Opportunity Zones, how will they benefit investors?

[Jonathan Taylor]

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?

Thanks

JT

[Ken Jernigan]

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.