Real Estate Opportunity Zones in Florida - Opportunity Zones are a new attractive opportunity for investors, Real Estate property in Opportunity Zones, Real Estate investing in Opportunity Zones For Sale and Lease, Florida (USA) | Real Estate Opportunity Zones in Florida - Real Estate property in Opportunity Zones For Sale and Lease, Florida (USA)

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Real Estate Opportunity Zones, Florida Real Estate

Opportunity zones (OZs), which were passed into law as part of the Tax Cuts and Jobs Act (TCJA) in December of 2017, have become one of the most popular new investment vehicles over the past three years. The program’s goal is to help create jobs and spur economic growth in some of the country’s poorest areas by incentivizing investors to redirect capital there, rewarding them with a variety of tax benefits through 2026.

What is an opportunity zone?

Opportunity zones are designated geographic areas that have been identified as low-income census tracts. These census tracts were nominated by governors and certified by the U.S. Department of the Treasury. To be eligible, they needed to have 1) a median family income of less than 80% of the surrounding area or 2) an average poverty rate of 20% or more.

There are currently 8,766 opportunity zones in both rural and urban areas throughout the country, with OZs in every state and territory. Over 35 million people reside in the designated OZs, with 7.5 million of its residents living in poverty. In the past decade, these zones have seen sluggish overall economic progress and a decline in population.

While these areas are some of the most underserved communities of the country, there is also clear opportunity for revitalization. While the removal of reporting requirements from the original legislature has made tracking the results of OZs over time difficult, the Council of Economic Advisors (CEA) estimates that real estate values in OZs have increased 1.1%, adding an extra $11 billion of additional wealth to property owners in these areas just over the past two years. The CEA estimates that OZs can lift around 1 million people out of poverty and are on track to create 500,000 jobs.

How to invest in an opportunity zone?

Participating in an opportunity zone and the preferential tax treatment they offer is done by placing qualified eligible capital gains in a qualified opportunity fund (QOF) on or before December 31, 2026. Eligible capital gains can be realized from the sale of stocks, bonds, private business, or real estate. Gains must be rolled into a qualified OF within 180 days from the sale of the asset in addition to filing IRS form 8949 with the investor's taxes. Nonqualified capital gains funds can also be invested in a qualified fund, but that money will not be eligible for the same tax incentives.

A qualified opportunity fund is a private fund structured as a corporation or partnership that invests at least 90% of its capital into an opportunity zone. A recent ruling stated that a fund’s failure to meet the 90% asset test would not disqualify it from being classified as an opportunity fund, but may result in a penalty.

The fund can invest in any qualified asset, which may be real property, equipment, or a business where 50% or more of income is derived from an opportunity zone. If property is purchased, the OF needs to make “substantial improvements” to the property within the first 30 months. OFs are subject to review at six-month and year-end intervals to ensure compliance with regulations and requirements.

The number of OFs is consistently growing, but according to Novogradac there are 927 OFs. The Economic Innovation Group (EIG) has an OZ activity map that highlights the most noteworthy OZ investments, including the fund's investment focus and location. Investments cover a broad range of geographic locations and asset types, including:

Investing in existing businesses.
Affordable housing.
Workforce housing.
Commercial real estate (including industrial, office, retail, mixed-use, and hospitality).
Clean energy.
Health care.
Sustainable and urban agriculture.
Manufacturing.
Historic preservation (redevelopment of historic buildings).
Venture capital.

Similarly to a crowdfunding investment, the opportunity fund should provide an offering memorandum (OM), which outlines the investment opportunity, market summary of that specific opportunity zone, economic outlook, and projected performance.

However, it’s essential the investor verify the feasibility of the investment and be comfortable with the structuring of the fund and its holdings. It’s also important to see what other assets the fund has managed or completed. While this is no guarantee that the opportunity fund will succeed, it does show that the fund has a track record and experience in the business.