Thread by @DallasAptGP

What types of Real Estate projects can qualify as Opportunity Zone deals?

There are a lot of rules. I’ll give a high level overview…please check all of this with a CPA and/or tax attorney before doing a deal (I am neither)

Thread below.

TLDR:

•Real property
•Located in OZ
•Purchased after 12/31/17 thru QOF or QOZB
•From unrelated party
•Original use must begin with fund or fund must substantially improve within any 30-month period (addition to basis must exceed initial adj basis)

The property needs to be located in an Opportunity Zone. There are more than 8,500 in the US. They are based on Low Income census tracts from the 2010 census data and designated by governors in 2017
novoco.com/resource-cente…

There are strict “related party” rules. With narrow exceptions, these need to be arms-length sales

It's difficult if you owned property prior to OZ regs to get it into an OZ structure. You can't sell property from yourself into a QOF that you (or a family member) control

The focus of the OZ program is not only new development.

Re-opening a long closed building is progress.

A building which has been vacant for 3 years will automatically qualify based on “original use” and there is no required amount of capital improvements

The “original use” rule is what lets an OZ fund buy almost completed new developments right before Certificate of Occupancy.

If it has been vacant for 3+ years then it automatically qualifies as long as a CO hasn’t been issued and it hasn’t been leased/rented.

“Raw land” does not qualify. However, raw land acquired with a plan to improve it by “more than an insubstantial amount” does qualify. This makes developing a new building a natural fit for the program.

“Land & Building” can be acquired but don't qualify until the building has been substantially improved.

You can use any reasonable allocation method to determine value/cost between buildings and land.

In order to pass the substantial improvement test you must double the basis of the building. Costs that add to basis will count. For example:

•site assessment and remediation
•all CapEx to the building
•interest on debt while bldg. is vacant
•legal/accounting costs

When you’re ready to close on any of this, you need to have the correct type of entity set up and you need to fund that entity with “eligible gains”.

https://twitter.com/DallasAptGP/status/1478111594810855433?s=20

My long-term goal is to create a well educated gang of QOF investors who want to compound tax efficiently

I will continue posting threads with OZ content. If you want to get engaged with the OZ content (or other Apartment Related tweets)

Follow along @DallasAptGP

If you want to get even more engagement with OZ operators, I have also put together a list of #RETwit Opportunity Zone GP’s and vendors.

If you think you should be on this list then just let me know.
twitter.com/i/lists/148358…