The Ultimate Guide to Opportunity Zones

The Ultimate Guide to Opportunity Zones

Posted by Marc DeLille on November 29th, 2021

As a commercial real estate investor, you’re always looking for ways to expand your portfolio most cost-effectively. You’ve likely heard the buzzword “opportunity zones,” but if you aren’t exactly sure what opportunity zones are and how you can benefit from them, stick around as Price Commercial Properties is here to explain.

According to the Internal Revenue Service (IRS), the opportunity zone is “an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.” The goal of opportunity zones is to provide real estate developers and investors with an incentive to go into areas of greatest need — thus starting the trend of opportunity and development in the specific area. As a result, these opportunity zones help create new jobs and lessen the distress the area faces.

Because of this, state and local leaders have made a point to identify potential opportunity zones as a way to promote growth and development in their communities.

What is a qualified opportunity fund? How does it work?

A qualified opportunity fund is an investing strategy where investors have the opportunity to receive a significant tax break on any capital gains they’ve earned from selling stocks or other assets. It’s important to note that investors cannot use their capital gains to invest directly into an opportunity zone, but must do so through a qualified opportunity fund.

Using the qualified opportunity fund, many investors use these capital gains to invest in opportunity zones in their communities. When investing in these opportunity funds, the investors must make substantial improvements to the investment property that is equal to the original paid value within the first 30 months for them to reap the benefits of the opportunity fund.

What are the tax incentives of investing?

If you’re looking to get involved in an opportunity fund, as an investor you can expect to enjoy capital gains tax deferral, reduction, or even permanent exclusion. Although you do have the ability to defer inclusion in taxable income for capital gains invested into the opportunity fund until you release the investment, there are incentives you will experience by holding onto the investment:

  • By retaining the investment for at least five years, you can exclude 10% of the taxable gains from the original investment amount.
  • By retaining the investment for at least seven years, you can exclude 15% of the taxable gains from the original investment amount.
  • By retaining the investment for at least 10 years, you can exclude 15% of the taxable gains from the original investment amount and 100% of the taxable gains of the opportunity fund investment.

In short, the longer you hold onto your opportunity zone investment, the greater the benefit will be. If you’re interested in investing in an opportunity fund, you’ll reap more benefits from your investment by being patient.

What are the requirements?

In order for an area to be deemed as an opportunity zone, the locality or community needs to meet certain income and location criteria. Once nominated by the state, the nomination must be certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service to qualify as an opportunity zone. Currently, North Carolina offers 252 opportunity zones in every corner of the state for consideration by investors.

Are there opportunity zones in the Piedmont Triad? High Point, NC?

If you’re located in the Piedmont Triad area, you may be wondering if there are opportunity zones available to you. The Piedmont Triad Regional Council of Governments has regional information on opportunity zones, including opportunity zones in High Point, Greensboro, and Winston-Salem, North Carolina.

In Greensboro, you will find 10 low-income census tracts that have been approved by the US Treasury Department as qualified opportunity zones (QOZs). Similarly, Winston-Salem offers an additional 10 opportunity zones, including areas within the downtown business district, sections of Wake Forest Innovation Quarter, neighborhoods south of the airport, and more. High Point offers an additional three opportunity zones. Two of which are in the Core City and the third is in Forsyth County.

The High Point and Piedmont Triad commercial real estate market is one of the most dynamic in the state and country. Many investors choose to partner with local brokerage firms, like Price Commercial Properties, to help with qualified opportunity funds and opportunity zones. The brokerage team at Price offers a long and deep relationship with the High Point and entire Piedmont Triad area — giving you the inside edge on identifying opportunity zones.

How do I get started?

If you’re looking to diversify your portfolio, you may want to consider investing in qualified opportunity zones. Whether or not adding qualified opportunity zones to your portfolio would be a good idea or not depends on your overall finances. Analyze your existing finances and determine your capital gains. If you are receiving significant capital gains, you may benefit from investing some of your cash into an opportunity fund.

Because this is a relatively new program, it is recommended that you loop in a commercial real estate firm that can guide qualified opportunity zones. They’re able to look at your existing portfolio, analyze your capital gains, and determine if (and which) opportunity funds make the most sense for you.

Get the Inside Edge with Price Commercial Properties

Price Commercial Properties is one of the fastest-growing commercial real estate firms in the Piedmont Triad. Why? We simply and effectively do the hard work for you.

If you are interested in learning more about opportunity zones or opportunity fund investments, we’d love to help! We support investors of all sizes, and we are here to support you through this process. We know and interact with city leaders, developers, lenders, business owners, and even other brokerage firms to plot our moves based on intelligent market research. Ready to get the inside edge on opportunity zones? Contact us today!

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