For years, leaders in different communities have been struggling with structure support programs that help incentivize investment and vulnerable residents in their communities. In 2017, the government created a program that encourages real estate investors to allocate capital to distressed communities (urban or rural) through tax incentives. This program earned inclusion in the 2017 Tax Cuts and Jobs Act and formed what is well-known as “Qualified Opportunity Zones.” In this post, we discuss what Opportunity Zones are? How they work, and why real estate investors should invest in it? 

What Are Opportunity Zones?

Qualified Opportunity Zones are pre-selected distressed communities around the US that have a high need and potential for revitalization. The real estate Opportunity Zone Program is a provision of the 2017 Tax Cuts and Jobs Act that allows investors to enjoy special tax treatment on their capital gains when they invest in these communities. These distressed communities (rural or urban) will benefit from an influx of development and funding in return. Real estate investors must invest in Qualified Opportunity Zones through the real estate opportunity fund to have access to capital gain tax incentives. 

Why Invest In Opportunity Zones Program

Investors should invest in the Opportunity Zone Program because it offers one of the best tax avoidance opportunities of our lifetime. The government allows any investor participating in the program to defer paying tax on capital gains if they invest their fund in a Qualified Opportunity Fund regardless of where capital gains came from – real estate investment properties, stocks, or the sale of a business. Real estate investors will benefit from tax cuts and deductions, but this depends on how long they have held the investment with the Opportunity Fund.

How To Invest In An Opportunity Zone

Investing in the Opportunity Zone Program is very simple. First, you need to sell an appreciated real estate investment property and earn capital gains. Then, you reinvest your capital gains in a Qualified Opportunity Fund within 180 days from the sale of the property. You qualified for temporary tax deferral once you reinvest capital gains. You can then defer taxes until when you sell your Opportunity Zone investment.

Real estate investments under Opportunity Funds provide new benefits to investors that are not common. Good Qualified Opportunity Fund (QOF) will have a track record of their investment and be already working in Opportunity Zones. You can talk to real estate developers, economic development agencies, and commercial real estate brokers operating in your community if you are looking for a good QOF.

Where Should I Invest

The location of your investment properties plays an essential role in your real estate investment strategy. Finding properties in a good area should be a priority if you want to invest in buy-and-hold, fix-and-flip, or Opportunity Zones. At GALENA EQUITY PARTNERS, our Galena Opportunity Fund focuses on multi-family and mixed-use apartments. Since we focus on densely populated local areas of Boise, Idaho, there is a high demand for our properties. Contact us today at (877) 424-8282 to explore our real estate investment opportunities.