The rush to buy Opportunity Zones sites has already begun, but then what?
Investors have started buying up properties and vacant land in designated Opportunity Zones sites around the country, even though some have no set plan about what they will build, according to the Wall Street Journal.
In one example, McDougal Cos. bought an 8,000-square-foot former movie theater in an Opportunity Zone in Lubbock, Texas, but isn’t sure how it will convert the theater. Companies like McDougal are speculating on these properties because of a provision in the federal program that requires investors to reinvest capital gains proceeds within 180 days. McDougal Cos. sold apartments last year so it had to reinvest the gains, according to the Journal.
Companies are buying these properties despite a number of unanswered questions around the rules of the federal program. Opportunity Zones legislation provides tax deferments and tax breaks for developers who invest in projects in designated low-income neighborhoods.
Many large institutional investors who have raised money are waiting for these rules to be announced by the U.S. Treasury and IRS before deploying capital into these Opportunity Zones projects. The latest guidelines are expected in the coming weeks.
There are more than 8,700 designated Opportunity Zones around the country. The program was put forward in President Trump’s tax plan in 2017. The biggest advantage comes if an investor holds an Opportunity Zone asset for at least 10 years. [WSJ] — Keith Larsen