Hello BP-ers! I am looking to purchase a buy and hold property for cash flow and see there are some properties for sale in Opportunity Zones. What does this mean to me as an investor? What should I be aware of? Are there any additional actions/steps I should be considering if I acquired one of these properties?

Thanks for your insight!

@Ashley Cao  

An opportunity zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. 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.

@Ashley Cao a simple analogy and in layman's terms, its like floating your money around in stocks a avoiding taxes on gains as long as it's being used towards investing. It basically delays taxes on gains. An example would be, you earned say 100k in gains or in an IRA and you reinvest them into a opportunity zone fund to purchase a property or invest in a business in these opportunity zones you will defer your taxes while injecting growth in these troubled markets.

Here’s a link that is pretty detailed: https://www.wellsfargo.com/the-private-bank/insights/planning/wpu-qualified-opportunity-zones/

@Ray A Delfi

Thank you!

If I am purchasing a property in an opportunity zone, should I be doing anything different, or will this only matter when I sell?

@Ashley Cao " In Real Estate, Money Is Made On The Purchase, Not On The Sale."

@Ashley Cao not if you are purchasing the property there should’t be anything different, but confirm with a CPA. I believe it cannot be your money, or I may be thinking of something different. If you have an investor or someone one with money sitting in the exchange or a retirement account and having them lend you the money to invest, or you lend money to another investor, that would be the situation where the opportunity zone comes into play. You can also invest in a business in an opportunity zone and get the same benefits. Again, I’m just going by what I believe I heard double check that with a CPA.

Hers an IRS Video on the topic

https://youtu.be/70M8KVfg6JU

@Ashley Cao OZ are areas that are high risk. That why they are labeled as such. Don't let the tax angle be the reason to go into a bad deal.

You only receive any benefit from buying in an Op Zone if you are reinvesting a newly generated Capital Gain. 

If you're just buying there you get no benefits tax wise.

@Natalie Kolodij

@Ray A Delfi

@Lane Kawaoka

@Ellie Adams

Thank you for your input. I have heard about using Qualified Opportunity Funds to invest in to OZ for tax benefits. My understanding is that QOFs comprise of capital gains, as you had mentioned, @Natalie Kolodij.

Do any of you know if it's possible to use another investor's QOF to fund my deal instead of using a traditional lender?

Originally posted by @Ashley Cao :

@Natalie Kolodij

@Ray A Delfi

@Lane Kawaoka

@Ellie Adams

Thank you for your input. I have heard about using Qualified Opportunity Funds to invest in to OZ for tax benefits. My understanding is that QOFs comprise of capital gains, as you had mentioned, @Natalie Kolodij.

Do any of you know if it's possible to use another investor's QOF to fund my deal instead of using a traditional lender?

If you have a capital gain to defer and another investor has a fund setup with a property or you can invest into it. 

The assets of the fund needs to be funded by capital gains- so you couldn't partner with them on buying a new property in their fund if they didn't have gain to invest too. 

@Lane Kawaoka great point!

@Lane Kawaoka

Thanks for the advice. Definitely not targeting for tax angle. The property just happened to be in an OZ.

I checked the crime map to and it seemed to check out.

My PM who is selective on what areas she would PM also ‘approved’ this area.

What other items would be seen as high risk? Or what other items should I be looking into?

Thank you!