Anyone that has been investing in real estate for the past two years has certainly heard of opportunity zones, and for good reason. Since Q2 2018, opportunity zones have been a heavily invested target market supplying stimulus to an otherwise underdeveloped real estate market. However, what exactly is an Opportunity Zone?
According to the IRS, an Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. The key phrase there is economically distressed. Often, when considering tax breaks for real estate acquisitions, it involves low to moderate income neighborhoods. Here, that is not necessarily the case. In the areas where I focus, the poverty areas certainly have larger opportunity zones, however, not exclusively. Some B-Class, A-Class, areas have opportunity zones because of historical properties or areas that have not been able to sell due to the strict deed restrictions. There are other reasons, so it is important you understand what makes an opportunity zone designation so you can understand the outlying risk.
How are Opportunity Zones Designated?
Once again relying on the IRS definition, localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service. That is a cumbersome process to create one investable area. And none of that includes the boots-on-the-ground operations that need to happen. That is one reason why the zones were originally designated in 2017 and did not begin to show up in April 2018. That is important because any changes that may come to Opportunity Zones will come slowly with enough notice to make sufficient adjustments.
Author:John Lewis Phone: 201-855-9377 Dated: April 8th 2019 Views: 64 About John: Specializing in Distressed Properties and Foreclosures, I have been regarded as "the angel realtor."...