One common assumption about Opportunity Zones (OZ) is that they're all the same. That is a false assumption.
All opportunity zones are not the same. OZs are economically distressed communities designated by each U.S. state, territory, or the District of Columbia, where certain types of investments are eligible for preferential tax treatment* under the Tax Cuts and Jobs Act of 2017. The goal of an OZ is to spur economic development and job creation in these low-income areas.1
Although opportunity zones share the common goal of promoting economic growth, they can differ in various aspects such as:
- Geographic location: Opportunity zones can be found across the United States and its territories, with each location generally having its own unique economic, demographic, and geographic characteristics.1
- Economic conditions: The economic conditions in opportunity zones can vary greatly. Some zones may be more distressed than others, with higher unemployment rates, lower incomes, and more significant infrastructure needs.2
- Industry focus: Some opportunity zones may have a specific industry focus or a more diverse range of industries. For example, certain zones may emphasize manufacturing, while others may focus on technology or tourism.2
- Development potential: The potential for development and growth may vary between opportunity zones. Factors that may influence development potential include the availability of land, access to transportation, and the presence of existing businesses and infrastructure.3
- Local and state policies: Policies and regulations at the local and state level can also differ across opportunity zones, which commonly influences the types of investments and development projects that are feasible.4
1 https://www.irs.gov/newsroom/opportunity-zones
3https://www.wellsfargo.com/the-private-bank/insights/planning/wpu-qualified-opportunity-zones/
Market volatility or lack of liquidity could impair an investment's profitability or result in losses. Factors such as high vacancy, oversupply of the product in the market, increase in interest rates for borrowing loans, bad credit quality of tenants occupying the property, general economic risks such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws and general overall deterioration of the market in which the asset sits, all of which could lead to financial difficulties and impact net operating income and can depreciate the value of the property. These factors, in addition to others including increases in the costs in excess of the budgeted costs, the burdens of ownership of real property, environmental liabilities, contingent liabilities on disposition of assets acts of God, pandemics and other national, regional or local emergency conditions, terrorist attacks, and war may affect the level and volatility of asset prices and the liquidity of investment assets.
This article was written by an employee(s) of Crowd Street and the contents of this publication are for informational purposes only. Neither this publication nor the financial professionals who authored it are rendering financial, legal, tax or other professional advice or opinions on specific facts or matters, nor does the distribution of this publication to any person constitute an offer, recommendation, or solicitation to buy or sell any security or investment product issued by Crowd Street or otherwise. The views and statements expressed are based upon the opinions of Crowd Street. All information is from sources believed to be reliable. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance or success. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. Crowd Street assumes no liability in connection with the use of this publication.
*The Opportunity Zone program, like any tax program, is subject to regulatory interpretation and change and future legislation. There can be no assurance that investors will enjoy the Opportunity Zone program benefits. Given such uncertainty, investors should consult with their personal tax, legal, and financial advisors before investing in the Portfolio.
