10 Jul Overview of Opp Zone Funds: A Look at Self-Certification and Where to Invest
This post originally appeared on Marketplace Advertiser, Reonomy and is republished with permission. Find out how to syndicate your content with theBrokerList.
Table of Contents
Opportunity Zone Funds:
Finding an Opportunity Zone Fund to Invest In:
- Find an Existing Opportunity Zone Fund
Opportunity Zone Funds
Since the onset of the Opportunity Zone program, one of the tidbits that has always been made clear is that, to make an investment in OZ assets, you must do so through a Qualified Opportunity Zone Fund.
What’s less clear, however, is how these funds work, where they are, and how an LLC or company can become a qualified fund. We’ll set out to answer those questions below.
What is an Opportunity Zone Fund?
Opportunity Zone Funds are an investment vehicle for those that would like to reinvest capital into Opportunity Zone assets in the United States.
These funds can be formed as an LLC, corporation, or partnership, and can invest in Opportunity Zones in a few different ways—including real estate or businesses.
A Qualified Opportunity Zone Fund must hold, or intend to hold, at least 90% of their assets within Opportunity Zones. Otherwise, those invested will not qualify for the program’s tax benefits.
Finding an Opportunity Zone Fund to Invest In
Understanding how QOFs work is only the first step. Finding the right fund to invest in can depend on how much decision making power you’d prefer as an investor, and more so, whether or not you’d like to establish your own QOF.
More sophisticated, hands-on investors, for example, may look to self-certify and chase down specific assets, whereas passive investors might leave the heavy-lifting up to an already-established fund.
It is actually very simple to self-certify as an Opportunity Fund.
To do so, you need to fill out the IRS Form 8996, and submit with your yearly tax filings. This form has twofold value.
It is first a way for LLCs, partnerships, or corporations to establish and certify themselves as an Opp Fund. Second, it allows these LLCs and corporations to report that said fund met its investment standard in the tax year gone-by.
Self-certifying as a QOF allows for more freedom in the investment process. As long as your fund meets the 90% mark, properties can be invested in freely.
Some large Opportunity Funds require fees for investment or an investment dollar minimum, as well. More sophisticated investors can simply establish a new LLC with their existing investment team and start making moves immediately.
In cases like that, tools like Reonomy serve a great benefit to those investors.
Find Opportunity Zone Real Estate with Reonomy
This includes all asset classes other than single-family homes, as well as layers of sales, debt, tenant, and ownership data on individual properties for detailed property analysis.
You can use Reonomy OffMarket to search for Opportunity Zone properties in any state, city, MSA, county, zip code, and neighborhood, or search by exact address.
Furthermore, you can add filters for specific sales and property debt characteristics, or search for specific owners and tenants.
If you’re unfamiliar with the owner of a property, you can use Reonomy to see who the owning LLC or party is, as well as the individuals associated with that party and their contact information.
By investing in off-market properties with Reonomy, you can save on broker fees, avoid the competition of other buyers, and minimize the amount of people involved in buying the property.
In other words, you can save on your initial Opportunity Zone investment, to only then sit on the property and collect even grander tax benefits in the future.
Find an Existing Opportunity Zone Fund
The other option, of course, is to inquire with an existing Opportunity Fund to see if their investment strategy aligns with yours in terms of asset classes, the market of focus, and level of development and risk.
There are qualified funds spread out across the entire country, some with national focuses, some with regional focuses, and some as small as city or neighborhood focuses.
The National Council of State Housing Agencies (NCSHA) and Novogradac both provide lengthy Opportunity Fund directories, breaking down different funds by where they are focused and what asset types they focus on. See those here:
Below, we’ll give an assortment of examples of each, also.
Fundrise is one of the largest Opportunity Funds in the country, serving investors on a national basis, for a variety of commercial and residential real estate asset types.
The fund provides a great deal of content on the Opportunity Zone program as a whole, serving as a thought-leader on top of being an investment vehicle. They even include a savings calculator on their site for you to see your potential QOF savings over time.
EquityMultiple is another nationally focused Qualified Opportunity Zone Fund that offers investors the chance to put their capital into commercial and residential real estate.
Their site is similar to Fundrise in the sense that they seek to inform investors about Opportunity Zones and Opportunity Funds. These two QOFs also serve as two of the largest, most wide-spanning vehicles for investors to turn to.
Cresset Diversified QOZ Fund
Cresset Partners offer a nationwide Opportunity Fund as well, called the Cresset-Diversified QOZ Fund.
The fund allows partners to invest in multi family, office buildings, student-housing, industrial, hospitality property, retail, and more.
Much like the aforementioned sites, Cresset also provides a range of Opportunity Zone information for visitors, including a timeline visualization of how the tax benefits unfold over time.
The Gateway Opportunity Fund
The Gateway Opportunity Fund is a St. Louis-based fund that is primarily focused on investments in the St. Louis area, but also has growing opportunities across other areas of the country.
The message that Gateway pushes across most heavily on their website is the idea that their investment efforts are backed by hard assets ad significant returns.
Loyalty Opp Fund
Another nationwide fund, Loyalty Opp Fund is an example of a fund that invest primarily in small business, as opposed to physical real estate.
John Hewitt has established roughly 5000 franchises in his career and is behind the Loyalty Fund. It is in place to invest in new small business development in Opportunity Zones around the country.
Obsidian Opportunity Fund
Obsidian Opportunity Fund specializes in solar and other renewable energy development on a national scale. The company takes on projects of various sizes, but claims that “no development is too large,” even referencing a professional sports stadium as an example.
Propel Opportunity Fund
Propel Opportunity Fund has their sights set on raising $450 million for investment in real estate projects across the U.S. in Opportunity Zones.
Propel is an example of a fund with a threshold, as the minimum required investment to be a part of the fund is $100,000.
Sixty West Funds
Sixty West Funds is a QOF, also offering nationwide opportunities to investors, that has a focus on mixed-use properties—including multi family, hospitality, office, and retail properties.
They offer custom funds for investors of different levels, from individuals to family shops, up to large investment groups, and cater to the specific location and asset type needs of those investors.
Virtua Partners’ Virtua Opportunity Zone Fund I is mainly focused on multi family development across Opp Zones nationwide.
Virtua was another early thought-leader of the Opportunity Zones program, sharing a great deal of insights and webinars since early-2018.
Caliber Co has a diverse set of Opportunity Zone investments for those looking to take advantage of the program’s tax benefits across the nation.
Through the Caliber Tax Advantaged Opportunity Zone Fund, the Caliber Diversified Opportunity Fund II, the Caliber Residential Advantage Fund, and the Caliber Fixed Income Fund III, Caliber Co gives investors the chance to buy into hospitality, multi family, single-family, and commercial Opportunity Zone properties.
There have been, and still are, many Qualified Opportunity Funds that have “upcoming” funds, or have a fund “in the works.” Given the timely nature of the program, some funds have established themselves online long before allowing investors to begin reinvesting. Not Sikari Luxe, however.
Sikari Luxe was founded in 2018, and for a long time, was one of the only Opportunity Funds actually open to investors.
The fund is focused specifically on Florida Opportunity Zones, with funds in Tampa, Miami, Orlando, and St. Augustine open to investors. They also have a Florida Recovery Opportunity Fund aimed towards Opp Zone properties in storm-damaged areas.
Urban Catalyst is an Opportunity Fund based in California, that primarily helps with investment in San Jose and Oakland Opportunity Zones.
While less extensive, they also offer Opp Zone investment options in Los Angeles, San Diego, Seattle, Portland, Phoenix, Nashville, Atlanta, New York, Houston, and more.
They focus on the walkable businesses and housing outside of San Jose’s downtown, and residential properties in Oakland giving rising costs in San Francisco.
Midtown Opportunity Fund
The Midtown Opportunity Fund claims to have “more than $2.5B of institutional quality opportunity zone projects” in their deal flow pipeline.
While they work with a variety of real estate assets and sectors, they focus largely on shovel-ready Opportunity Projects and working with experienced developers.
Monarch Private Capital
Monarch Private Capital (MPC) is a national investment firm that developers, finances, and manages a portfolio of tax-advantaged assets. Over the past 13 years, the firm has operated “numerous tax credit funds.”
At the beginning of 2019, they launched three Opportunity Funds for those that would like to invest in nationwide Opportunity Zones.
The fund is in place for investment in rural (as might assume) areas of both Colorado and Wyoming. Rural COZ states that they are raising funds for projects that are “profit-driven, real estate backed, tax-deferred, and impact motivated.”
Savage Grant Opportunity Fund
The Savage Grant Opportunity Zone Fund is another example of a fund with a very specific investment focus.
The fund is in place to invest capital in Opportunity Zone assets in West Virginia and Central Appalachia. Typically, the fund invests in commercial real estate and small businesses in these areas.
Last on our list is the Fortuitous Partners Opportunity Fund, which has a nationwide focus on raising capital to invest in “professional-sports anchored real estate developments.”
Where ever you might seek to invest in the United States, and regardless of the asset class, there is certainly flexibility available in searching for Opportunity Zone property investments.
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