Opportunity Fund Investors Beware

Posted on April 30, 2019

Much ink has been spilled and many billions of dollars already directed to the Opportunity Zone program, which provides tax breaks to private investors who reinvest capital gains into one of the country’s more than 8,700 certified, low-income Opportunity Zone communities. However, at this early stage of development, it is worthwhile to consider that not all opportunity zones are created equal. Investors must be prepared to ask questions and avoid quick decisions based solely on tax benefits rather than the merits of underlying real estate property.

Not every property in an OZ will qualify for a tax break, and choosing the wrong Qualified Opportunity Fund (QOF) to invest with could result in liquidity issues and unexpected tax liabilities. While QOF’s must meet rigid compliance standards to participate in the program, they are not required to provide details about their investment sources, how those dollars are being used and whether or not their investments yield desired results. For these reasons alone, QOF investors should seek the counsel of tax and legal advisors as well as experienced real estate professionals who can assess the viability of the underlying investments, potential risks and rewards. After all, a tax benefit alone should never be the primary reason for making investment decisions.

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 info@orionmiami.com.