INVESTING IN U.S. COMMUNITIES: AN ALTERNATIVE TO REAL ESTATE INVESTING
Perch Wealth Experience
The Perch Wealth team has successfully assisted hundreds of clients with their investment strategies. We have a diverse team of experts with extensive experience in a variety of sectors, including real estate development, law, syndications, and more.
Through our library of resources and expertise, we are strategically positioned to guide you through your investment journey.
What are Qualified Opportunity Zones
A qualified opportunity zone, or QOZ, is an economically distressed community where new investments may be eligible for preferred tax treatment. More than 8,700 census tracts have received a QOZ designation in the United States, District of Columbia, and U.S. territories.
In order to invest in a QOZ, an investor must use a qualified opportunity fund – or QOF. Perch Wealth offers investors access to QOFs with investments across the United States. Our team can introduce you to opportunity zone investments that match your financial goals.
Why invest in opportunity zones?
Opportunity zones offer investors multiple tax benefits, as long as their investments align with the guidelines of the Tax Cuts and Jobs Act of 2017. QOZs offer a unique opportunity for investors to sell a range of investments, including, but not limited to, stocks, bonds, real estate, closely held business assets, cryptocurrency, jewellery, and art.
When the gains realized from the sale of these assets are reinvested into QOFs, investors can potentially benefit from the following “triple-layer” tax incentives:
Deferral
Those who rollover their capital gains into a QOF can defer capital gain recognition from the original investment until December 31, 2026.
Reduction
The amount of capital gain recognized from the original investment is reduced by 10 percent after achieving a five-year holding period, as long as that five-year holding period is achieved by December 31, 2026.
Exclusion
Long-term investors are eligible to pay no tax on the appreciation of their QOF investment upon disposition of that investment, regardless of the size of the profit, if the assets held in that QOF are held for at least 10 years.
1031 Exchange Resources
OZ investments enable investors to benefit from a 1031 exchange according to Section 1031 of the Internal Revenue Code. A 1031 exchange is a trade-off in real estate ownership that allows investors to defer capital gains taxes. Section 1031 requires investors to follow a strict timeline when leveraging this opportunity.
Unfortunately, successfully locating and identifying suitable replacement property (or properties) within the 45-day identification window is one of the most challenging issues with a 1031 like-kind exchange.
With our professional guidance, library of resources, and access to properties available nationwide, Perch Wealth might be the solution for your successful 1031 exchange.
Opportunity Zone Disclosures
- Opportunity Zones (“OZ”) are speculative. OZs are newly formed entities with no operating history. There’s no assurance of investment return, property appreciation, or profits. The ability to resell the fund’s underlying assets is not guaranteed. Investing in OZ funds may involve higher risk than investing in other established real estate offerings.
- Long-term. OZ funds are illiquid and return of capital and realization of gains, if any, from an investment will generally occur only upon partial or complete disposition or refinancing of such investments.
- Limited secondary market. Although secondary markets may provide a liquidity option in limited circumstances, the amount you will receive is typically reduced.
- Difficult valuation assessment. The portfolio holdings in OZ funds may be difficult to value. As such, market prices for most of a fund’s holdings will not be readily available.
- Default consequences. Meeting capital calls to provide pledged capital is a contractual obligation of each investor. Failure to meet this requirement in a timely manner could have adverse consequences including forfeiture of your interest in the fund.
- Leverage. OZ funds may use leverage in connection with investments or participate in investments with highly leveraged structures. Leverage involves a high degree of risk and increases the exposure of the investments to factors such as rising interest rates, downturns in the economy, or deterioration in the condition of the assets underlying the investments.
- Unregistered. The regulatory protections of the Investment Company Act of 1940 are not available with unregistered securities.
- Regulation. It is possible, due to tax, regulatory, or investment decisions, that a fund, or its investors, are unable to realize any tax benefits. Evaluate the merits of the underlying investment and do not solely invest in an OZ fund for any potential tax advantage.
