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It’s simple: the Qualified Opportunity Zone (QOZ) program encourages real estate investors to put their money to work in low-income areas in the U.S. by offering significant tax benefits, thus spurring economic growth.

The Commonwealth. (Fallout 4) Nuclear holocaust has turned the US housing market upside down, making property in The Commonwealth incredibly cheap to buy – invest while you can! (The Legend of Zelda: Breath of the Wild) The property market in Hyrule remains small. Buy property, mortgage it, collect rent, and erect buildings while trying to avoid being thrown in jail and running out of money. The winner is the player with the highest net worth determined by property and cash. It’s a board game about buying property and more or less becoming a rich person without going bankrupt. There are only 2,000 copies of the 3D Monopoly: New York edition, and on average, a copy sells anywhere between $500 to $1,000. That’s quite a bit of cash for a fancy version of Monopoly.

The Tax Cuts and Jobs Act passed by Congress in 2017 created the Qualified Opportunity Zone (QOZ) program. By investing realized capital gains in QOZs, real estate investors can reduce their existing capital gains tax liability. Better still, investors can completely eliminate all capital gains tax liability from future value appreciation on Qualified Opportunity Zone investments!

These investment tax incentives give investors the opportunity to nearly double their after-tax returns when compared to a traditional real estate investment. Unsure what the pros and cons are of Opportunity Zones versus a 1031 Exchange? We got you.

Opportunity Zone Investing in Action

Let’s take a look at a case study. Eight years ago, Julie purchased a small apartment building in her hometown. The property was priced right when she bought it, and over the years generated a nice healthy cash flow and – to her pleasant surprise – has nearly doubled in value.

She’s built up a lot of equity in the building and figures that now might be a good time to sell, when the market is so strong. But the problem is paying capital gains tax. Julie knows she can use a 1031 Exchange to defer capital gains (she did that when she purchased her apartment building) but she is concerned about finding a like-kind replacement especially while multifamily cap rates are at historic lows.

Julie wants to stay invested in real estate, but hopefully in a less hands-on role than she has had with her previous apartments. She begins researching alternative real estate investments and discovers the Qualified Opportunity Zone program. The more she learns about opportunity zone investing, the more she likes what she sees.

Tax benefits of investing in Opportunity Zones

Deferring existing capital gains taxes and potentially avoiding new capital gains taxes attracted Julie to opportunity zone investing. She discovered two key tax benefits of investing her capital gains into a Qualified Opportunity Zone:

  • Realized capital gains invested in an Opportunity Fund are reduced by 10% in five years, and another 5% in seven years, and can be deferred up to nine years.
  • Future capital gains on Opportunity Fund investments held in the Fund at least 10 years are completely excluded from capital gains taxation.

What are other benefits of Opportunity Zone investing?

Opportunity Zones offer four other attractive benefits to real estate investors compared to the empowerment zones and renewal communities programs previously authorized by Congress:

  • Capital gains only need to be reinvested, not the entire proceeds from a previous asset sale.
  • Capital gains can be deferred from sales made outside of QOZs, not only from within.
  • Any type of capital gain – stocks, Bitcoin, precious metals, and more – qualify for Opportunity Zone investment.
  • Opportunity Funds may be created by syndicators to invest in a variety of QOZ opportunities such as residential rental property.

Using Opportunity Funds to invest in Opportunity Zones


In her research, Julie noticed that the phrase Opportunity Fund kept coming up. She soon realized that Opportunity Funds are the designated investment vehicle used to invest in Qualified Opportunity Zones.

The IRS defines Qualified Opportunity Funds as U.S. partnerships or corporations set up for investing in eligible property that is located in a Qualified Opportunity Zone.

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Where are Qualified Opportunity Zones located?

After the Jobs Act was passed in 2017, State Governors presented low-income census tracts as Opportunity Zones to the U.S. Treasury and IRS. About 8,700 Qualified Opportunity Zone designations were finalized in 2018.

Opportunity Zones can be found throughout all 50 U.S. states, Washington D.C., and U.S. territories like Guam, Puerto Rico, the Virgin Islands, and the Northern Mariana Islands.

As you can imagine, Julie liked the idea of deferring and permanently excluding her capital gains from taxation and having the potential of double-digit returns. The geographical diversification that Qualified Opportunity Zone investments offered her was icing on the investment cake.


Although her apartment building had done well, she sometimes worried about having so much money tied up in one asset. If the local economy ever ran into trouble , the value of her property would likely fall at the same time as Julie’s day job might be in jeopardy.

Investing her capital gains in a Qualified Opportunity Fund could help her reduce risk by diversifying across multiple geographies throughout the U.S.

How to Defer / Exclude Capital Gains Tax with Opportunity Zones

Armed with her new found knowledge, as any good real estate investor would, Julie did a quick analysis of how much capital gains tax she’d defer by investing her capital gains in an Opportunity Zone:

  • The capital gain from selling her apartment building would be $500,000.
  • By investing that $500,000 in an Opportunity Fund after five years her taxable capital gain would be reduced by 10% to $450,000.
  • After seven years her taxable gain would be reduced by another 5% to $425,000.
  • The reduced deferred capital gains tax on her initial investment of $500,000 would have to be paid after nine years.
  • After 10 years, any appreciation of her initial $500,000 invested would be completely tax free.

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Julie sat back and thought for a moment.

Over the last eight years, her apartment building had doubled in value. If her capital gains invested in an Opportunity Fund also doubled in value to $1 million over the next 10 years, she’d have another $500,000 gain that would be completely tax free.

Common questions about real estate Opportunity Zone investing

Is there a time limit for investing capital gains in an Opportunity Fund?

Yes, the same time limit of 180 days that applies to 1031 Exchanges also applies to Opportunity Funds.

How are 1031 tax-deferred exchanges different from investing in an Opportunity Zone?

The biggest similarity is that 1031 exchanges and an Opportunity Zones can both defer or eliminate capital gains tax. That said, Opportunity Zone investing does not carry with it the like-kind constraint of a 1031 exchange.

Can more than the amount of capital gains be invested in an Opportunity Fund?

Yes, investors may invest more money than the amount of capital gains. In effect, the investor would be making two investments: One to defer capital gains, and the second as a regular investment unrelated to its capital gains.

How is an Opportunity Fund formed?

There are no laws limiting who can form an Opportunity Fund. Qualified Funds must:

  • Be an entity organized for the purpose of investing in Qualified Opportunity Zone property
  • Hold at least 90% of its property – such as stock, partnership interests, or real estate – within a QOZ
  • Self-certify to the IRS using Form 8996 as an Opportunity Fund and verify that they are fulfilling the 90% asset requirement

What happens next? In January 2019 the IRS will hold a public hearing on proposed regulations for the Qualified Opportunity Zone programs, and issue further rulemaking.

The Bottom Line for Real Estate Investment in Opportunity Zones

Qualified Opportunity Zones give real estate investors a new way to defer – and potentially eliminate – tax on capital gains. There are 8,700 Opportunity Zones in every state in the U.S. and its territories – including Puerto Rico and the Virgin Islands.

Qualified Opportunity Funds – or QOFs – are the designated investment vehicle used to invest in Opportunity Zones. QOFs can be corporations or partnerships and need to invest at least 90% of their holdings in one or more Opportunity Zones.

Capital gains that are generated from any asset sale – such as real estate, stocks and bonds, Bitcoin, and art – can be invested in QOFs. After five years the taxable capital gain is reduced by 10%, and after seven years the capital gain is reduced by another 5%.

After nine years, tax on the reduced capital gain amount must be paid. Best of all, any appreciation on the capital gains invested in a QOF is completely tax free!

Like any new government program there are always details to be worked out. But one thing is for certain: Opportunity Zones offer real estate investors a great way to defer existing and permanently eliminate new capital gains while investing in underserved communities across America.

In the current economic climate there is almost no point in putting your money into many traditional savings accounts that will earn 1% APR or less. Since Coronavirus hit, the entire global economy has seen a downturn like none we’ve seen before.

Right now, it’s hard to know how this is going to affect the real-estate market. What we do know however, is that real estate will always be valuable, and the price of property always bounces back.

Of course though there’s still an element of risk, as there is with any kind of investment. Here then we will look at a few tips for investing in property to try and help you avoid mistakes and makes sure that you rake in the profits.

How to Profit From Real Estate

The first question is how you are going to profit from real estate. To that end, there are a few different options available to you.

The first is to buy the property with the intention of selling it. You can renovate the property, decorate, add value, and then sell for a profit. This is called “flipping” and it is often extremely effective.

The other popular option is to rent out the property. You can do this in a number of ways. For instance, you might become a landlord and deal with tenants on a long-term basis, or you might consider putting your property on AirBnB. If your property is on AirBnB, then you will need to list it on the site, while also making sure to keep it tidy and clean the rest of the time. Remember that vacation rentals tend to be more popular at certain times of year, meaning that your property may be empty for months on end.

Either think about ways to mitigate this, or look into costs associated with maintaining the property (or paying the mortgage) and whether this will ultimately be profitable for you.

Being a landlord can offer a more stable form of income, though you do need to consider the other work and costs involved. For instance, it will be your job to fix the boiler when it breaks, and you’ll need to deal with damages and bills too.

To that end, you might prefer to use a property management company. They will act as a go-between to help you to deal with these issues, but they will of course take a cut as well.

Tips for Making Money From Real Estate

Choose the Right Property to Sell

Choosing the right property is of course the single biggest way to make your money grow and to maximize your profits. The price of properties will almost always rise eventually which is why this is such a safe way to invest, but the amount by which this value increases, and the speed with which it does, comes down to your choice of property.

When you buy stocks and shares you don’t just want shares that will be worth a lot of money in the future, you want shares that will be worth a lot more money in the near future. You need to stop buying property like a resident, and start thinking like a businessman/woman.

The best homes for selling are not necessarily the nicest properties. These will be the homes that are 'up and coming' and that generally can improve a lot over a short period of time. So for instance if you buy a property that is in a run down area that is going through development or where the council is spending a lot of money this can be a great investment as the home will become more appealing over time. Look out for new developments and do some research into where the best properties are to invest in in your area. Likewise, consider other factors that might increase the value of an area/property: things such as new transport links, or like new shopping outlets in the area.

Again, it’s not about what the area is like now but what the area will be like soon.

Likewise, you want to buy properties where you personally are able to add a lot of value. You can add value to a home in a lot of ways. For instance, by adding new flooring, by installing new doors and windows, by getting tiles placed outside, by adding rooms, by converting lofts and garages etc. All of this will enable you to make your property worth more than it was when you bought it and in turn this will mean that you earn more from it.

Think about your personal contacts and skills in particular. If your Dad works in double glazing, then that’s a very good deal! You can add a lot of value to a property by adding double glazing – in fact some research suggests that double glazing can add up to 10% to the value of a home!

Let that sink in for a moment. If you can get your relative to add double glazing to your property, then you can take a $400,000 house and sell it for $440,000! That’s a HUGE potential earning for doing very little.

This is what we call a “fixer-upper” and this will have a lot more potential for increasing the value and making a lot of money that you can then put straight in the bank and invest into more properties. If you have a team of skilled individuals, this can very quickly become a small business.


Another thing that can help you to get a good price initially is to haggle. Look for signs of wear and tear and then use these as leverage to try and bring the price down. Make sure that when you're buying you aren't in any hurry - the person who has the most urgency will generally be the one who loses the negotiations.


When choosing your property you need to think not only about how much it is 'technically' worth, but also about how much you'll realistically be able to sell it for. Like selling any product, you should make sure that there is a market out there for your property and that means ensuring it's desirable, affordable for the area and practical. Things like close proximity to shops and extra features like balconies and hot tubs may be what makes your property sell, while an awkwardly shaped living room that makes decorating difficult might be what prevents it from shifting as rapidly as it should.

Choose the Right Property to Lease

Choosing the right property to lease is a slightly different story again. This time, you will be investing in the property with an eye to renting it out to people, in which case it does need to be desirable now.

(Though with that said, if you can buy it cheaply and then fix it up to look nicer, then you can breakeven more quickly.)

What you should also think about though, is just what kinds of properties are desirable as vacation rentals, or as properties to rent.

For example, if you can find a property that is within the commuter belt for a big city, then this will naturally appeal to potential young professionals.

Likewise, properties that are near to landmarks or to tourist attractions will work particularly well as properties that you can lease through AirBnB or on other websites.

The good news is that properties that are popular to rent, are not always the same ones that are popular to buy. That means you may be able to get a great deal on a property and then lease it for a high value!

Get a Good Loan

The whole point of investing in your property is to make as much money as possible, so you need to make sure that you aren’t wasting cash for instance on an unnecessarily high APR. Shop around and improve your credit rating and you can get a cheaper loan meaning lower overheads and more profit.

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How about a loan from the bank of Mum and Dad? This can potentially help you to afford far more valuable properties without needing to take out an expensive loan. It’s a fantastic strategy, and especially if you repay them with interest. Don’t be afraid to ask for help – relying a little on the community that raised you and wants to see you succeed is just good sense.

At the very least, consider using your parents to take out guarantor loans in order to get the best deals. And fix your credit score while you’re at it!

Likewise, you also need to be careful when investing profit that you aren’t swindled by buying a dilapidated building or not getting all of the rights to the property when you sign. By investing in a good settlement agent, surveyor, estate agent etc. you can save yourself a lot of money and avoid problems. It’s easy to get swept up in the excitement of buying a new property and to thereby end up with a sub-par deal!

Some Things to Look Out For


A bit of mold might not seem like a big issue, but it is indicative of a far more serious problem. If you’re struggling with mold, then it probably means that your property has an issue with damp, which will mean the mold only spreads and gets worse with time. This then leads to damage to your property as the mold spreads, it makes leaks more likely and it can even damage your health. It’s crucial to tackle damp and mold with waterproofing and smart living and if you notice any setting in you should ensure you get to the bottom of the issue rather than just tackling the symptoms.


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Flooding is an incredibly destructive problem that can quickly lay waste to much of your property as well as your belongings. From waterlogging the garden, to damaging your flooring, to destroying your furniture and electronics, there are any number of ways that a flood can ruin your home. The problem is that you can’t do much about flooding once it’s an issue, so make sure to look out for flood-plains and use a surveyor to avoid making a bad investment.

Weak Foundations

Cracks in your walls don’t necessarily spell doom and may be easy to repair, but once the damage becomes extensive and effects the foundations of your building it can lead to incredibly costly damage that makes the property a poor proposition for investors. Again, look out for signs of serious damage when choosing your home and make sure to maintain the building as you go along rather than waiting until it’s too late.


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As with any business model, the right strategy can make a huge difference to your likelihood of success. Again, the key is to think of this like a business person.

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For example, if you want to earn money from a property but you don’t have a lot of cash to invest in multiple locations, why not consider staying with your parents to flip your first home? You could even stay with friends!

Likewise, you could consider investing in a property with friends. If you team up to buy a property, you could potentially invest $20,000 each and maybe even avoid needing to go to a lender at all (say there’s ten of you). Leverage each of your individual skills, and you could turn a small flat into somewhere far more desirable and then split the profits!

If you buy a property to use as a vacation rental, why not find ways to make it more desirable? How about decorating your property in a historical manner for instance? Now the property itself becomes the appealing sight!

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Finally, keep in mind that there are plenty of ways to invest in real estate without ever buying a property! These include using Real Estate Investment Trusts (REITs), Real Estate Mutual Funds, and more. There are even now online real estate investment platforms!

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Speak to your bank if that sounds more appealing.