How to take advantage of “Opportunity Zones”

The Tax Cuts and Jobs Act of 2017 created new rules for “opportunity zones,” underdeveloped neighborhoods, sheltering your investments from federal taxes with minimal limits and employment requirements. You only have a few more months to maximize the benefits of this program: so how does it work?

When you sell a property, you can immediately reinvest that gain, tax-deferred, into an Opportunity Zone by depositing it into a qualified Opportunity Zone fund (either one you create or a traditional one). Then you have two choices; buy a property in one of the zones, or invest in a business in the zone. We’ll focus on the property option.

You have 31 months to purchase your new property, whether it’s multifamily, retail, industrial, or office space. Eventually, you need to invest the same amount of money as the property’s structures (not land!) currently are worth; if the current building is worth $100,000, you need to spend $100,000 remodeling, rebuilding, or otherwise upgrading the building. This means if you buy a property with a structure worth very little, you don’t have to do much to get the tax benefits.

Speaking of benefits, not only is the tax on your original gains deferred until 2026, but if you hold it for seven years, 15 percent of that gain will completely avoid federal capital gains taxes. (You only get 10 percent if you hold it for five years.) And if you hold it for ten years and your new investment appreciates? None of that appreciation is taxable under federal capital gains taxes. This is an opportunity indeed!

There are 102 opportunity zones designated around the Bay Area, including in Oakland, Concord, San Rafael, Santa Rosa, and even San Francisco; visit the SF Business Times’ site for maps and stats about the zones, or contact one of our advisors to find a property that matches your investment goals.

Sources: BizJournals.com, Tax Policy Center

Read our June 25, 2019 newsletter

NAI Senior Advisor Joby Tapia Closes Novato Multifamily Property for $3,020,000

NOVATO, CA – January 2016 – NAI Northern California announced the sale of 729 Cherry Street in Novato, California.

The property sold for $3,020,000, or about $300 per square foot, a 10% premium over the market rate for the area. The property is located close to Downtown Novato and consists of 15 units, including 2 bed/1 bath and 1 bed/1 bath units.  Joby Tapia represented the seller and persevered through two evictions and a fire during escrow.  Tapia was able to balance the needs of the seller along with the demands of the buyer to negotiate acceptable reconstruction terms. The diligence and service provided by Tapia salvaged the deal.

Tapia is an accomplished Multifamily Executive with over 16 years of experience managing commercial and multi-family assets, including market rate and rent-controlled properties, for both private and institutional owners in Northern California.

About NAI Northern California

NAI Northern California is full service commercial real estate firm in the San Francisco Bay Area and part of NAI Global, the largest managed network of Commercial Real Estate Brokerage Service firms in the World. Recognized as one of the Top 25 Commercial Real Estate Firms by the East Bay and San Francisco Business Times, NAI Northern California provides comprehensive brokerage, leasing, debt, advisory, and property management services for corporate end users, property owners, developers, investors, and financial institutions.