Last week we got great advice from Mike Tyson and now this week we are getting advice from Eminem.
What is the world coming to?
Well Eminem, was wise beyond his years when in the early 2000's he starred in a movie called 8 Mile and wrote one of his most famous songs, "Lose Yourself."
The first line can sum up the song and movie.
"If you had one shot, or one opportunity
To seize everything you ever wanted
Would you capture it or just let it slip?"
Eminem emphasized the importance of taking advantage of opportunities.
And since this is a real estate-focused newsletter, we can only assume he was talking about opportunity zones.
For those that don't know what opportunity zones are, they are designated geographic areas in the United States that provide tax incentives for investment in real estate and other assets.
The program was created as part of the Tax Cuts and Jobs Act of 2017 and is designed to encourage long-term investment and economic growth in underserved communities.
Some of the benefits of investing in Opportunity Zones in real estate include:
- Tax benefits: Investors can defer paying taxes on capital gains by investing those gains in an Opportunity Zone fund. If the investment is held for at least 5 years, the investor can reduce their tax liability by up to 10% of the original capital gains. If the investment is held for at least 7 years, the investor can reduce their tax liability by up to 15% of the original capital gains. And if the investment is held for at least 10 years, any additional gains earned on the investment are tax-free.
- Potential for higher returns: Opportunity Zones are often located in economically distressed areas that have been overlooked by investors in the past. As a result, real estate prices in these areas may be lower, providing an opportunity for investors to acquire properties at a discount. In addition, the tax benefits associated with Opportunity Zones can help to boost returns on investment.
- Positive impact on communities: By investing in Opportunity Zones, investors can help to stimulate economic growth and job creation in underserved areas. This can have a positive impact on the local community and help to address issues such as poverty and unemployment.
- Diversification: Investing in Opportunity Zones can provide investors with a way to diversify their portfolios and potentially reduce risk. By investing in real estate in multiple geographic areas, investors can spread their risk across different markets and potentially mitigate the impact of any downturns in a single market.
- Socially responsible investing: Investing in Opportunity Zones can be a way for investors to support socially responsible investing. By investing in economically distressed areas, investors can help to address social and economic inequalities and promote social justice.
Give credit where credit is due.
Eminem was foreshadowing the existence of opportunity zones roughly 15 years before they came into existence.
And now opportunity zones are investment opportunities that the majority of people would rather "capture" vs "just let it slip."
A recent study released by the Economic Innovation Group shared the following key points:
- Evidence suggests that Opportunity Zones have already achieved a combination of expansive geographic reach, large-scale private investment, and significant economic effects that is unique in the history of U.S. place-based policy.
- OZ investment reached approximately 3,800 communities from mid-2018 through 2020, representing nearly half (48 percent) of the total number of designated OZ communities nationwide. For comparison, it took 18 years for New Markets Tax Credit (NMTC) investments to reach an equivalent number of communities.
- OZ investment is going to communities that are substantially more economically distressed than the rest of the country. Ranked from lowest to highest levels of need, they average in the 87th percentile for poverty, 81st for median household income, and 80th for unemployment.?
- Total OZ equity investment was at least $48 billion by the end of 2020. This capital was raised from roughly 21,000 individual and 4,000 corporate OZ investors and deployed into 7,800 Qualified Opportunity Funds.
- OZ designation caused a “large and immediate” increase in new commercial and residential development activity such that the likelihood of investment in a given month jumped by over 20 percent in designated tracts across 47 studied cities.?
- Rather than crowding out local activity, OZ designations carried positive economic spillovers into neighboring communities and boosted development at a city-wide scale.?
- In addition to boosting the supply of housing, OZ designations improved local home values by 3.4 percent from 2017 to 2020 with no observed increase in rents.
Combined, these findings signal that Opportunity Zones are shaping up to be a consequential policy that holds important lessons for the future of place-based policy interventions.
An Opportunity Zone is a win-win-win situation.
Investors get a great return, the local government improves the value of their economy, and residents get a permanent place to call home.
So the question goes to you the reader...
If you had one shot, one opportunity to invest in an opportunity zone deal would you capture it, or let it slip?
