When opportunity zones were first touted a few years ago, quite a few people were skeptical. The Treasury Department originally projected that they expected opportunity zones to generate $100 billion in private investments over the course of ten years. After just two years, the program has generated $75 billion and is still running strong. But what are opportunity zones? What benefits do they offer to commercial real estate investors, and what larger impact do they have?
Defining Opportunity Zones
Opportunity zones are economically distressed areas that are in need of commercial and residential revitalization. Currently, there are almost 9,000 officially-designated zones throughout the country, in all 50 states. At the start of the program, each state was able to recommend up to 25 areas to qualify, based on population and other factors outlined in the census.
The Benefits to Property Investors
As part of the Tax Cuts and Jobs Act, commercial real estate investors and developers were offered tax deferments on prior gains from qualified opportunity zone funds until the end of 2026, or in cases where investors sell those funds, which situation occurs first. From 2018 to the end of 2019 alone, the zones have experienced an increase in economic investment of 29%, and the program is still running strong. Property values have also risen, with a base 1.1% increase just from being located in an opportunity zone.
The Bigger Picture
In addition to increased value and tremendous tax breaks, opportunity zones are helping to create jobs and breathe new life into areas that were once run-down. New apartment complexes, new commercial space to attract businesses or give entrepreneurs a chance of making their dreams a reality, and renovated houses for families looking to put down roots. Opportunity zones continue to have a positive impact locally and nationally.
Financing Properties in Opportunity Zones
First and foremost, the IRS and the Treasury Department at large do not provide loans for properties in opportunity zones. Instead, they provide the guidance for property investors to follow in order to reap the benefits once a revenue-generating property is established. At The Capital Rams, we provide a wide range of financing solutions for commercial real estate in opportunity zones nationwide. From SBA and conventional loans to fix and flip lines of credit and construction financing, The Capital Rams will provide solutions tailored to your needs. Contact our offices today to get started.
