How Can You Invest in Opportunity Zones?

Investments are the best way to grow your financial portfolio. But it’s not easy to determine which projects are worth your time and effort, not to mention your money. Given the buzz around opportunity zones, though, you might have thought about putting your money in an opportunity zone or two. If you’re interested, here’s how you can get a deal out of investing in these properties.

What are Opportunity Zones?

Before you choose opportunity zones for real estate investment, you’ll need to know what these investment projects are. Opportunity zones are low-income communities. Investing in these properties will allow you to take advantage of tax perks. Reinvesting your capital gains from selling your assets unto a Qualified Opportunity Zone Property or QOZP will make your property eligible for tax benefits. However, there are several conditions. One of them is that the transaction must be done within 180 days from the date of the asset sale.

What is a Qualified Opportunity Zone?

A qualified opportunity zone is a property that meets the following conditions:

· It is located in an area designated as an opportunity zone.

· It is used in a business or trade.

· It was bought using cash after December 31, 2017.

· It was improved by the opportunity zone fund.

How Do Opportunity Zones Work?

An Opportunity Zone Fund provides potential investors and real estate developers to finance projects in low-income communicates. Some of these places include historic renovations or urban infills. When they invest their capital gains into a qualified opportunity zone property, the property becomes eligible for three benefits. These include:

• A temporary deferral on capital gains tax on the property. The deferral remains in place until the investment is sold or before December 31, 2026, whichever happens first.
• If the investment in the qualified opportunity zone property is held for at least five years, then the property is eligible for a 10 percent reduction in taxable gain. If it is held for seven years, then that 10 percent becomes 15 percent.
• If the capital gains tax from the sale of a qualified opportunity zone property is held for ten years, then the property owner doesn’t need to pay any of the taxes for those gains. That’s a huge cost saving. This is the tax perk that many investors want, as well.

How to Invest in Opportunity Zones?

Investing in an opportunity zone might seem difficult. But it’s easy when you have an expert to guide you. From choosing an opportunity zone to going over the steps, you’ll need to consult with an investment group to help you determine which projects are worth your while. Be sure to understand the long-term risk that comes with investing in any of the properties on your shortlist. Don’t just focus on the benefits, though. Talk to an investment group about the possible risks, consider your risk profile, and go over your options to check which opportunity zones fit your budget and goals. With professional help, you’ll have an easier time finding out which investments deliver the level of risks that you’re comfortable with and which options are projected to deliver high gains.