Investor visas to the US

I saw this interesting article in the Wall Street Journal about real estate developers looking to Vietnam for cheap financing. Just a little background. the US allows investors to get a green card after investing $1 million (or $500,000 in certain areas that have high unemployment). The investment has to create 10 jobs as well.

The US is not the only country to do this. Both Portugal (EUR250,000) and Canada (in Quebec it requires an CAD1,200,000 investment) have similar programs. . The benefit is that the destination country gets cheap capital and a guarantee of some jobs. In addition, it attracts immigrants that already have resources and may end up paying more in taxes.

In the US, the number of visas issued is pretty low, something like 10,000 people, with another potential 3,000 in a subsidiary program. No year has reached that; the most was 10,692 visas issued or status adjusted back in 2014. And it has remained close to that level for a while.

REPORT OF THE VISA OFFICE, US DEPARTMENT OF STATE

REPORT OF THE VISA OFFICE, US DEPARTMENT OF STATE

The surprising thing is that Vietnam has now become one of the larger countries. It represented 5% of all visas issued by the program in 2018, up from just 2% in 2017. The number is still low, but it is growing quickly. According to the article linked to above, it appears that developers have turned from China to Vietnam to get more interest in the program. Chinese investors, for multiple reasons, including a very long wait time as the US government caps visas given to citizens of any one country, have dropped off from a high of 9,128 in 2014 to 4,642 in 2015.

REPORT OF THE VISA OFFICE, US DEPARTMENT OF STATE

And now Vietnam has become the next great hope. It’s kind of surprising to me, because a friend in real estate finance told me that they have no real network in Vietnam (and they have networks all over the world). So it is interesting to hear that developers are able to do attract money from Vietnam on a retail basis, but attracting larger Vietnamese institutions to invest are not as successful. It helps that there is a network of marketers out there that are pushing this in return for commissions. Based on a quick search, one company is having two seminars in Ho Chi Minh City this year (one in March and one in September) to “educate” Vietnamese about these visas. I assume this is just the tip of the iceberg and that there are tons of people out there interested.

We can see this marketing has been successful by the numbers. At the peak of the program back in 2014, the figures for Vietnam were pretty minimal, but since then they have increase almost 6x.

It’s a great deal for the developers, because they get “cheap” capital that is not going to be that demanding. As long as they deliver the jobs, the investor gets the green card. But the investor would also like some return, and that’s where the investor’s likely inability to do much due diligence puts him at a great disadvantage. Fraud is a real problem, as you can see detailed in this article.

It’s been pretty good for the US. By my back-of-the-envelope calculations, total investment over the past 10 years was probably around $40 billion, and almost 750,000 jobs were created. That’s not nothing. Foreign Direct Investment (FDI) was just over $250 billion in 2017, with $9.7 billion in real estate. This compares to my estimate of around $5 billion from this program in the same year. [Timing on the investment versus when the visa was issued may not be in the same year, so this might not be like-for-like. My point, though, is that the investment is significant, especially for real estate FDI.] So almost half of FDI in real estate comes from this program.

The law is under discussion now, and we could see something come out pretty soon. Early releases for public comment showed that the Office of Management and Budget wanted to increase the investment requirement to $1.35 million ($1.8 million if not in a high-unemployment area), which everyone says will destroy the program. Also, the waiting list for Vietnamese applications had risen to 7.2 years as of last October.

My bet is that this all goes away in the next year or two, at least for Vietnam, and all of these brokers move on to the next country. South America is a ripe continent, as is Africa, both of which have seen a nice rise over the past few years. Hope those Vietnamese that wanted a visa got in before the door shut.