Why E-2 Visas and Passive U.S. Real Estate Investments Don’t Mix

Lots of folks are saying that passive real estate investments in the U.S. will qualify you for an E-2 visa. Not true.

MIAMI- I am increasingly concerned by the “E-2 Real Estate Investments” currently being marketed in Vietnam; as one of the few U.S. law firms who has procured an E-2 visa for a renationalized Vietnamese investor, I feel the need to speak up.  I’ve met too many people who have been defrauded by the EB-3 employment scams perpetuated by migration agents in HCMC, so let’s set the record straight as to why passive real estate investing does NOT qualify an investor for an E-2 Treaty Trader visa.  (Hopefully this will save at least a few readers from making a bad E-2 choice, however sound and valid the underlying real estate investment.)

In the past decade of working with immigrant investor clients in Vietnam, one thing has been made very clear: while the immigration objectives of the family are paramount, the vast majority of Vietnamese entrepreneurs are also interested in speculating in U.S. real estate, whether simply to build a portfolio of income-generating residential rental properties or for something more ambitious.  Given the incredible boom in Vietnam’s own real estate market over these years, it is easy to understand the attraction.  Once in a while, we will have an investor who, him or herself, is a proven real estate developer in Vietnam and wants to start a similar business in the U.S.  In fact, one of AVS EB-5 Regional Center’s very first Vietnam investors did precisely that, building a successful U.S. development company during the time it took to procure the final permanent residency.  

But that’s a rare example. Far more frequently we are presented with the following question:

“I would like to invest in properties, rent them, and live in the U.S.”

That simple and evidently reasonable question has a very complex, multifaceted answer which varies depending specific visa. (For example, a B-1 visa holder personally putting together a U.S. real estate investment portfolio and its management can most certainly follow that path and EVENTUALLY segue to E-2). But the SHORT answer, gleaned from the past 35 years of both serving as a U.S. visa officer and as an attorney representing immigrant investors, is this:

“Investing in rental properties has always been defined as a passive endeavor under US immigration law and as such it will NOT get your L-1, E-2 or other nonimmigrant visa approved”

Rather than explaining all the underlying laws and precedent cases behind that simple, very historical fact, I will keep this short and simple:

  1. The E-2 has a number of specific requirements you can read here, but there is only one we care about for this subject: the requirement that the investment must be “active” and not “passive”.
  2. That “active” requirement is hardly new; it is the subject of decades of case law and consular clarifications in the Foreign Affairs Manual (FAM) adjudication guidelines and notes relied upon by every single US visa officer in the world when deciding an E-2 case.
  3. For the E-2 visa specifically, to satisfy the “active” requirement the investor must be actively involved in the business, directing and developing it on a regular basis and he or she must be “directing” and “developing” the investment process and decisions.
  4. An investor who is buying properties to rent or fixing/flipping properties will NOT qualify for the E-2 visa because these activities have long been defined as “passive”.

U.S. real estate investment companies – legitimate ones – have long partnered with Vietnam real estate groups to offer U.S. properties to Vietnam investors, which is GREAT!  In fact, we have EB-5 clients who have done so very successfully over the years; we’ve also had EB-5 clients who have lost a lot of money speculating in the U.S. real estate market.  But U.S. law on this E-2 requirement goes back decades, so suddenly telling people now that such investments lend themselves to serve as E-2 Treaty Investor vehicles is pretty inexcusable.

So how does one meet the “active” requirement for E-2 purposes through U.S. real estate investments?  By being actively involved in the business, directing and developing it on a regular basis. As in “hands on”, not “hands off”.  Remember the EB-5 investor I mentioned who built his successful U.S. real estate development company?  He did it by personally visiting the U.S. with a B visa, selecting properties, making investments, filing his I-526 petition, getting temporary residency as an EB-5 investor and making all of the investment decisions directly, i.e., “active”.  I’ve had other clients from other countries create successful E-2 real estate businesses by partnering with a licensed U.S. developer in a 50-50 joint venture, drawing up plans, making the big decisions require to build commercial real estate properties…”active”.  The point is that putting in money into rental properties or speculating in fix and flip deals where the investor is NOT in charge of the dealmaking and execution process is “passive” under E-2 regulations.  Period, very old legal fact, end of story.

Now, all that being said, it is a GREAT time to invest in real estate in the U.S. and there are great investments opportunities here…just don’t tell people that passive real estate investing will get them an E-2…it never has, it never will.

[P.S.  While we’re on the subject of US real estate, I should add that we TOO are investing in America: after successfully closing out our last EB-5 limited partnership in late 2019, American Venture Solutions Regional Center will soon be announcing our new EB-5 project group, a series of new-construction single family home rental communities in South Florida, 100% of them federal-designated TEAs, all backed by the same Forbes group we’ve worked with since the beginning.]