Your Guide for How to Invest in Real Estate in an Opportunity Zone
Are you looking for new investment opportunities? Searching for ways to diversify your portfolio while also making a positive difference with the money you invest? How about sheltering your capital gains from immediate and complete taxation? All of this is possible by investing in opportunity zones real estate!
What are Opportunity Zones?
Opportunity zones are areas of American communities designated as low-income. These areas are typically comprised of both residential and business properties. They are financially distressed, and their structures are in disrepair. These are the only hard and fast qualifications for opportunity zones, which is why so many of them have been chosen by the federal government; nearly nine thousand of these areas are currently registered., with the number growing all the time.
Why Should You Invest in These Areas?
So, why do so many investors opt to put their money toward these communities? It isn’t just out of the goodness of their hearts, although that is undoubtedly part of it! Investing in these communities revitalizes these areas and breathes new life into regions that have seen better days. However, the tax benefits are the most significant reason, so many benefactors choose this as the way to put their money to work.
You see, when you invest your capital gains directly into these zones, it will be protected from the whole and immediate taxation you would otherwise deal with. Everyone who has sold significant investment assets understands that the resulting taxation can be very stressful. After all, no one likes letting go of a substantial portion of their income in the form of taxes. But with opportunity zone investment, taxation on these gains will be deferred.
That’s right! By investing in opportunity zones, you will see deferral taxes collected on the capital gains that you invest within 180 days. What’s more, you will continue to see more extensive and more significant benefits over time. After five years of owning these investments, you will receive a ten percent discount on overall taxation. After seven years, that will jump up to fifteen percent. After ten years of investment ownership, you’re entitled to forgo taxation of these funds altogether! That’s the kind of benefit that investors go for!
How Do You Invest in Opportunity Zones?
Now that you see the benefits of these investments, you’re probably wondering how to get involved yourself. You may already know that investment professionals do not recommend investing in these opportunities individually. The risk of loss in doing so is just too significant, and no individual investor wants to lose that much money potentially.
Instead, financial advisors typically recommend participating in a qualified opportunity fund. These funds are created and offered by companies that help investors find these opportunities. By putting money towards these funds, investors can pool their resources and protect their investments, making a safer choice than simply pouring all of their own money into these properties. By being part of a fund, they can put less on the line and maximize the benefits they will potentially receive by doing so. It’s the best and safest way to participate in investments that can benefit both the investor and their community.
