Opportunity Zones How To Question

[David London]

Hi,

Just made an offer on a house located in an opportunity zone and trying to figures the particulars of how it works.

From my research I have some understanding of the big picture of the zones but am quite confused about the details.

The deal from what I see so far possibly qualify:

1. Located in an approved zone.

2. House is in need of some renovation (although condition is livable overall...and currently rented).

3. We are planning to sell stocks to buy the house.

My first question are:

1. Which properties in a zone are eligible properties?

2. How do one go about setting a Qualified Opportunity Fund? Do I need to buy the house as an LLC? I am planning to partially BRRR out after renovation and thus will probably be much easier if bought privately.

3. What is the timeline of the process? Do I need to do all before closing or can it be handled later?

Appreciate any links to resources that explain how individuals can take advantage of the opportunity zones...from my reading so far it seem to be more geared towards the larger investors then individuals.

[Bryan Mills]

@David London

There’s a lot to consider here. First, will you have enough gains to fully fund the project. What is the purchase price for the property? What is the expected rehab cost? The rehab cost needs to equal or exceed the purchase price of the house (however, you can exclude the value of the land in that calculation).

Yes, you need to buy through an LLC. In fact, you will need at least one other partner in the LLC too, because a wholly owned LLC cannot be a qualified opportunity fund. From a documentation, the LLC operating agreement will need a few extra provisions to comply with the Opportunity Fund requirements.

A fund is easy to set up from an IRS standpoint, you simply file a form 8996 with the LLC's partnership tax return. The hard part is making sure you navigate all of the asset restrictions and compliance rules to certify that your fund actually does qualify.