ownership: With Direct Investment Businesses, EB-5 visa seekers can own and operate their businesses in any part of the US and still continue professional careers as engineers, doctors, pharmacists, dentists, etc. It is very easy for owners of Direct Investment Businesses to manage and operate their businesses even on part time basis if they're working full time jobs and managing their businesses only 12-20 hours a week.

6. Solid profit earnings: It is very easy for investors in Direct Investment Businesses to earn profits of 15-50% annually, while investors in partnerships and RC's usually earn 1% annually. In dollar terms, over a 5 year period, EB-5 visa seekers who invest $1,000,000 in a partnership or RC get $50,000 total dividends if they're lucky, while those who bought their own Businesses usually earned $1,000,000 or more in profits. This is a massive difference in profits.

I've helped 53 investors successfully obtain EB-5 visas, and will be happy to assist those who wish to get their EB-5 visas in a quick & safe manner.

Yours truly
Mohammed Shaikh, MBA, Licensed Business & RE Broker (CA & FL)