Article provided by: Galena Equity Partners
Opportunity fund real estate
An opportunity fund is an investment vehicle that’s specially designated towards investment into opportunity zones. The designated zones are low-income areas that investors would usually overlook. However, the promise of preferential tax treatments makes them appealing. Plus, there’s the possibility that these zones may develop to become the business hubs of the future. The federal and state governments are in charge of designating opportunity zones, and they usually pick regions where they hope to spur rapid economic development. If you’re considering investing in opportunity funds for real estate, Galena Equity Partners is ready to be your trusted investment broker.
Why should I consider investing in an opportunity fund for real estate?
Investing in opportunity funds for real estate holds countless benefits. Investors get to:
- Pay no federal taxes on the returns on their investment as long as they can hold the opportunity fund for at least ten years
- Defer federal taxes on previous capital gains tax until 2027
Asides allowing you to defer paying taxes on previous gains, opportunity funds can also significantly lessen your tax burden.
- If you hold the fund investment for more than five years, you’ll be eligible for a 10% reduction in the deferred gains.
- If you hold it for seven years, you’ll be eligible for a 15% reduction.
- If you hold if for more than ten years, you wouldn’t be paying any tax on the fund’s appreciation after selling.
We understand that these terms could be slightly confusing, but we hope the example below can help you understand the concept of opportunity fund for real estate better:
If a long term property sale results in a profit of $1,000,000, you would ordinarily have to pay $238,000 (23.8%) as federal capital gain taxes. However, you can choose to invest the total profit into an opportunity fund. That way, you won’t have to pay any tax in the short term.
Assuming you’re guaranteed an annual return of 10%, your investment would be worth $2,000,000 after ten years. Because you invested in an opportunity fund, you won’t have to pay any tax on the accrued $1,000,000. The only tax you’ll be paying is the deferred tax, and you’ll only have to pay 90% of $238,000 ($214,200).
What are some of the requirements for investing in an opportunity fund?
If you wish to benefit from capital gains tax deferral by investing in opportunity zones, you must place your money in an Opportunity Fund within 180 days of the sale of the asset. Furthermore, the fund is required to invest the funds in qualified assets within six months of receipt.
The government is in charge of regulating the ‘qualified assets.’ Presently, opportunity fund managers cannot invest in some business types, even if they would be situated in the designated zones. Some of such businesses include:
- Massage parlors
- Country clubs
- Hot tub facilities
- Golf courses
- Liquor stores
- Horse racing tracks and other facilities meant for gambling.
- Suntan facilities
Contact the leading opportunity zone investment group
If you want to make the most out of your opportunity fund for real estate, it would be best to get in touch with Galena Equity Partners. Our opportunity fund arm is dedicated to making a purposeful impact, and you can trust us to manage your investment in the best way possible. Join us today to gain a first-hand experience of what it means to have a good investment.Opportunity Fund Real Estate