Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
Hello BP folks,
I am starting the rehab on my first property but am looking ahead on my next one and have been hearing a lot about opportunity zones. I cannot find much pertinent info about them. Im specifically in the LA market but am really curious about what others experience with this is. Could anyone help shine light on this?
Wilmington, NC · Member since 2017 · 132 posts · 70 votes
7y
OZ funds self certify through IRS declaration. Lots of activity in this space, but many are holding off until final IRS regs are issued. Biggest hurdles for investors is "substantial" improvement requirement. Although not spelled out, most think this means investing an amount in improvements equal to the tax basis of the building--not including land. Practically this means only major renovation or ground-up projects will qualify, but should provide some good opportunities for cost-seg salesmen. Also up in the air is exact timing of rolled over cap gains, with big funds lobbying for 360 days versus the proposed 180; lengthening the construction period beyond the suggested 30 months; and allowing interim profits to be rolled forward.
All the same, looks like OZs will be a good alternative to 1031s. I believe there will be a lot of activity here, but mostly project driven rather than fund driven.
Developer · San Francisco, CA · Member since 2015 · 103 posts · 47 votes
7y
@Jonathan Taylor - I can help but would need to know what your questions are. It is similar to a 1031 exchange but has its own set of rule and regulations. We're currently launching OZ based investments so I can help as an investor as well as someone looking to raise capital/make investments in OZ projects.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
7y
@Matthew Ryan
Thank you for the response and my questions about OZ are because I’ll be purchasing my next property in Q2-3 of 2020. I’ve read brief summaries about OZ and feel that where I’m based in La, these zones may be a good move. What kind of OZ projects are you putting together?
Hi There, I am new to BiggerPockets and trying to navigate all the information here. This is an interesting concept and I'm trying to understand the process. It looks from my superficial research that investment/bank institutions become certified, is that correct? If so who assists the individual, (you or me) to locate a property in the OZ. Can anyone share their experience, ideally in CO or ME? Many thanks!
Realtor · Lone Tree, CO · Member since 2017 · 139 posts · 112 votes
7y
Hi Kathy, Not just major institutions can become Opportunity Funds. You could register as a sole proprietorship, LLC, or Partnership.
Locating a property within an OZ is a simple process, the zones are clearly identified and maps are available. I'm involved with Opportunity Zones here in CO. Feel free to pm me with any more questions.
Wilmington, NC · Member since 2017 · 132 posts · 70 votes
7y
OZ funds self certify through IRS declaration. Lots of activity in this space, but many are holding off until final IRS regs are issued. Biggest hurdles for investors is "substantial" improvement requirement. Although not spelled out, most think this means investing an amount in improvements equal to the tax basis of the building--not including land. Practically this means only major renovation or ground-up projects will qualify, but should provide some good opportunities for cost-seg salesmen. Also up in the air is exact timing of rolled over cap gains, with big funds lobbying for 360 days versus the proposed 180; lengthening the construction period beyond the suggested 30 months; and allowing interim profits to be rolled forward.
All the same, looks like OZs will be a good alternative to 1031s. I believe there will be a lot of activity here, but mostly project driven rather than fund driven.
Developer · San Francisco, CA · Member since 2015 · 103 posts · 47 votes
7y
@Kathy Carpenter Kathy - @Ken Jernigan and @Tanner Crawley all make good points and are 100% valid. Only thing I would add is if you're taking other people money you'll need to find a securities attorney who is familiar and has completed an OZ "Fund" formation. Keep in mind that the "Fund" is technically a misnomer. A qualified attorney can explain the reasoning behind this.