Opportunity Zones & Funds: Aligning Public and Private Real Estate Capital

Opportunity zone funds (OZFs) can help the neighborhoods that need it most, while also providing significant tax benefits for investors.

An Opportunity Zone is a designation created by the Tax Cuts and Jobs Act of 2017 allowing for certain investments in lower income areas to have tax advantages. The purpose of this program is to put capital to work that would otherwise be locked up due to the asset holder's unwillingness to trigger a capital gains tax.

An opportunity zone fund (OZF) is an investment vehicle that provides tax benefits for private capital to help revitalize economically distressed communities. Both operating businesses and real estate are eligible for investment.

A Qualified Opportunity Zone Fund is any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property.

Many investor types may take advantage of opportunity zone funds:

  • Corporations– Also includes partnerships
  • Accredited investors– Defined as high net worth individuals, brokers, and trusts
  • Nonresident foreign investors– Only on capital gains earned in the U.S.
  • Retail investors– Through funds that have lower minimums, though options are more limited

In addition to their wide eligibility, OZFs have a number of potential benefits.


How to Build a Mountain of Wealth Outside of the Stock Market

Seems like every time I either turn on the TV or read business articles all I see is that the Market is approaching a correction.  To me, that does not mean much as I have not been one that places all my financial eggs in one basket.  I like to have multiple streams of investment income when it comes to my financial future. One of those streams that I found 5 years ago was purchasing performing and non-performing mortgages.  I can hear you saying…What the heck are you talking about? I can invest in mortgages?  Yes, you can just as hedge funds and banks do.  Of course, on a smaller scale, and you too can own real estate without all the hassles of being a landlord.

Mortgages A.K.A. notes can be bought directly from banks, credit unions, lenders, and private sellers. To buy directly from banks and credit unions you would have to have established connections. Do not fret, the third option and that is purchasing notes from private sellers works just fine for us average investors. Full disclosure, my Company TruVest sells notes to interested investors.  And I am not trying to pitch you at all.  I want to share and educate you on a different world that most investors do not know exists outside of the Stock and Bond Markets.

For this post, I just want to introduce you to real estate notes and how they can help you solidify your financial future.  Below are some basic key descriptions:

 

Real estate notes are also known in the industry as the following:

• Deed of Trust
• Land Contract
• Bond for Title
• Mortgage (Fixed or adjustable, First or second)
• Promissory Note

Typically, lenders refer to real estate notes in the following four distinct categories:

1.Residential Notes – Those obtained by borrower(s) for use as a home or investment
2.Commercial Notes – Those acquired by a business entity to have a location to perform business functions from or investment
3. Performing – The borrower(s) are actively repaying the note within the note’s term and requirements
4. Non-Performing – For whatever reason(s) the borrower(s) have ceased making the note’s required payments.

 

Mailbox Money or Risk Taker?-My favorite Question

 There are several avenues that you can explore.  The first question to ask yourself is are you looking for mailbox money or are you a bit more of a risk taker? If you are looking for mailbox money, then you need to be looking at performing notes.  If you are bit more of a risk taker and are looking for a more substantial ROI then you want to look at non-performing notes.  Each of these investments can return double-digit returns in as little as 6 months. My last statement is solely based upon my experience investing in real estate notes.  And I will share some of my deals in my upcoming posts.  I am going to leave you here for this post and next week I will be sharing more in-depth on performing notes and a few horror stories of mine from my note investing journey.

 

About the Author:

Ryan is an Executive Level Manager with over 20 years of progressive management experience in all aspects of; finance, compliance, divisional & product management, operations, advanced technology development, and real estate related investment opportunities. TruVest, infuses cutting-edge technology to identify non-performing assets that will generate multiple streams of revenue. Utilizing proven models and processes, TruVest consistently turns non-performing assets into performing, resulting in consistent solid returns.


What the Heck is Mortgage “Note” Investing? The Start of a Journey

Have you ever heard of people talking about note investing? Probably not! It is not a topic that you are discussing over coffee or at a social event.  Would you be surprised to know that note investing has been around since the 1950’s.  When I first heard about note investing 4 years ago I had no clue what it was and I was skeptical just like you are.  Since note investing is not part of the mainstream investing conversation, people do not believe or understand how they can invest in notes passively.  What is a note? Instead of giving you some crazy definition from Investopedia I wanted to share my definition with you: Notes are financial instruments that are used to secure loans against real property.  These instruments can be used on just about any type of real estate.  Additionally, notes play a critical role in the housing market in the form of land contracts, owner financing, trust deeds.  These forms of mortgages “notes”, are utilized for homeowners that do not qualify for financing from traditional brick and mortar banks.

Now we got the boring stuff out of the way let’s start talking turkey!  We all remember the last recession and how bad the housing market was hit.  Housing prices in some markets dropped 30% in value, and foreclosure rates were in the double-digits.  The American Economy was a disaster and there was no relief in sight.  Just like you, I do not want to go through another time like that again without being prepared.  This is where note investing comes into play for all of us. In 2016, banks/lenders sold $116B worth of non-performing notes (1st trust of deeds on Single Family Residences).  This number does not include purchases by hedge funds like Black Stone, Fortress, and GCM Grosvenor to name a few. These hedge funds are buying directly from Freddie and Fannie, and are paying between 20%-40% of the Current Market Value of each property.  When I first learned about all this I could not believe it!  I did my homework on the offerings, and I wanted to find out how I could buy directly from banks/lenders.  This is where I will leave you on this posting and on my next posting we will talk more about the journey and how banks/lenders operate in this space. Let’s work together to bring Wall Street to Main Street!