Real Estate Insights

What Opportunity Funds Mean for the Future of Community Development

What Opportunity Funds Mean for the Future of Community Development

All investors share a common goal of wanting to maximize the return on their funds within a framework of tolerable risk. Yet that desire is tempered in some cases by the means by which gain is achieved, and for some, the manner in which wealth may potentially be accumulated becomes equally as important as bottom line success. Primior can explain how opportunity funds can offer a true win-win investment option for the right investor.

Opportunity zone investment

An opportunity zone is a population census tract that as an economically distressed community designated by its state’s governor and certified by the US Department of the Treasury, is eligible to receive investment money providing tax incentives to the investors. While the clear intent is to provide economic stimulus to an area of significant poverty, a seminal opportunity arises when the potential investment accomplishes that goal or more likely provides primarily the investor with the benefits of the program.

Types of investments

The various types of investments include equity stakes in businesses, real estate, and business assets located within an opportunity zone. It also includes new businesses or business expansion, as well as real estate development or rehabilitation of abandoned or vacant lots. 

Extractive vs. Additive

The concern for some is the exact nature of the asset invested in. Foundationally, the type of business must be targeted to the residents within the zone. Consequently, projects such as golf clubs, country clubs, or race tracks are specifically excluded. It becomes a bit trickier with real estate. If the project creates affordable housing for the residents while allowing the investor tax relief and wealth accumulation, it can be said to be both extractive and additive at the same time. Certain other projects, for example, one that may be more appropriately considered a “regentrification” that may not benefit residents and may not need the lure of tax incentives to motivate buyers, could be considered primarily extractive.

If your goal as an investor is to try and create a solid return on your funds with an eye towards improving the lot of your fellow citizens, Opportunity Funds may be the right vehicle for you. Primior provides innovative approaches to asset management, financial management, commercial property management, and financial services.   

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