Opportunity Zone investing for dummies

[Sol Romand]

Anyone have a dummies guide for Opportunity Zone investing? Books, Youtube Anything.. I'm looking for a DIY step by step process to do things like the BRRR method, buy & hold etc. I am the type who figures things out himself, so I've read dozens of articles on the subject, but I have yet found a simple process that would teach us regular RE guys what to do. If the only thing I would get out of it would be to calm my self down that I'm doing it the right way, that's all I need. Anyone?

[Andrew C.]

I'll assume you understand what is and is not eligible to invest in an OZ and what the benefits of doing so are, and your question is how to do this yourself for BRRRR properties you buy, rehab, etc...rather than just dropping it in a fund (of which there are many, and that's definitely the easier route, though less 'fun').

OzToolKit is the best explanation on the web I've found. Do check that out.

IANAL or a CPA. you should ask one. But essentially the tl;dr is:

1) you must have a QOZ Fund. That fund must be at least a partnership (2+ people), but those 2 can be you + spouse. The obvious thing to do is start an LLC in one of the various friendly places for that, esp if they treat married spouses are separate entities in a partnership. Since you're going to have a 2 layer entity structure anyway, you might as well go the anonymous route (see: AndersonAdv's 'ghost LLC' you-tube videos for a solid description).

2) the QOZF then owns a QOZB. so make one. As usual in the 2-layer structure, put this in the state that has the properties you want to BURRR, member managed and sole-owned by your QOZF. note: set everything up and then fund it - there are sticky rules about what a QOZF can own, and it precludes having a bunch of cash sitting around. so fund the QOZF and have it transfer right away to the QOZB.

the QOZB is the entity that will actually buy, rehab, and rent out properties. Do keep in mind that you will have to do more than a gentle rehab for it to qualify - you have to put at least as much into the property (over a contig 31 month period, IIRC) as the purchase price of the property (excluding land) to count as 'substantially improved'. And, like all QOZ thingies, you'll have to hold for 10+ years.

But the win is huge. still get to take depreciation against the rental income, and since the 'no cap gains on sale' bit is actually defined as 'cost basis == sales price', you don't have to pay the depreciation recapture tax either. tax-free money. woot.