Wednesday, November 13th, 2019 November13th2019

Sell for More News: So far opportunity zones have been a flop

Published on November 13th, 2019

Sell for More News is a weekly blog series with interesting information from the world of commercial real estate.

 

I am on the record saying that Opportunity Zone investing isn’t that interesting for the average investor.  I still don’t believe it will amount to much but time will tell.

It turns out that despite all the hype, investor interest in Opportunity Zone funds simply hasn’t materialized as fund managers had hoped.  A recent study concluded that 103 Opportunity Zone funds have raised just 15% of what fund managers expected.

That said, there are at least 285 Opportunity Zone funds in the United States and many have not shared fundraising metrics.

While Treasury Secretary Steven Mnuchin said last year that Opportunity Zones could raise $100 billion of private capital, the funds analyzed in the study raised just $3 billion of the total $22.7 billion fund managers anticipated.

Opportunity Zone investments must be held for 10 years in order to get the most benefit from the program, leading to some uncertainty about the potential upside of deferring capital gains taxes.

The #1 concern investors have is the length of time they’re investing for and the uncertainty of what can happen over that period of time the money is invested.

Also, details of the implementation of the program…which was part of a 2017 tax overhaul and created to spur economic growth in disadvantaged communities…are still being decided by federal regulators. That may help explain some investors’ hesitancy.

In summary, when we’re marketing a property for sale…we’ll note that it’s located in an Opportunity Zone.  It might not result in a higher sale price but it could influence whether the property sells at all.

 


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About Beau Beach, CCIM

Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.

Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee, South Florida and Chicago markets.

He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.

Beau can be reached at 800-721-3287, click to schedule a call or Beau@BeachwoodSells.com