What Are Qualified Opportunity Zones?

Las Vegas Strip and downtown

Qualified Opportunity Zones represent a new, yet little-understood frontier for real estate investors. There are more than 8,760 designated qualified opportunity zones in all 50 U.S. states, territories, and overseas possessions, many of which are located in downtown cores that have been the focus of recent redevelopment efforts. Opportunity zones offer substantial opportunities for investment that you can begin taking advantage of today. Find out how to find them and how to identify the ones that are best suited to your investment strategy.

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What Are Opportunity Zones and Why Were They Created?

Americans are sitting on trillions of dollars in unrealized capital gains due to the appreciation of assets, such as stocks, bonds, real estate, and more, yet many communities across the country face chronic underinvestment. This tension and opportunity provided the impetus for the creation of Opportunity Zones in the 2017 Tax Cuts and Jobs Act. Opportunity Zones (OZs) were created to initiate investments in these underserved communities, bringing profits to investors and new opportunities to people who live there.

OZs allow investors who collect capital gains from the sale of stocks, real estate, or another asset to roll that profit into a real estate project. Investors can defer the taxes they have to pay on their investment for a period of ten years and delay the total amount of taxes they pay while also offering tax-free gains from the OZ itself. OZs may also benefit the surrounding community, as they can foster capital improvements and economic diversification in areas that have trouble attracting major investments from existing financial markets.

What Are Qualified Opportunity Funds?

Qualified opportunity funds (QOFs) are the actual vehicles through which people invest their capital gains in qualified OZs. QOFs are privately run and self-certified, allowing them to be highly flexible with low barriers for entry or creation. They typically fund the construction of new projects or the renovation of existing buildings in OZs. It’s very easy for investors to participate in a QOF, and they even have the opportunity of starting their own.

Investment Process for Qualified Opportunity Zones

Once an investor has sold an asset, they have 180 days to invest their capital gains in a QOF. If they keep their invested capital gains in the fund until December 31, 2026, they can reduce the amount of taxes they pay on it by 10%. If an investor holds onto the investment purchased through the QOF for ten years, they can avoid all taxes on any new capital gains they make, since the basis of the property will be raised to 100% of its fair market value when sold.

How Would an Investor Benefit from Qualified Opportunity Zones?

An investor can benefit from an OZ by deferring capital gains taxes on an asset sale they were already going to make. Investors also stand to make more money from a new real estate investment with those capital gains, which won’t be subject to taxation if they are held in the property for ten years.

One major disadvantage of investing in a qualified opportunity zone is the lack of institutionalization of the investment process. It can be difficult for investors to identify a good deal within the 180 days they have to invest in a QOF. They typically need to work with an expert in the markets that they wish to invest and may not know where to find one in the time allotted. The real estate market may also be subject to a downturn, which can affect the maturity of the investment.

Invest In Las Vegas Qualified Opportunity Zones

Many of the opportunity zones in Clark County are located in the core downtown areas of Las Vegas, North Las Vegas, Paradise, and Henderson. These areas have seen concerted redevelopment efforts over the last decade and have attracted new residents, businesses, and opportunities for investors.

If you’re interested in learning about available opportunities to invest in qualified Opportunity Zones in the greater Las Vegas area, contact the Graham Team at Graham Team Commercial Real Estate today. With more than a billion dollars in transactions as a developer, Gidget Graham and her team have a deep knowledge of the local real estate market and will provide you with the boutique service you need to find the best additions to your portfolio.

Gidget Graham

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