The more informed investors are as to a particular income opportunity, the better able they are to assess the risk/reward potential within their individual comfort levels. On June 8 2019, Primior CEO Johnney Zhang, took the stage along with other panelists around the Opportunity Zone program and shared some of the specifics of OZ fund investing. As OZ funds are of relatively recent origin and with many of the specific details evolving as the IRS and Treasury Department fully explore all the real world variables as they arise, Primior remains committed to providing the most recent and up-to-date information to our clients. Here are some highlights from the OZ seminar.
While there are threshold requirements for investing in an OZ fund, such as the rollover of gains from a capital investment must be made within six months and existing properties within the OZ must be substantially improved within 30 months, the most important time frame to consider is 10 years. This is the period of time that the OZ investment must remain in the fund to derive the optimal tax advantages. For many investors, 10 years is a greater commitment than they are used to and it is an important consideration before moving forward.
The potential for success
While as with any investment there is no guarantee of success, there are several factors that are more likely to be predictive of success in OZ funds. The number one factor to consider is return on investment. Without consideration of the tax deferral advantages, a low ROI is not likely to justify a 10 year investment period. In assessing a projected acceptable ROI, Primior looks to certain key factors such as whether the OZ is adjacent to a flourishing economic area and whether the property already has an anchor tenant.
Currently, there are two developing projects in Santa Ana, California that potential investors can be excited about. First Harbor Plaza and Westfair Plaza both have a targeted return of 7-10% annualized IRR net to limited partners and require a minimum commitment of $200,000. Contact Primior today to learn more about the potential of these projects or to discuss any of your investment needs.