Despite the prospect of significant tax breaks, investments in Opportunity Zones (OZs) are not for everyone. Investors must consider their exposure to a higher level of risk in distressed neighborhoods that often do not have a proven track record of rehabilitation success. In Florida, more than 90 percent of Opportunity Zones are in severely depressed areas of extremely high poverty and low resident income. According to the Urban Institute, many of the Opportunity Zones across the country have not experienced socio-economic change over the past 16 years and, as such, have not benefitted from the country’s 10-year long economic expansion. In addition, to yield the greatest tax benefits from the OZ program, investors should be prepared to hold onto their Qualified Opportunity Fund (QOF) investments for seven to 10 years. As a result, it is critical that investors have other forms of liquidity available to them during the holding period.
Finally, like all investments, QOFs require investors to conduct due diligence under the guidance of experienced tax and real estate professionals and understand how these potential opportunities may fit into their larger investment and estate-planning strategies.
With offices in Miami, Orlando, New York City and Geneva, the team at Orion works with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email email@example.com.