October 23, 2018 A Window Of Opportunity: OZs Are Ripe For Real Estate Investing
Opportunity Zones was recently covered by Forbes:
The federal government has recently designated 9,000 census tracts as Opportunity Zones and they have become ripe for real estate investment. Investment in opportunity zones has become part of a new community development program through the Federal Tax cuts and Job Acts of 2017. This program encourages private investment in low-income urban and rural communities. The investment program is a free-market approach that is meant to spur economic and community development through long-term investment.
Earlier this year, governors from all 50 states were asked to identify low-income or low-performing areas in need of infrastructure investment. States themselves could then go on to nominate 25% of those tracts to make opportunity zones.
The opportunity zone program will allow investors to defer taxes by taking capital gains from other investments and placing them into businesses or various real estate assets in the opportunity zone. The tax incentives not only encourage investment in low income areas, but also promotes long-term investment. The longer investors keep their money in opportunity zones, the more tax incentives they receive. Real estate funds provide many benefits to its investors, including low risk. The companies creating the real estate funds are usually sophisticated in understanding the economic and social climate for each location and they tend to have more influence over the areas, which increases the chance of a positive return on investment.
In the opportunity zone program, there are no official guidelines on the type of investment that must be made. Investors have their choice of a capital investment in a startup company based in the area or they can choose to develop a new residential or commercial building. Investors ultimately become an integral part of a opportunity zone community’s rebirth. Usually, investors can transform low-income areas into thriving and economically sound neighborhoods. Investments in low-income opportunity zones usually improve housing stock, create new jobs, and leverage public transportation.
The opportunity zone program is still in its early stages, but there has been discussion about the long term impact the investments will have on the people and the areas they live in. While awaiting government guidance, the preliminary research would appear to show that the program is going to be mutually beneficial to investors and the communities in which they operate.
Read more on Forbes