Is Opportunity Zone Investment Worth the Risk?


Is Opportunity Zone Investment Worth the Risk?
Investors should be wary of the risk profile of Opportunity Zone deals, which could be much higher in certain targeted census tracts than the stock market. Federal initiatives designed to incentivize private investment in low-income communities have been around for years, often with mixed results. Today, “Opportunity Zones,” a program inserted into the new tax law, holds a lot of promise but represents a dramatic departure—with considerably more risk—from New Markets Tax Credits, a time-tested tool favored by real estate developers since the early 2000s... ...Similar to the like-kind 1031 exchange, Opportunity Zones are designed to reward long-term investment by deferring or abating capital gains taxes. Initially, investors defer their unrealized capital gains by reinvesting into an Opportunity Fund. They’re taxed on just 85 percent of that original investment, as well as proceeds, if they stay in the fund for seven years. If an investment is held beyond 10 years, investors are only responsible for paying taxes on the original investment, making it the more cost-effective option... ...more RSK: We had this very same topic at our RASCW Commercial Update Seminar on Wed the 23rd. There is opportunity here but need to know where the zones are and the risk. Ken Notes: Like other zones or districts the key will be to get one or two businesses in the zone that generate growth for the investors. Then the risk factor is minimized as new startups come and go. If I had a zone I would look for a distribution center as an anchor..
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Our Sponsors - - Volume: 6 - WEEK: 23 Date: 12/3/2021 6:11:36 PM -

Investors should be wary of the risk profile of Opportunity Zone deals, which could be much higher in certain targeted census tracts than the stock market.

Federal initiatives designed to incentivize private investment in low-income communities have been around for years, often with mixed results.

Today, “Opportunity Zones,” a program inserted into the new tax law, holds a lot of promise but represents a dramatic departure—with considerably more risk—from New Markets Tax Credits, a time-tested tool favored by real estate developers since the early 2000s...

...Similar to the like-kind 1031 exchange, Opportunity Zones are designed to reward long-term investment by deferring or abating capital gains taxes. Initially, investors defer their unrealized capital gains by reinvesting into an Opportunity Fund. They’re taxed on just 85 percent of that original investment, as well as proceeds, if they stay in the fund for seven years. If an investment is held beyond 10 years, investors are only responsible for paying taxes on the original investment, making it the more cost-effective option...

...more

RSK: We had this very same topic at our RASCW Commercial Update Seminar on Wed the 23rd. There is opportunity here but need to know where the zones are and the risk.

Ken Notes: Like other zones or districts the key will be to get one or two businesses in the zone that generate growth for the investors. Then the risk factor is minimized as new startups come and go. If I had a zone I would look for a distribution center as an anchor..

Is Opportunity Zone Investment Worth the Risk?

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