Parents all over the world choose to send their children overseas to the United States in order to secure a first class college education. But, some of these parents—particularly those in China—occasionally run into a serious complication: it can be very difficult to send money to their children in the US. There is also the natural risk that comes with sending cash to a young person who hasn’t necessarily developed the financial management skills needed to budget appropriately.
However, there is a solution to both of these problems that foreign investors have been taking advantage of for decades: property investment. Typically, these parents purchase American commercial and residential real estate in areas close to where their children live and go to school, and leasing the properties out. Some or all of this rent money is send directly to the investor’s student, providing the student with a dependable monthly stipend.
This approach solves a number of challenging problems in one go:
- Countries such as China that restrict sending currency outside the country typically grant some leeway when it comes to buying foreign real estate.
- Rather than struggling to send money multiple times a year for several years, the number of international financial transactions is minimized.
- There’s no need to risk sending a lump sum to a young student, only to have them spend it unwisely.
- If it’s necessary to provide the student with a place to live near their college or university, an investor who purchases a home or multifamily unit can choose to let their child live there rent-free.
There’s no need for foreign real estate investors to obtain American citizenship or a green card. But you will need to apply for an Individual Taxpayer Identification Number (ITIN). To do so, fill out a Form W-7, Application for IRS Individual Taxpayer Identification Number.
Depending on your circumstances, it may also be wise to hire a real estate attorney experienced in handling US real estate purchases by foreign investors.
Investment in American commercial enterprises also offers foreign parents the opportunity to immigrate via EB-5.
It’s not unusual for parents of students in the US to unexpectedly discover a desire to move to the United States and embrace the country’s distinctive culture. For those with the investment capital, the United States’ EB-5 Immigrant Investor Program offers the opportunity to do just that.
Back in 1990, the US Congress sought to combat a stagnant economy by creating the EB-5 Program, which provided an incentive for foreign entrepreneurs to invest in the American economy. Under the program, if a foreign investor invests $1 million in a new commercial enterprise that will provide at least 10 permanent full-time jobs, the investor is eligible to apply for a green card, and can also secure green cards for their spouse and any unmarried children under the age of 21. The investment can be halved to $500,000 if the business is in a “Targeted Employment Area,” which are typically geographic areas with high unemployment or in rural areas.
If you take advantage of the EB-5 program while your student is still early in their education—before they turn 21—you can grant your child the opportunity to pursue a career in the United States after they graduate, and bring your family over to the United States as well.
Even if you have no interest in living in the United States, the EB-5 program is a great way to secure a life in the United States for your children, who will likely have grown to love the country they’ve spent years studying and living in, and who perhaps hope to stay there after they graduate.
It’s important to keep in mind that the EB-5 program isn’t limited to the super-rich. In a New York Times article about Chinese participation in the EB-5 program, Daniel Chang, the head of the Asia desk at Sotheby’s International Realty noted that EB-5 “is really for middle-class and upper-middle-class Chinese, and many are doing it for their children.”
For those who don’t quite have the necessary capital to invest in American real estate or take advantage of the EB-5 program, Socotra Capital can help you finance your real estate purchase or business venture. Take advantage of our growing economy while establishing a stable source of income for your child, and potentially secure US citizenship as well.