Opportunity Zone Investing Simplified
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- Опубліковано 9 лют 2025
- www.freedommen... Opportunity Zone Investing has enormous tax advantages but unfortunately, too few real estate investors are capitalizing on this incredible incentive! Why? It's been around for more than 2 years. What's the hold up? One major reason is so few actually understand how it works or how they can apply it to their personal investment plans. The following will simplify Opportunity Zone Investing for you so that you can begin getting this gigantic tax break for yourself.
And I am purposely NOT going to go into every little nuance. If you want complication, just read the IRS Opportunity Zone Publication on the matter: www.irs.gov/cr...
By the way, I own real estate in Qualified Opportunity Zones, so I practice exactly what I preach.
But I do have to give the following lame disclosure before I start... that I am not giving you tax or legal advice in this training because I am not an attorney or a CPA. Before attempting the following, consult your tax advisor.
Get a free copy of my best selling book here: https:www.freedommentor.com/free-book
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Phil is the most under appreciated Investment expert I have seen. I love every nugget he throws to us all...for free! ( I'm going out and buying a whiteboard).
This is such an interesting topic! I wish there were opportunity zone investment options up here in Canada, it seems like such an ....... opportunity! 😂
usually I try to avoid commenting but I just need to congratulate you and your team because your content is (or seams) genuine and unlike most content that is just trying to bait people in for the " secrets"..
Great video! Question for you. the "qualified opportunity fund"--does that LLC then have to pay cash for the properties it's investing in/buying? IF they do have to buy cash, is there any penalty for doing a cash out refi on that property down the road? I liked that you mention that the opportunity zone needs to be icing on the cake, not the sole reason youre buying that property. Thankfully the properties I was looking at prior to learning about this just so happened to be in an Opp. zone.
No. You can get a loan on a property that you purchase in an opportunity zone. I've personally done it several times. The Qualified Opportunity Fund LLC is the borrower on the loan.
The great investment plans are explained in a very simple way. Thank you for all the helpful inputs.
Great video. I am selling a property at the end of the month that i will owe a significant amount of capital gains tax on, would I 1031 exchange into one of these QOZ properties to defer the cap gains taxes? Or the 1031 exchange is no longer necessary?
You can 1031 into any real estate. If you did a 1031 specifically into a QOZ property, then if the 1031 exchange was eliminated by the thugs in Congress, you could sell that QOZ property 10 years later without any capital gains. But you don't need to buy a QOZ property to defer taxes from the current sale. Watch this video: ua-cam.com/video/MrbEkxsCQYM/v-deo.html
Hey, Phil, great video as usual. One question with regards to the Capital Gains exemption after 10 years of holding the QOZ property. I know the law is relatively new in the past 2-3 years. However, just suppose I purchased investment property back in, for instance, 2006, within an LLC with S-corp election, and I still currently own that property 14 years later in 2020. And today the area where the property is located has been designated as a Qualified Opportunity Zone. Can I simply complete IRS form 8949 to update my LLC into a Qualified Opportunity Fund, and thereafter sell my property this year (2020 or 2021) and be exempt from the Capital Gains tax, since I held the property for over 10 years?
Or does the Capital Gains exemption only pertain to properties purchased only AFTER the Opportunity Zone 'law' went into effect? Thanks.
I believe you would have had to have purchased the property AFTER the Opportunity Zone was established. But what you are suggesting is something that I personally would at least try to do. What can it hurt?
@@freedom_mentor - Yep...I was thinking the same thing. I will check with my CPA regarding that question (and even check directly with the IRS) to see what the answer is. Thanks as always for your great insight in the awesome content you post
I have this same question! Did you ever find an answer to this?? Although I bought mine in 2017. Any way of making it into an QOZ Fund and still retaining ownership?
I’m wondering if you own a QOZ property in your own name and transfer title into an S Corp, does the “10 year timeline” start from the date of transfer? All the years owned under personal name ownership doesn’t count?
Phil, are you utilizing rent to own strategies on the opportunity zone homes or is there a different strategy you use?
Best Opportunity Zone Explained video ever!
Hi Phil! Let’s say I buy a residential property in a QOZ..and get good financing...I buy it under my name. Then I transfer it to an LLC I created like
said. Will I have any issues with the mortgage on the home??? Or will the bank be okay with the transfer into an LLC?
Watch this video which covers that topic in the early part of the video: ua-cam.com/video/aWsuzxHQVcE/v-deo.html
@@freedom_mentor just watched it, amazing video!
Phil, what about the need to make “substantial improvements” to the property in an amount equal to the original cost of the property within a 30-month time frame at some point during the 10-year period if you want to reap the tax benefits?
Are you sure it is "an amount equal to the original cost"?
@@freedom_mentor Finding this video now and have the same questions. Seems you have to double the original basis of tangible property. So purchase a house for $100,000 must invest an additional $100,000.
It requires "substantial improvements" equal to the amount of the original adjusted basis (not cost). So, whatever the basis in the property (value of structure not the land) needs to be reinvested in improvements to benefit from the tax savings of a QOF. I'm not an attorney or CPA, just what I've gathered off of IRS website.
I just purchased a property in an opportunity zone - great video. Thanks!
3 years later. How was your experience? Pro / Cons?
Great video phil.
Good to see you again Phil ❤✝️ 🇺🇸🌴 God Bless from the Gulf side.
Thank you
I have a client that owns a property in opportunity zone and he's asked me to sell it for him. Thanks for the training!
NO SUGAR COATING WITH THIS GUY. I LOVE IT. STRAIGHT ON YOUR FACE.
I have a capital gain that I want to buy three properties in a local opportunity zone. Do I set up 1 QOZF for all 3 or do I setup up 3 QOZF funds (1 for each property)? How is that handled for risk or liability management over the next 10 years?
Ask a competent attorney. For me personally, I have several Opportunity Zone properties in one Fund.
Always on point!
Thanks! We do our best to provide the best content in real estate investing
Oh my GOSH!! You are amazing!!
I have property in an opportunity zone in Florida and live in CA so the property needs a separate tax return already. I already have it in a trust. Do I still need to create an LLC and create an s-corp? My accountant wants to put my hair salon business in an s-corp. Could I include the property in the same s Corp? Or is it better to keep it in the trust? Or does it need to have its own s-corp? He said it would cost $800 a year.
I live in California I don't know if that has anything to do with the price.
Thanks for the great information on owning a property already. I have been asking this question for a while and no one seemed to have an answer on it so thanks!
You would need to establish an LLC (a Florida LLC is much cheaper), when you get your EIN number for that LLC, designate that it is to be taxed as an S-Corp, then you would transfer the title from the Trust to the LLC. Although normally you wouldn't, you may want to include both the real property and the business in the same entity because they both may be part of this "Opportunity Zone" concept.
Thank you. My business is not in an opportunity zone In California....could they still be in the same s-corp?
I purchased the property in 2012 and I understand after reading something that it would need to be sold a separate party to qualify. Does that sound right?
@@joyallen2415 In order to get the benefits of being a QOF, 90% or more of the assets must be located IN a QOZ. That will likely preclude using only one S-Corp for both in your instance.
The $800 question earlier, related to the annual fee (minimum, flat tax), that California charges every entity that wants to do business in their state, and domicile their entity there as well. One of the most expensive, in that way.
Thank you for sharing!! I have an opportunity zone property in my name instead of the LLC. If I move it to a LLC and create the fund will the 10 years start from there or when I first purchased the property?
Also if in 10 years the house is no longer in an opportunity zone but originally is was, how does that work?
Move into an LLC that is taxed as an S Corp so that it files it's own tax return. Then, make improvements to the property to prove that you have benefited the community with the changes. My understanding is that you are grandfathered in if the zone changes on the map.
While Operating and holding the QOZ do you get tax benefits in the business that is being operated in an Opportunity zone? Or is that just business as usual?
Nothing special. It's normal business as usual
Hey Phil, Great Information! Just Subscribed! Any advice on which credit union to go to for a Home Equity Line of Credit with a low credit score of 580? Don't really mind the the high interest rates and I won't be able to start credit repair until next month and believe the credit repair process will take another 3 months however I see a big opportunity for a cash flow investment and I need to capitalize. Thank you for your time!
The bank your bank with is usually the best place to start.
Hey Phil. I appreciate this video. I currently own two duplexes in opportunity zones. I bought one 7 years ago and one 2 years ago. They are both owned in LLC’s. One is owned by an LLC that only owns that one and one that owns multiple properties under it (with one in an opp zone). Can i still attach the opp fund to the LLC’s and claim these properties in the zones?
GREAT question for your CPA. The one you purchased a few years ago may work but I doubt the one 7 years ago would. The opportunity zone tax code didn't exist back then
Hi Phil please help me understand this. So let’s say I sold some stocks for 1 million bucks for example. Would I then purchase a QOZ property for the same price or higher?
Depends on what you bought those stock for. If you paid $500,000 for the stocks, then your taxable gain would be $500,000. If you invested $500,000 into a QOZ Fund, you could defer the capital gains on that $500,000 for several years.
Couple questions @philpustejovsky. Does everything have to be set up pre-purchase like a 1031? The further that question, I have property that I sold in 2019 and I coincidentally purchased in an opportunity zone in 2020 but didn’t realize until I started hearing about opportunity zones. Could I make the deal work or did everything have to be set up prior to?
Hi.. I’m in the same boat.. did you make the deal work? Thanks if yes, can you please share?
Hey Phil, If you sell multiple properties one sale being in 2021 and another sale in 2022 Can you combine both those gains into buying one qualified opportunity zone if it's within the 180 days ?
When you say no cap gains would that include the rental income or just on the future sale
That does not include rental income. Capital Gains Taxes are calculated by subtracting your basis from your final net proceeds. Whatever you paid for the property less the land is your basis (although if you make improvements, its possible to increase that basis) and then the final net proceeds is what you sell it for less any selling expenses (such as closing costs and commissions).
Phil, is subtracting land to get your basis a special rule for opportunity zone gains?i s the gain just exempt or deferred on the building and not the land?
Phil Pustejovsky, where do all these funds come from?
My understanding is the whole QOF program is scheduled to sunset as of December 31, 2026, making any investment since December 31, 2021 unable to become fully realized. Is that true? Are there any work-arounds?
5:19 Where is your video on Always own real estate in llc?
Right here: ua-cam.com/video/VAv_jZWUL3I/v-deo.html
how can I get the book? Phil
Go here: https:www.freedommentor.com/free-book
Hi, is there a tax advantage of selling inside of OZ after 1 year of ownership in an LLC? Basically i flipped a house closing next week only now realized it's located in an opportunity zone. Bought the house October 2019 and selling now. Thanks
No. You have to own it for 10 years to avoid capital gains taxes from the sale. If you want to defer current capital gains, you would have had to prepare for that prior to have purchased it.
Am I understanding correctly that I do not have to have a capital gain to invest as I can take cash flow to invest in a property and at least take advantage of the lack of capital gains when I sell? I understand I won't get the deferral of gains now but as I don't have any that is not my goal. Thanks!
If you hold for 10 years, there would be no capital gains.
You did a great job explaining this, but as I understand it, the "no cap gains" on the growth/appreciation is Federal but not state. At least this is the case in California.
The only two states I have lived in during my adult, tax paying life are Tennessee and Florida, both of which do not have state income taxes. I can't imagine living in a state that charges income taxes.
Hi Phil, really great stuff as always. I have recently seen 'opportunity zone' in listings and wondered about it. Are there any downsides or fees incurred if you hold less than 10 years? (Above and beyond the normal cap gains?)
No.
You defer taxes on capital gains until the property is sold or exchanged, or 2026, whichever comes first.
If you manage to hold for 5 years or more, then 10% of those gains are permanently excluded. 7 years or more gets you to a total of 15% permanently excluded. So, you eventually pay some capital gains.
If held in a QOF for more than 10 years, your reward is a step up to fair market value, of your original investment amount.
@@freedom_mentor Thank you so much for this video! Quick question, would the gains then be considered long term gains if they were originally short term gains?
@@levin9867 That's a good question for your accountant. I am not exactly sure.
@@levin9867 technically, capital gains refers to long term(1 yr or more). Short term cap gain is used but all that translates to is ordinary earned income. So u must have sold something u had for a year or more as u can only use the capital gains aka long term cap gains to invest in an Op zone
Thank you!!!!
This information was very helpful.
I somehow got the impression that you could ONLY invest capital gains, meaning that if you didn't have any, then a QOF was out for you. The IRC is needlessly confusing, so could you clarify this point, please?
As I am not a CPA, I wouldn't be at liberty to be your tax adviser; but you can buy real estate in a QOZ without getting any tax benefits, if you would like. But those tax benefits do exist too if you want to take advantage of them.
Welcome back
excellent video...thanks..
I just bought a property in an opportunity zones for fha my broker didnt know about it. Thanks for info
Phil i am selling a long term property for 700k with450k down and carrying the balance, can i buy a property in an oportunity zone for 700k and put the 450 down and feed payments from the sold property to the purchased property and still not pay gains?
You sound like the perfect candidate for a 1031 exchange. Rather than having to buy in an Opportunity Zone, you could buy any property (or properties) so long as they added up to be $700,000 or more.
Great information. Blessings. Thank you
Great breakdown
What about the time limits. It’s 2021. If we invest now we pay 5% of the initial gain correct? Where is the literature on the 180 day limit?
So basically i can buy some land in a opportunity zone and not pay property taxes on it until 10 years later as well??
Property taxes are always due; this is talking about saving on capital gains taxes if you ever sell it (after owning for 10 years) or being able to defer some current capital gains taxes you may have just developed from the sale of an asset recently.
Could you please do a video specifically on crypto gains?
I am not familiar with how crypto gains are taxed
Awesome video THANK YOU
I had this conversation with my accountant last week about a property I am purchasing, actually today. She was not aware of Opportunity zone and her office is in the same zone. I knew more about it than she did. I should charge them I suppose.
Thank you for making a video about this, I really wanted to learn more about this
And Phil you are an inspiration to me to start R.E investing and growing a UA-cam channel
Looks nice.
But you didn’t mention how the deferred capital gains are only until 2026 😟. So that tax bill will come due and if all your capital is tied up in the opportunity zone property, you might not have the money on hand for that tax owed
Good point; a cash out refinance would solve that.
@@freedom_mentor Phil at what tax% would the deferred capital gains be taxed in 2026, at my current rate now or at my future rate?
@@Avolonka My understanding is that it will be at 2026 rate but verify that with an accountant
Hey I have a question @PhilPustejovsky Phil. I'm sitting on _massive_ unrealized gains from crypto currency. I also own rental buildings, in my name, in an opportunity zone. Do you think it's possible to sell my buildings to an opportunity zone qualified company that I control for the amount that I paid for them? The idea being that I would sell the buildings, and realize a zero gain on them, but pull all the cash out. The opportunity zone fund would buy the buildings and hold/manage them. The net result in my mind would be all taxes deferred, my buildings paid off, and I walk away with some cash.
Consult with your CPA. It seems entirely possible from my understanding of how Opportunity Zone Funds work but the best person to get concrete advice on this subject is a qualified tax professional.
@@freedom_mentor I appreciate the response. To be frank, my CPA is the problem. I've been asking him for years for ways to defer cap gains, reduce my tax bill, etc etc. His answer is always earn less because there's no way to do it. I had a ton of gains from the bitcoin 2017 run that I would have loved to save from the IRS but he let me take a $25,000 tax bill on the chin. No recommendations to gift it to my son. No mention of opportunity zones, nothing. Didn't ever mention it. This past tax season I got sick of hearing no, I started doing some research and realized how many opportunities there are. I'm gearing up to take another massive hit this year and I'd be a fool to go through him again. He's not working for me anymore. I'm currently hunting for a CFO service to take over.
@@DotNetRussell Your attorney, your CPA, they are only as good as you are. You chart the course. Then, you hire them to figure out specific details. Such as this. You discovered that you could set up an Opportunity Zone Fund in which to purchase certain real estate and that would allow you, in theory, to defer capital gains for a few years. Now, you are hiring that CPA to figure out how you can do it.
I would add that another HUGE tax reducing move is to improve commercial real estate (See: www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act)
@@freedom_mentor I really appreciate the advice. Thank you
Can I spread out the gain payment or does it have to all be paid in one if I keep the money invested? I'm working on a gain that will put me over the $440k threshold if i realize it all in one year. I would be under the threshold if I were to pay 18% per year for 5 years (assuming 10% forgiven). My current gain is $700k. If I put $700k in an OZ can I keep the money in the OZ and pay $126k of the $700k gain every year for 5 years while still keeping the $700k in the OZ?
That's a good question for a CPA that has experience with Opportunity Zone investing.
Hello Phil, Great video! Thanks for your time..
I am selling a property which I held for 1 year and making a profit of 200k on 300k investment.I am buying a multifamily property all cash for 600k in the opportunity zone.My question is once I close, can I do cash-out refinance and taking my investment back and reinvest and keep this property for 10 years.I would also need to invest 200 to 300k to bring this property up to market rents.
Appreciate your response!
one more Questions,I read we need to invest the same amount to improve the property,Is the amount similar to capital gains I am investing not the total buying price.Thanks a ton!
Do a 1031 Exchange so you can roll all of your gains into that new property. As for it being in an Opportunity Zone, you may get the added benefit of not having to pay any capital gains taxes after 10 years BUT you must prove that you actually improved the property and provided a new benefit to the community with those improvements.
GET A MENTOR !!!!! with Phil voice
Opportunity zone nothing but a tax shelter
Poor burned out landlords. What's this about evicted renters having to sleep in the cold during a pandemic? Nevermind that, we only care about how people who dont contribute to society in anyway are making so little money.
GET A MANTOR MY FAV QUOTE BY PHIL