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Property Sales in Opportunity Zones Grew 12 Percent in 2018

Could you benefit by investing in a property located in an Opportunity Zone? Please read this article to see what the buzz is all about…

Photo Courtesy of M.V. Jantzen

A search of the nation's nearly 8,700 opportunity zones currently finds more than 817,000 commercial properties. Of those results, 48,563 are being actively marketed for sale and more than 39,000 properties have been sold in this first year that opportunity zone tax benefits have been available to investors.

The Opportunity Zone federal tax incentive program expanded in 2018.

Sales of commercial properties in so-called Opportunity Zones rose 12.4 percent to $52.3 billion in 2018 from the year before.

The numbers are likely to climb higher as details of deals become public and get added to the tally. Opportunity zone transactions make up 8 percent of all property sales, a slight increase from the 7.8 percent recorded in 2017.

The data comes amid optimism in the real estate community that opportunity zone spending could jump in 2019.

Interest should exponentially increase in 2019 and 2020 as the federal government moves to clarify and solidify the rules and regulations surrounding various aspects of the opportunity zone program.

Opportunity zones are communities dubbed economically distressed where new investments can be eligible for preferential tax treatment.

Investors can defer or exclude taxes on any prior gains if held for five years or more.

In addition, if the investor holds the investment for at least 10 years, investors can exclude 100 percent of new gains.

As enacted, investments would have to be deployed by the end of 2019 to take full advantage of the tax estimates.

Big firms and funds will be the major players in 2019. The smaller players probably will not be able to or may not want to absorb the opportunity paperwork and hassle.

The smaller players could be more likely to pull the trigger on deals with adjacency to but not in opportunity zones.

There would be much more investment in opportunity zones if the rules were not so convoluted and more developers understood the intricacies of investment in this type of venture.

The majority of money that has been invested in opportunity zones to date is primarily based on projects that were already targeted to receive these monies.

The industry is still unclear when it comes to how opportunity zones will play out in 2019 and beyond.

We are short on data, and the earliest investors bring a different perspective than those who will invest later.

2019 CoStar.

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