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EB-5 fund administration – should you build in-house or outsource?

Some people think that traditional real estate fund administration and EB-5 fund administration are the same. In a recent blog post, I wrote about the four key differences and the importance of working with a fund administrator who understands them. After understanding the distinct specifications for EB-5 fund administration, an important question to consider is whether you should make or buy.

Should an EB-5 issuer develop the technology and capabilities internally or outsource to a third party fund administrator?

There are several factors to analyze when making this decision. In an upcoming series of blogs, I will be taking a deeper look at all of the factors you should take into consideration when deciding whether to outsource the proper EB-5 fund administration technology or develop it in-house.

In this blog, we will discuss costs. Most people translate the outsourced service provider’s pricing into a rough estimate of the number of employees that should be hired in order to do the same work in-house, but end up forgetting to include many of the other significant cost items.

While employee costs are certainly the most significant component of the do-it-yourself approach, they are not the whole story. In fact, this may represent a smaller portion of the overall cost than you would originally think.

In-house costs you would incur are:

  • Employee costs. You need to include the time and resources involved in recruiting skilled professionals that meet the job requirements. As a rule of thumb, managers tend to spend four to eight hours interviewing candidates and usually interview eight people for every one they hire. That means between 32 to 64 hours of your time is taken per needed staff member. Once the staff has been hired, the time and effort needs to be taken to properly train them. Managers spend at least another five hours per week per employee to get them up to speed. It tends to take about six to nine months for an employee to get fully caught up. Depending on changes in the market, training may have to be repeated throughout the year. Of course, the more employees you hire, the more salary and benefits are required. You have to spend time researching and evaluating the proper pay levels and then administer them to the new hires.
  • Technology costs. To make sure you select the right solution, you need to spend time beforehand defining and writing the business requirements, researching different vendors, and requesting and then analyzing vendor RFPs. Once the technology has been selected, there may be costs to deploy the software. Typically, there is an additional cost for consultants to help configure the software to your business needs. You may also need hardware or an existing system reconfiguration, which can pile on additional costs. The entire process can take quite a bit of time, plus there is always the worst-case scenario that the end result is not successful.
  • Ongoing costs. In addition to the startup costs, there are extra incurred costs, such as employee retention, additional recruiting and training that may arise, maintenance, and system upgrades to name a few.

As you can see, it costs a lot to properly implement EB-5 fund administration internally. Look for my future blogs discussing the additional factors that you need to consider, such as scalability, risk mitigation, compliance, and strategic focus.

NES Financial is the industry leader for EB-5 solutions. Having worked on over 200 EB-5 projects with more than 85 Regional Centers, we have the most experience and expertise in the market. Our leading suite of EB-5 solutions, including EB-5 Fund Administration, was developed specifically for EB-5 – so it can handle all aspects as well as stay current with constantly evolving and stringent compliance requirements.

Using the NES Financial EB-5 Fund Administration solution can save countless hours and thousands of dollars and allow you to focus on doing what you do best.

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