What are Opportunity Zones?
“Opportunity Zones” are a new phenomenon in Commercial Real Estate that have created an uproar of excitement in the development and investment community. Passed by the United States Congress (hooray, they did something) in December, 2017, the 28 zones were defined/released in March, 2018 for the Austin Metropolitan Statistical Area. The goal of these “zones” is to encourage long-term investment in traditionally rural or low-income areas, which is why a vast majority of the zones in the Austin MSA are in northern Williamson County and toward the South/Southeast quadrant of the Austin area.
Not to be confused, Opportunity Zones differ from 1031 Exchanges in a few ways, primarily in the ability to not only minimize one’s capital gains exposure, but an investor can potentially eliminate capital gains taxes on an investment if it’s held for a qualifying period of time (at least 10 years). There are intricacies and subtleties, but by and large, the program is creating significant opportunity for investors/developers in these areas, which is great!
The RealWealth Network web-site has a very thorough article about Opportunity Zones (& 1031 exchanges), that would be a great supplement to this article. In addition, the IRS Web-site has some basic info as does this very insightful article from the Dallas Fed, complete with maps, graphs, demographics, etc.
In a nutshell, if you’re an investor seeking long-term opportunities in the Austin area, you might consider looking in the Opportunity Zones as a way to minimize your tax burden. And luckily, Funk Group can dig up properties/projects to invest in within these Opportunity Zones!