All Forum Posts by: Austin Hendrickson

Keep in mind any investment in an OZ Fund has to be new construction or a "significant" renovation which is 100% of the purchase price. So for most typical 1031 exchange property this will not work.

Example: Sell stock for $500k capital gain, contribute that into a Qualified Opportunity Zone Fund (QOZ Fund) and then either build a new apartment building or buy one for $250k for example and put $250k of renovations into it.

Best bet might be new construction if you want real estate. You can also buy businesses and equipment in these zones. As mentioned before if you hold the assets in the QOZ for 10+ years you only pay tax on 85% of the initial capital gain from the stock sale in your example and you can defer it until 12/31/2026.

All appreciation and depreciation on the investment real estate if you hold it for 10+ years are tax free.

Additional guidance is needed but not sure that it's super bad news for buy and hold landlords. 

The 20% deduction essentially replaced the old 9% DPAD deduction that only construction, manufacturing, engineering companies etc. got in the past.

Buy and hold landlords never got the DPAD deduction before, so not much will change now that they still might not qualify.

Have you lived in the house for two out of the past five years? If so you may qualify for the $250k personal residence gain exclusion

Pete with Innovative Basement Solutions is very knowledgeable when it comes to foundations and foundation repairs 

Welcome, it sounds like you are well on your way to financial freedom! Are you doing most of your investing in the Twin Cities or in rural areas? I grew up about 20 minutes NW of Winsted so am familiar with the area. 

@Jamie Bolinger Bridge Realty may be a good starter option for you as they have no monthly fees (just a per transaction fee). They are in Bloomington. Although if you really want to be an agent full time, joining a successful motivated team is probably the best thing you can do - meet with several different teams with a few different brokers to see who you feel most comfortable with. If you went with a bigger brokerage (Remax etc.) you would most likely need to be a full time agent.

@Paul Caputo good point, abandonment studies are often not done at all as they fly under the radar a bit as compared to cost segs. An abandonment study performed in tandem with a cost seg could lead to some big write offs.

@Michael Plaks Good article, thanks!

@John Woodrich I also agree the zones will not be for everyone. I am thinking developers/operators and some funds/institutional money will be big players in these zones, although if smaller investors can find big enough value add opportunities there could be the potential for some big long term savings.

Interestingly enough it appears that the Mall of America is smack dab in the middle of one of the OZ's. Granted the zones will not be "A" locations but some of them seem to be fairly decent. 

I think these zones have the potential to be the biggest tax incentive since the New Markets Tax Credit - the potential tax savings could be enormous.

@Dalton DesRoches Very good point! The cost seg with 100% bonus could be another big tax savings on the front end of an investment

@Daniel Kurkowski I believe the improvement must be double the basis in the property (i.e. buy an apartment building for $300k, and then put another $300k into it) - Note that the investment must be made in a qualified OZ fund as well which are self-certified and can be any partnership that holds at least 90% of assets in qualified OZ property.