What are opportunity zones and why is everyone crazing about them? Opportunity Zones is a new tax incentive program casted by the government that is forecasted to activate billions of dollars in development and investment in 8,700 federally designated low-income census tracts across the US. The basic concept behind this initiative is to incentive private investors to place capital in these low-income areas in return for deferred and reduced taxes on capital gains. The government is still in the process of ironing out all the final details, but investment funds are coming out of the wood work to take advantage of this new incentive and opportunity to place capital and defer gains.
The simple thought behind this idea was to create an incentive for the investment of capital to be drawn to these low-income census tracts for the attributable benefit to the subject communities located in these areas. This program is exciting because it is not just for “like-kind” assets but it allows for investors to reinvest capital for a variety of different assets such as stocks, art and businesses. This new program is expected to create a sizable new sector within the commercial real estate investment market. Many believe that this creation of the Opportunity Zone program has the potential to be one of the most transformative US tax incentive or government development programs within decades. In my opinion, I believe investors must approach and underwrite these assets to be able to stand along by themselves as a real estate investment before the Opportunity Zone benefit is considered. The OZ benefit should be looked to at as the cherry on top served to sweeten a deal.