Categories: Podcast

106 – Development in Opportunity Zones for Major Tax Advantages with Marc Berkowitz

Synopsis:

Marc is a founder of an investment and advisory firm called Coplace. In this episode, we’ll be diving deep into opportunity zone investments.

Opportunity zone funds allow investors to defer their capital gains taxes for up to seven years, reduces the tax basis on those gains, and allows the capital gains of the fund investment to be tax-free if they hold on to the property for over 10 years!

Key Points:

Opportunity zones give investors the opportunity to invest in underserved neighborhoods while also giving them fantastic tax benefits.

Because of the strict deadline, most fund managers only want to purchase projects that are shovel ready, which means they’ve been through the planning and building departments and have permits approved.

If you’re in the lending space, it could be a good idea to be in the refinancing arm for QOZ funds in 2026 because a lot of them will need to do a cash-out refinance so that their investors can pay their capital gains taxes.

Marc also thinks that it’ll be a good idea to look into buying properties in a qualified opportunity zone because big investors will start putting money into these areas, which will increase the value of your properties as well.

Show Notes:

Who Is Marc Berkowitz

Marc is one of the founders of a company called CoPlace, an investment advisory firm. They’ve been focusing a lot on distressed communities for many years.

How CoPlace started

Marc and his partners were young entrepreneurs and investors. They started working on some projects locally in the Southern California San Diego area. Started with a public-private partnership with the city on a project to activate some space in a distressed area of town. They’ve continued to do it locally and throughout California.

Opportunity Zone Legislation

The opportunity zone legislation or the investing and Opportunity Act is the most widely bipartisan piece of legislation. Obama Era Economists worked and created it through Congress for many years. It is widely the largest public incentive for private investment. The overall number is about $6.7 or $6.3 trillion. The federal government is incentivizing those types of investors to invest those amounts of money patiently into distressed communities around the country.

Benefits Of Investing In A QOZ

The investor who invested for 5 years gets a discount or a 5% step-up in basis on that tax bill. If you’re there for 7 years, you get a 10% step-up in basis. And 7 years by 2027, then you get a 15% step up and basis.

Should It be 10 Years with The Same Property For The Investment

You can cycle investments. There are some things that with proper structuring can be mitigated. Let’s say they completed a project that funded and you want to exit. You can exit that fund and have 180 days to reinvest into another fund to stay compliant with the program. There’s no need to stay in the same fund and do not need to keep your allocations to a single fund. You can change the allocations across funds and the number of funds you’re invested in. As long as you’re within compliance, you can change which funds and areas you’re invested in.

How To Push The 10-Year Outline Out

This is possible when you buy a house. Add a unit at the back or rehab or build 7 units on the lot. You sell that off and gain profit. When you have that game, you essentially are starting from that new game. The investment could not be qualified if the fund does not follow the compliance guidelines. As long as you’re in compliance, you’re good. Within the context of compliance, to use the proper structures from an entity and jurisdiction standpoint is a smart idea prior to making investments.