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Finding Opportunities in Opportunity Zones

March 11, 2020  //  BY Team DataTree

If you’re looking for an investment opportunity that might also help improve economically-distressed or underdeveloped communities while reducing your capital gains tax – this post is for you! It’s been over two years since the Tax Cuts and Jobs Act of 2017 created Qualified Opportunity Zones to incentivize investments in nearly 9,000 distressed communities across the U.S., while allowing accredited investors the chance to defer and reduce capital gains payments.


Opportunity Zones – The Big Picture 

Successful investors often face a “good news/bad news” scenario at the end of an investment period. The good news is investment value growth; the bad news is that the capital gain profit is taxed by the federal government. The Opportunity Zone program provides investors a chance to defer and – in many cases – reduce the tax payments on those capital gains.

While there are a lot of details involved in the program, the basic premise is simple: your capital gains are invested in a Qualified Opportunity Fund (QOF). These capital gains don’t necessarily need to be from real estate investments. Gains from several types of investments qualify for QOFs. Check with your tax professional on exactly which investment gains meet the criteria established by applicable taxation authorities. For more program details, you can view the IRS Opportunity Zone Frequently Asked Questions page.


How to Analyze Opportunity Zones for Investments

Despite the QOF program benefits, Opportunity Zone investments are not without risks, including the inherent risk of investing in a distressed neighborhood

Not all Opportunity Zones are created equal, so it’s important to take a close look at Opportunity Zone neighborhoods and properties to determine which investments fit your personal criteria. DataTree reports can help you answer some of the tough questions, including:

  • Do the target properties have prohibitive liens?
  • What is the title history of each potential investment?
  • How close are potential investments to mass transit, businesses, public parks or other important neighborhood assets?
  • What are sales and price trends?
  • Are there an unusually high number of foreclosure properties?
  • Which realtors and lenders would make the best partners?

Answering these questions can help you determine whether the potential benefits of an Opportunity Zone investment justify the risks.


Add Clarity to Your Investment Process

If you’re interested in taking full advantage of the Opportunity Zone program, the sooner you start, the more benefits you’ll accrue. With DataTree, you have instant access to real-time Opportunity Zone data, including information to locate investments, find title and lien history, locate realtors and lenders who are doing business in Opportunity Zones, and much more. Get a demo and start your free trial of DataTree.com today!

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