Skip to main content

WHO IS INVESTING INTO OPPORTUNITY ZONES

In my last two blogs, I went through why family offices are not investing in opportunity zones…………….at least to the extent that everyone thought they would be.   So who are the ones who are investing in these real estate opportunities?  That is the institutions and the high net worth individuals.   But I see a problem coming down the road with these high net worth investors.    I don’t think they know what is coming down the pike in the next seven years.  Let me give you an example.   So I have $500K in capital gains that I invest.  Well, in year 5, 10% of my capital gains are forgiven.  In another two years another 5%.  So in total, 15% is forgiven on the $500K, which is a total of 75K.   So now I am left with a tax bill of $425K.  So where is that money going to come from for them to pay the taxes????  Remember these are high net worth investors, not family office type capital.   Now some sponsors say “well we will refinance and they will be able to use that money”   Well let's say that doesn’t happen…….now what???   I suspect that many of these investors, and I think a majority of them will not have the money to pay this tax bill.  Then what?   Well, that is where I see them coming after the sponsors because for sure there will be lawyers lining up to file class-action lawsuits saying “they didn’t understand” (which personally is a whole another topic that I feel strongly about.), but this will happen.  I don’t think the sponsors see it coming either but when there was a downturn which was coming after the sponsors?   The retail clients, high net worth clients, not the family offices, and the number of lawsuits were considerable.   You heard it here; first, there will be issues when it comes time to pay the taxes by high net worth investors.
Labels:

Comments

Post a Comment

Popular posts from this blog

Embedded in CNBC’s Real Estate “Recovery Watch” data center is evidence that the US real estate cycle is in full swing

Embedded in CNBC’s Real Estate “Recovery Watch” data center is evidence that the US real estate cycle is in full swing.  You can access it  here . It shows that of the 141 main cities in the contiguous United States, only 5 saw price falls in the last12 months (and those prices fell by 1 per cent in those 5 cities). Expect general rise in prices to continue for a while. Akhil Patel, of US Family Real Estate, said the following: “It’s ironic that CNBC refers to its graphics as a “recovery” watch. The US real estate market recovered a long time ago. The data shows that the current real estate cycle is now in full swing. Expect to see continued house price appreciation across the United States as well as rising demand for housing, increase in construction and mortgages. The real estate cycle plays out over 18-20 years historically, and there is much further to go.” You can read more about the cycle by downloading our White Paper.
Post a Comment
Read more

Harvard's Endowment commits to a target investment range into real estate between 10% to 17% for 2016

Years ago, before the downturn I was paying very close attention to the investing allocation of my Alma Maters Endowments Investing Strategy HMC (Harvard Management Company), especially in the area of real estate.  I believe that not only was Harvard a great place to understand the importance of investment allocation strategies before the downturn but even more so since the downturn. In fact, investors who are looking to enhance the performance of their investment portfolios probably won’t find a better investment model than the one used by the $37.6 billion endowment for Harvard University. The entity in charge of managing the endowment, Harvard Management Company (HMC), has accrued an impressive investment track record across its 41-year history. As of fiscal year 2015, the endowment had produced an average annual return of 12.2% – 290 basis points higher than the average 9.3% return of a typical U.S. 60/40 stock and bond portfolio. The methodology behind HMC’s success i...
1 comment
Read more

Are Attending Family Office Conferences Worth It?

Today I had the opportunity to attend the Wilson Single Family Office in NYC (which was a great conference).  Throughout the day I would take the time to meet others that had attended, and when I approached one of the attendees I asked where he was from and the reason for him attending.  His response was that he was there looking into the Family Office space as a possible section of the market to raise capital from.  It was then that I started to explain to him the nature of Family Office Conferences and what you will find in the Family Office space. Is the Family Office space a place to raise capital for your venture, project or opportunity?  Yes, however Family Offices do not move quickly and heavily rely on relationships.   They want to know you are here to stay and not just a "one and done participant"  so when they see you for the second or third time it makes an impression. DJ Van Keuren on the Panel of Real Estate Investing at the ...
Post a Comment
Read more