1031 Exchange or Opportunity Zone Fund

[Sunil Kapoor]

Hi Everyone,

I’m looking to sell a property and going back and forth between doing a 1031 exchange into more properties or putting the funds into an Opportunity Zone Fund. From my opinion, the pros and cons of each are

Opportunity Zone Fund

Pro:

I can pull out cost basis

After 10 years capital gains tax is reduced 15%

Capital gains of the investment are zero after 10 years

Once the property is developed, I should get a regular stream of dividends until cashing out in 10 years

Con:

I may have a 2-3 year wait until the Fund generates income

Funds are pretty much locked in for 10 years

Returns don’t seem to be as good as a rental property

1031 Exchange

Pro:

I can exchange into properties with better cash flow and collect monthly cash flow immediately

I have a tangible property rather than a fund which can be mismanaged

I believe my monthly returns will be higher than an OZ Fund

Con:

Capital gains (depreciation recapture) continues to build

Not as passive as an OZ Fund

I’m wondering if I missed anything? What are your plans for your next property sale, 1031, OZ Fund or just cashing out and paying tax?

Thanks everyone!