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

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

"Family Offices NEED to be aware of the impact Blockchain and Cryptocurrencies will have on Real Estate Investing" Here's Why:

·         Blockchain has the potential to revolutionize how the real estate sector operates. ·         It will lower transaction costs  ·         It will provide family office investors easier access to international listings ·         Because of cryptocurrencies there will be no need to deal with different banking systems ·         It will allow the process of purchasing or selling a piece of real estate to be more efficient and accurate ·         Its already happening HOWEVER FAMILY OFFICES SHOULD BE AWARE THAT ·         Some cryptocurrencies have gone under ·         There has been fraud associated with a few them ·     ...
Post a Comment
Read more

6 Things Family-Owned Real Estate Firms Should Know About Succession Planning

For the  family-run firms  in the real estate industry , a crucial concern centers around ensuring the longevity of the business they’ve spent years building and the assets they may have accrued. It usually means  the process  of prepping children to take over the business itself, as well as any assets in the firm’s portfolio.  NREI  consulted with attorneys specializing in succession planning for tips that family-run real estate businesses may want to keep in mind. About succession planning Among the chief goals of succession planning is providing continuity of management, in addition to minimizing the tax costs of transferring property interests to new generations, according to Bruce W. Tigani, attorney and chair of the tax, estates and business practice group at Morris James, a law firm based in Wilmington, Del. “Succession planning ensures the business has the capability of continuing profitability in case something happens to the owner or i...
Post a Comment
Read more