Tax advantage real estate investing
Opportunity Zone Investing In Mobile Home Park & Light Industrial Business Parks Developments in Texas
Tax Advantages investing in OZ
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The Tax Cuts and Jobs Act of 2017 (TCJA) has provided additional tax benefits from investing in “Qualified Opportunity Funds.” These funds create a new tax incentive program designed to promote new investment capital into certain low-income and distressed communities throughout the country. They are referred to as Qualified Opportunity Zones. The program enables investors with unrealized capital gains to receive significant tax incentives for investing in these funds.
Opportunity Funds:
A Qualified Opportunity Fund is a privately managed investment vehicle, generally formed as a partnership, LLC or a corporation, whose sole purpose of formation is to invest at least 90% of its assets directly invested into a qualified Opportunity Zone property.
Qualified Opportunity Zones:
Qualified Opportunity Zones are designated census tracts or neighborhoods. For a census tract to be treated as a Qualified Opportunity Zone, the governor of the respective state must identify such communities in writing to the U.S. Treasury Department. The Treasury Department must then certify each designated area as a Qualified Opportunity Zone. Each zone will maintain its designation for 10 years.
Tax Incentives:
Under the TCJA there are three specific tax incentives possible for investing in a Qualified Opportunity Zone fund:
Capital Gain Deferral:
If an investor has a short or long-term gain from the sale or exchange of property, and the capital gain is reinvested in a Qualified Opportunity Fund within 180 days of the sale of that property or stocks, the realized gain may be able to be deferred until the earlier of the date of the investment in the Qualified Opportunity Fund is disposed of and or December 31, 2026.
Elimination of 10% or 15% of the Deferred Gain:
10% of the gain on investments in Qualified Opportunity Funds may be excluded if the taxpayer holds the interest in the Qualified Opportunity Fund for at least five years.
- This exclusion may be increased by an additional 5% if the investment is maintained for at least seven years, thereby eliminating potentially 15% of the original gain from taxation.
- The exclusion is achieved through a step up in basis in connection with the original gain.
Permanent Exclusion on Taxable Gain: When the investment in the Qualified Opportunity Fund is held for 10 years, the taxpayer will not recognize taxable gain on the appreciation in value of the investment in the Qualified Opportunity Fund.
Check with your CPA: Check with your CPA to find out how investing in these Qualified Opportunity Funds will impact your investments.
Mobile Home Park Development Investment
New development because that is where the profits are.
Land Lease Mobile Home Parks (MHP): The investment will be in projects that own the land / infrastructure and rent lot spaces to tenants who own the homes. This land lease structure provides better returns because:
- · Greatly reduced maintenance expenses – Low expense ratio because we rent
- Mobile Home Spaces (MHS) to homeowners, combined with the new nature of the park
- · Low expense ratio compared to other multi-family investments (25%-40% vs. 50%-60% for apartment buildings). The homeowners maintain the house, the park maintains the grounds.
- · Additional cash income when the park finances the mobile home buyers.
- · Pride of ownership - little to no turn-over of tenants; most tenants stay for many years
- · Predictable cash flow from renting the MHS lots to low turnover tenants
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Light Industrial warehouse BUSINESS parks
A quite investment space with double didgit returns.
Warehouse business parks: This type of rental business park is designed for small businesses needing 4,000 to 10,000 square foot warehouse type buildings on 1/2-acre fenced lots.
The project’s buildings will be leased for rental income and held for long term appreciation.
- 14 acres divided into – ½ acre Industrial building lots
- Metal warehouses buildings of 3,000-8,000 Sq. Ft (for lease).
- High growth Austin/San Marcos metro
- Project has all of it's entitlements
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