What Makes a Good Qualified Opportunity Zone Investment?

Alex Sinunu is the Director of project and development services at Cushman & Wakefield. He was recently interviewed about his opinions about the Qualified Opportunity Zone program and what makes a good QOZ investment.

Who Is It For?

Qualified Opportunity Zone Investments are great for people who work at high tech jobs and have lots of capital gains from stock sales. This is an opportunity to defer the taxes on the sale and turn the capital gains into real estate investments.

An example is someone who works at Google or Apple and has been given tons of RSUs over the years and has been taking full advantage of their Employee Stock Purchase Plan (ESPP). When the finally sell their stocks, they’ll have to pay a large amount of capital gains taxes if the stock has been doing well. They now have an opportunity to invest in something that helps the community and keep more money in their pocket.

Alex believes that more people should invest in Opportunity Zone Funds. “We have so much capital gains in the Bay Area. Once you pay the tax, it never comes back. Why not defer?”

What Are Some Basic Criteria?

When he invests in a Qualified Opportunity Zone fund, he has a list of 17 criteria. Of the 17, these four are the most important:

• Experience of the developer
• Location of the project
• The project itself
• Fees associated with the project

Naturally, you don’t want to invest in a large project if this is the first time the developer has taken on a project of this scale. You want someone who you can trust that has accomplished a task this size before.

The Qualified Opportunity Zones are an “Opportunity” for a reason. You want to make sure that the place you invest has some potential to grow. Alex likes San Jose and Oakland because the 10 year investment is about sustained growth. He believes that the area needs good transportation and rents with room to grow.

These projects have a 10 year window to take full advantage of the tax benefits. They’re not looking for home runs, doubles are just fine.

Why Don’t More People Invest?

He thinks people shy away because it’s more complicated. You need to understand the rules and in the last 6 months the Treasury released over 200 pages of clarifications and updates. People don’t invest in what they don’t understand. They also may not like the 180 day window for investing. There’s a lot of work to do and the time goes by so quickly.

You need to do a lot of research on the fund raisers and developers who will be taking that money. You also need to make sure that the project fits your investment goals and that you believe in their plan and execution.

The Future of Opportunity Zones

Alex believes that the Bay Area will be find with or without Opportunity Zones, but it’ll really help Oakland and San Jose turn a corner. The tax incentives will add more patient investors to these areas.

Over the long term, Opportunity Zone Funds can possibly attack bigger issues such as creating ‘Green’ living or public-private partnerships solving infrastructure issues. Basically, the program is the Fed telling us that they don’t want our taxes on our capital gains. They want us to put that money and solving problems the best we can.

There’s a lot of people who are nervous about investing in things they don’t understand. The Government gives us incentives to do what they want us to do by giving us tax credits and tax breaks. This is the chance for us to invest in our communities and improve our neighborhoods, all while making more profit on our investments.

If you want to check out more Opportunity Zone projects, you can take a check them out here https://oppsites.com/

Here’s a link to the original Business Journal article https://www.bizjournals.com/sanjose/news/2019/06/20/alex-sinunu-cushman-wakefield-opportunity-zones.html