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Episode #7: Opportunity Zone Round Table Discussion

Opportunity zones are an ongoing area of interest and discussion among real estate investors. At Millionacres we receive numerous questions about what an opportunity zone is, how to find and take advantage of opportunity zones and other factors interested investors should consider.

In this episode, Millionacres Editor, Deidre Woollard moderates a round table discussion about opportunity zones with Millionacres contributors, Matt Frankel, Liz Brumer-Smith and Kevin Vanderboss.


Deidre Woollard: Ever since Opportunity Zones first came out in 2017, we've been tracking the legislation, the ways that it's grown and changed, and perhaps most importantly, how people are taking advantage of the tax breaks offered by this program. At Millionacres, we get dozens of questions about what an Opportunity Zone is, what makes an Opportunity Zone an Opportunity Zone, and why it matters. [MUSIC] If you've heard about this topic online, in other circles, sort of wondered what it's all about, we're going to break it down for you and discuss what we love.

Deidre Woollard: [MUSIC] You are listening to the Millionacres podcast. Our mission at Millionacres is to educate and empower investors to make great decisions and achieve real estate investing success. We provide regular content and perspective for everyone from those just starting out to seasoned pros with decades of experience. At Millionacres, we work every day to help demystify real estate investing and build real wealth.

Deidre Woollard: [MUSIC] Hello, I'm Deidre Woollard and this is a Millionacres podcast, and today we're going to talk about all-things Opportunity Zones. There are currently over 8,700 of these neighborhoods that are all around the United States, and it's really a program with wide-reaching implications for a large variety of investors. I wanted to bring together a super team of billionacres contributors. This is a panel of real estate writers that you've probably seen on the site. They are going to help me break down some of the questions that we've heard and get some guidance and really understand what this category is all about. At our table today we have three amazing Millionacres contributors. Liz Brumer Smith, Matt Frankel, and Kevin Vanderboss. I'm excited to have you guys here with me.

Matt Frankel: Great to be here.

Liz Brumer-Smith: Thanks for having us.

Kevin Vandenboss: Thank you.

Deidre Woollard: Excellent. Matt, I'm going to start with you. You are definitely one of our most prolific writers on Millionacres. You've done a lot of the ask Millionacres questions, which I really appreciate because it's a chance for our readers to send in questions and get them answered. You've probably heard this a lot. Let's just start with the basics. What is an Opportunity Zone?

Matt Frankel: First of all, thank you for calling me prolific. I like that word. But I do think on our site, Liz is probably the most prolific when it comes to Opportunity Zone, so we know that. An Opportunity Zone, you gave a quick intro. These were formed in 2017 as part of the Tax Cuts and Jobs Act, a big tax reform plan that's most known for the lower tax brackets, the expanded child tax credit, things like that. This came out of that same legislation. An Opportunity Zone, the point is twofold. One, it's a way to revitalize our lower-income neighborhoods in the US as you mentioned, there are about 8,700 of them that have been identified. They're defined as places that have either 80 percent or less of the surrounding areas median income or a poverty rate of 20 percent or more. Like I said, there are 8,700 of these, so they're not rare, they're not hard to find. The other reason they created Opportunity Zones is to allow investors to save money on taxes. We'll get into the actual tax breaks in a second. But this incentivizes investors who have large capital gains and don't necessarily want to pay taxes on them, because who does, to invest in the communities that really needed to be invested in. Like I said, I don't want to get too many specifics on the tax breaks just yet. We're going to do that in just a second. But that's the overall idea of what an Opportunity Zone is. It's a way to invest in our lower-income communities while saving a buck at the same time.

Deidre Woollard: Thanks, Matt, that's a great way to start. I think another thing that people are a little bit confused about is, who they are for. A lot of people think maybe you need to be a millionaire to take advantage of it. One of the questions we've gotten is, should I open an Opportunity Zone? should I invest in one? What is that like? Kevin, I was wondering if you could explain a little bit about how it's used and one of the things I think people are confused about is the capital gains aspect of it.

Kevin Vandenboss: Yeah, absolutely. There is two ways to go about essentially investing in the Opportunity Zones, whether it's starting your own firm and do the project or invest more passively. I guess the route anybody goes with would depend on how much capital gains they really have to try to defer and what role they want to play in it. To invest in an existing fund, the major advantage there, like Matt was talking, is the deferring the capital gains, which opposed to other types of real estate investments when it comes to the deferment, they can come from anything. It doesn't necessarily have to be like a 1031 where you sell a property and you wanted to defer those gains, it could be from anything else such as stocks and whatnot. The other benefit, I guess to either side though, besides those tax benefits, most leave the developer, the investor side, bringing the fund together, doing the project, is from what I've seen, a lot easier to get the local community, the city, wherever municipalities you have to work with behind it because it's a benefit to the community obviously. That's very helpful in getting projects done as anybody who's been involved with any sort of development knows. Municipalities can be one of your biggest hurdles in getting investments as well. You get a lot more publicity doing some of these Opportunity Zone developments. Other people in the community want to help revitalize it, other people have a stake in it as well, not just as far as the profits go from the deal itself, but local community, businesses nearby, other real estate investors that hold properties around there. Anything that can be done to help their neighborhood is a benefit for everyone. From my experience anyway, collecting investments, raising investments has been a lot easier when it comes to the Opportunity Zones.

Deidre Woollard: Well, I think you make a really interesting point there about the publicity because that's certainly one of the things that, as someone who watches the market, I've seen every time there's an Opportunity Zone Fund or there is an Opportunity Zone Project in a neighborhood, you get the local media involved. People want to know more about it. People are really interested in what these projects mean for the neighborhood. You're right that there also is that, that government involvement. Partly because the Opportunity Zones, I believe were originally chosen by the states themselves, so they have that investment as well. Liz, I wanted to switch to you because you wrote our Opportunity Zone hub on Millionacres and it's definitely one of the most comprehensive guides to Opportunity Zones that I think is out there, of course, I'm biased. But if you want to find an Opportunity Zone in your area, what's the best way to do that if you are an investor who wants to join in on a project?

Liz Brumer-Smith: I definitely think the easiest way to participate in Opportunity Zone Funds is going to be the more passive route. Where you take your qualified capital gains, rolling it into a qualified Opportunity Zone. Those are already designated approved Opportunity Zones that have established plans in a designated zone. There's zones all across the United States and the fund does not necessarily have to have the base or their operations in the area they are investing in. Really the only requirement is that 50 percent of the investment is going into a dedicated Opportunity Zone area. That can be in a number of different ways. You'll find there is a wide variety of different funds to participate in, in a variety of sectors. What's happened this year definitely has thrown a curveball, so if you're looking for an Opportunity Zone Fund to invest in, I would suggest going to the EIG, which is the Economic Innovation Group. They pretty much are the hub for all-things Opportunity Zones. They are really in charge of managing everything that's happening with Opportunity Zones. They have updates on what's going on with the Opportunity Zones. They are tracking its progress, success, potentially its failures. They actually have maps that you can see where the funds are located, where fund activity is happening. They also share insights onto who are some of the more successful markets or funds in this space. Definitely, that's a great resource for trying to find fund to participate in. You can also narrow it down by sector too, with our map, which I think is really helpful, especially with everything going on. You might be interested in a particular area, but if the only investment in that area is potentially struggling in the current marketplace, then you might want to look at a different investment elsewhere.

Deidre Woollard: Well, that's really interesting too because one of the things that we've seen is construction paused when the outbreak began and now has ramped up again. But there is that concern that some areas are coming back slower than others. You want to invest in an Opportunity Zone, a hotel project right now, possibly not, but a housing project or an industrial warehouse project might be more appealing. Another aspect of these Opportunity Zones too is the jobs that they create and that's also a consideration. I wanted to go back to something that Kevin mentioned, which was, he mentioned briefly 1031 exchanges. This is for either Matt or Kevin, whoever wants to answer it. I'm wondering if either one of you could tell me a little bit about, as an investor, which path, Opportunity Zone, or 1031 exchange, is right for any investor and how do you know?

Matt Frankel: Sure. There's two basic considerations when you're trying to decide between a 1031 exchange with capital gains and an Opportunity Zone Fund. The first one is that a 1031 exchange is just for real estate. If your capital gains come from stock investment, for example, you can't use 1031 exchange. A like-kind exchange that wouldn't be a like-kind investment of stock to a real estate investment. That's consideration number one. Obviously, if you're sitting on gains from anything other than real estate, a 1031 exchange is out. The other consideration, this is a big benefit of Opportunity Zone Funds over 1031 is that Opportunity Zones allow you to actually eliminate some of your capital gains, whereas 1031 exchanges just allow you to defer them.

Matt Frankel: Liz could probably correct me on this if I'm wrong, but if your opportunities under investment is held for five years, you get to exclude 10 percent of your deferred capital gains completely, and after seven years, I believe it jumps up to 15 percent. She is nodding, so that's correct. That is the big benefit instead of just being able to kind of kick the can down the road, if you will. There's some of that where there are no opportunities on, but there is some element of eliminating taxes entirely. A lot of people, not necessarily in 2020, but a lot of people over the past few years, with the record-long bull market and stocks, have been sitting on certain pretty large capital gains. A big reason they haven't wanted to sell stock positions that have doubled or tripled, is because they don't want to get hit with that giant capital gain tax bill. When we started our mobile service about a year ago, this was one of the biggest questions we got was from investors who were sitting on mountains of capital gains and didn't really want to pay a giant tax bill, and who can blame them. 1031 exchanges are not always a great option, especially if you're not comfortable investing in individual properties. 1031 exchange, it's stuff to do with a fund, you generally need to actually buy a physical property, I can tell you firsthand, that's not for everybody.

Deidre Woollard: Excellent. Thank you. I wanted to get a little bit more into how this works, the step-up basis versus the capital gains that are deferred. Liz, I was wondering if you could explain exactly how that works.

Liz Brumer-Smith: Sure. Matt did a great job explaining the deferment of taxes. If you have your investment, the qualified capital gains rolled into the Opportunity Zone Fund, and it's held for a minimum of five years, it reduces your cost basis. What that means is you actually lower the amount of taxes that you have to pay. We have great examples for numbers. I don't want to throw numbers out here and misquote because it definitely does take precise calculations, but it can significantly reduce the amount of capital gains that you are paying on. Now as you go beyond five years, like he said, it goes up to 15 percent. Your cost basis is reduced by 15 percent then you are taxed your capital gains on that amount. Now if you go even longer, it kind of steps up from there. If you hold the investment in the fund for a minimum of 10 years, you still get your 15 percent step-up basis, reducing your cost or the capital gains tax. But any capital gains that you made on the investment from the Opportunity Zone Fund, specifically, is you don't have to pay capital gains tax on that at all. That's an incredible benefit. Obviously, the longer that you have your investment in an Opportunity Zone Fund, the better it is for you, the more bang for your buck per say that you're going to get by reducing your taxes, which is an incredible opportunity through these funds. That's really how it works. It sounds complicated, but when you break it down, it just reduces your tax burden and potentially defers or reduces taxes altogether.

Deidre Woollard: I think that something that is exciting too, is that the idea that you could invest and basically any of the gains you make in the project itself, you don't have to pay taxes. That's kind of amazing. I think one of the things that makes that really important then, is choosing that right project is because it's not only that you get that tax deduction and you get to defer. It's also the benefit of choosing a project that could make you a significant return in the long run. In terms of how much in capital gains you have to invest, Kevin, I want to ask you, how much do you think a person should start thinking about in capital gains to make this type of investment worthwhile? Given that it's such a long hold.

Kevin Vandenboss: I don't think somebody necessarily has to have a lot of capital gains before it could be beneficial, if you're already looking at real estate fund to invest in. I mean, the Opportunity Fund has its tax advantages, but it's also real estate investment as well. It has that benefits on its own. I would say if you're already looking at real estate fund to invest in, if you already want to park some money, then whatever you have, capital gains, that's just a bonus. If the whole point is to defer the capital gains then it has to be, I think a significant amount. I think most people that are getting into this for this purpose, have to be looking at six figures or more to justify parking your money that long just for the sake of saving on your capital gains taxes.

Liz Brumer-Smith: I'd also just like to add that if an investor is truly trying to reduce their tax burden, six figures is great. The more you can invest into a fund, the better. But a lot of the funds are going to designate their minimum requirement. Some of them won't take less than 100 thousand or more at a time.

Kevin Vandenboss: That's the point.

Liz Brumer-Smith: A lot of big players are getting into this because of that reason. But don't discount that if you're a smaller investor, even if you have $25 thousand, $50 thousand to invest. I mean, if you're saving anywhere from 30-50 percent of your tax basis because of the step-up basis, I think that's a worthwhile opportunity, but the fund itself will ultimately tell you if you can put to pay or not.

Kevin Vandenboss: I do want to step back real quick, if you don't mind. I want to steal this opportunity to, maybe ask Liz something that I was unsure about before. I noticed, was you said about the fund, 50 percent of it needs to be in that Opportunity Zone property. I know there's some other rules about there's 70 percent rule, a 90 percent rule, and my involvement has always been a little bit less on the technical. I guess piece of it and more just in the actual development. So, if you know that, I would look to maybe finally give some clarification on what those differences in those roles are.

Liz Brumer-Smith: Do the differences change frequently? I guess, I wouldn't say the differences. The clarification that is provided on these roles change. When Opportunity Zones were first rolled out, there wasn't a lot of guidance. It was a lot of gray area still around them, and then slowly as things progressed they started to clarify more and more. Initially, they said that at least a minimum of 50 percent of activity, which again, that's a very broad term there, that could include, not necessarily where your headquarters are based, but a number of employees or where the products are being sourced from. It just had to have at least a minimum of 50 percent of core activity coming from that area. I believe there has been further guidance clarifying that more. But I do know a lot of those Opportunity Zone Funds that started in the beginning, were really following that rule as their guidance. You'll notice if you do go to the EIG map, you'll see there's funds that are investing in, let's say a lot of rural areas. This is rather common, especially in the field for renewable energies, which is a popular sector for Opportunity Zone Funds. You'll find that their base for where their headquarters are, is not where an Opportunity Zone Fund is located. But because all of their activity is in those areas, it's still qualifies for that. It depends on the rules. You could also be and technically investing in a company or a corporation that's in an Opportunity Zone Fund, rather than you being investing in project like real estate, like a hotel, for example. There's all different ways to participate. The funds are very diverse in their participation in those markets because of that. Did that help clarify more?

Kevin Vandenboss: It did. Yeah. Basically, I just keep leaving that stuff up to the accountants and everything on the team to make sure that money is going where it needs to be.

Liz Brumer-Smith: Yeah, that's always a good idea. Let the experts in that field take that over, make sure you're following.

Liz Brumer-Smith: Crossing your T's, dotting your I's, an accountant or attorney is definitely the one to do that for you.

Deidre Woollard: Well, I think that's an important point too, is that there are a bunch of different tax forms that you have to fill out if you want to participate in Opportunity Zones, and also if you want to designate those capital gains in that. That is definitely one reason that you do want to let a CPA or a tax professional guide you in that because they have to keep track of all of the regulations. Liz, you made a really good point, which is when these first came out, there was so much excitement and there was so little guidance. Then gradually over time, there were a couple of different major releases of rules. I know there were a couple of periods of time where it was open for feedback and questions, and then they released another batch of rules and then have gone through that process. Now it seems like they're pretty much finalized. Nothing in government is ever final but it seems like right now, they're pretty much finalized at least for the time being. Is that correct?

Liz Brumer-Smith: Kind of, there's always different guidance coming out. Like right now, they actually recently allowed banks to start participating in Opportunity Zone Funds. Prior to this summer, that wasn't allowed. They also just amended the timeline for you to roll qualified capital gains into an Opportunity Zone Fund for this year. I think, especially with what's going on in the current climate in our economy, a lot of modifications may come from this. Right now, there is a deadline for 2026 for Opportunity Zone Funds, for the benefits that are associated with them. They expire in 2026, and there's potential talk depending on what happens in the next election, who we have as our policy leaders. Things could change, they could extend those dates, they could cut them short. We never really know, but right now it seems rather firm.

Deidre Woollard: Excellent. Thank you. I've heard that they probably won't cut them short, but what we may see is extensions, and I think one of the things is that we're seeing the Opportunity Zone impact being very carefully monitored. We've talked a little bit about those 8,700 neighborhoods. That obviously is a large part of the country, and it also is a lot of different types of neighborhoods. A lot of it is urban, a lot of it is rural. One of the things I wanted to discuss with all of you is how that's starting to play out and whether or not we're seeing more activity in urban neighborhoods overall. Most of what I've seen in the research so far has been that it's been a lot of urban activity, but I feel like with COVID-19, we're starting to see more interest in suburban and rural areas, so that may extend to Opportunity Zones.

Matt Frankel: Yeah, for sure. Well, it make sense why it's been urban for the time being. When you're thinking about some of these projects, as Kevin mentioned, the average person who is investing in an Opportunity Zone has a six-figure capital gain to invest. They need to find projects that can accommodate a lot of investor capital, like a high-rise apartment building, or a hotel, or an industrial warehouse, which you're just going to find, no pun intended more opportunities to build those in urban areas. If you build a suburban apartment complex, it might not be a big enough project to accommodate all the investors who want a piece of it. That's been a consideration, but I could definitely see that branching out. I tend not to believe in the long-lasting rural effect of the COVID pandemic as much as most people do, so I'm curious to see what the others on the panel do.

Kevin Vandenboss: I'm not going to comment.

Matt Frankel: That's finally the safe move.

Kevin Vandenboss: Politics, COVID, I'm just going to stay out of it. I have seen some pretty amazing turnarounds in some neighborhoods and cities with the Opportunity Zones. I live in Michigan and Detroit, an amazing example. A few years ago, there was this particular neighborhood, there was snow and just, don't walk the house. He had staying at the other end and get a Uber to get through. Then last year, we were down there, and my wife and her friend was asked for a wedding, they were giving her Airbnb and the property was in this area. "No way. You got to see the pictures, it's really nice." We went down there and it's a completely different neighborhood. People managed a ton of money on some of the real estate they held onto beforehand. Here locally where I live, there's a particular neighborhood that, as long as I've been alive, it's just been known as not a good area. All the buildings have become vacant, a lot of crime, and it's been really cool watching this over the past few years turn around. I think developers, generally, they don't want to put their money into an area like this because the value was just never going to be there. It didn't make sense, and the first one I saw go up, I ended up thinking, "why in the world would those guys stick his money here?" Since then, you can really see why a lot of these old dilapidated buildings are now beautiful apartments, they're mixed use. There's new businesses going in down there. There was this one particular corner that was tore down because things had just gotten so nasty there, now has an apartment store in there. They've got again, apartments, condos. Some of the most expensive apartments in the city actually are in this area that you couldn't have came near them before. Seeing this Opportunity Zone initiative worked all round.

Liz Brumer-Smith: I would love to speak on the rural side of things, give a different perspective. I would agree that most of the projects that we've seen are going to be in urban areas, and Matt, pointing to that perfectly. There is more technically opportunity in those areas for investments, for development. You're taking on more risk when you go to a rural area that might not have the demand or the opportunity to see their vision come through. If there's less people there, just because you are creating an opportunity or new development project, it doesn't mean people are going to go there. I do think there are a lot of rural developments that are happening, they're just a lot more on the agricultural or sustainable energy side of things. There's a lot of renewable energy projects that are a part of the Opportunity Zone Funds. There are also a lot of agricultural projects including sustainable regenerative agriculture, which I think is really cool. It's a sidestep from a lot of the large agricultural rates that you might see or stocks that you can invest in, and they're taking a different approach to gain the tax benefits available for them, but also to take a social charge, make a positive change. I definitely think there's both activity, I just think they're very different projects in those fields.

Kevin Vandenboss: I didn't really studied where some different ones are, and now I look at specific areas, say where in this area are there Opportunity Zones? I've never really thought to look out in more rural areas, but is that pretty common to see some big tracks there that have these opportunities?

Liz Brumer-Smith: I definitely think so, but they're mostly in the same sub-sectors. There's not many apartment developments or hotel projects or retail side of things outside of those urban hubs. Those types of investments I think are really concentrated, and really into about 10 to 15 core markets, on top of that. LA, Orlando, you mentioned Michigan, Detroit is a big one, Cleveland, Ohio is another big one. There's definitely just core hubs for those types of projects, but if you look outside of that, there's definitely some really creative and unique projects happening in the rural areas as well.

Kevin Vandenboss: Thanks.

Matt Frankel: A lot of rural areas, it's relatively easy for them to qualify as an Opportunity Zone because if you remember, they're not going to qualify usually based on their 20 percent poverty rate rule, but when it comes to that 80 percent of the income of surrounding areas, rural areas are generally not the highest income places. You will see a lot of opportunities on some of these rural areas. Liz hinted at a really good point a minute ago when she said, "just because you can build something in a rural area, it doesn't mean that you should." Just because something is an Opportunity Zone investment, it doesn't make it a good investment. You still need to do your due diligence. It still needs to make sense. Even if it weren't an Opportunity Zone, it should make sense. If you build a self-storage facility in the middle of New York City, you're not going to have any shortage of demand. If you build it in rural South Carolina where I live, is it going to fill up? Maybe, maybe not. That's something you need to do your due diligence on.

Liz Brumer-Smith: That is really important to see how the market has been affected from going on currently. There was a recent study done by the EIG, and they found that about 52 percent of funds stated that COVID-related challenges have created setbacks for their funds. They've been negatively affected in some way or another, and some of that is just slowdowns in construction permitting. Construction came to a halt at the start of the pandemic and has definitely paved backup pace, and I think a lot of projects are back on track now where that negative impact isn't necessarily a long-term impact. But there's definitely going to be some sectors that when they launched their fund, it was a great project, and it was a great investment opportunity that may be negatively impacted for quite a while. I take a long term look at the real estate market, and I always think everything happens in cycles and things will recover, but what might have been, hopefully 20 percent projected ROI is now five percent projected ROI. Those are just loose numbers, but that's definitely something to take into consideration, especially right now due to [inaudible 00:32:35] .

Kevin Vandenboss: I agree there. I think you get some certain buzzwords like opportunity funds, and I think some people might be a little more quick to put their money into some of these, maybe without the same due diligence. There's one issue that I've come across and understand is a particular developer, quite a few projects going on and he just gotten into the Opportunity Zone development and he just fell flat on his face. I think he just was anxious to pick an area, got a good deal, got a good price on it, and built something where, I guess, he shouldn't. People were quick to put their money into it. I think it was the fastest race he'd ever done. He is so hopeful that we're going to get it put back together, but yeah, definitely just because it's Opportunity Zone and it's a good price and everything sounds exciting isn't a guarantee that things are going to go well.

Deidre Woollard: I think that's really true, and I think that's one of the reasons that we did some research on Millionacres. We did the fastest-growing Opportunity Zones. One of the things that we did was look at some of the underlying demographics, of the underlying fundamentals and see what is driving? What is the unemployment? What other businesses are in the area? I think when you're looking at Opportunity Zones, you want to look at, of course, the individual project, what need it serves, and what the potential growth is. But you also want to look at the overall neighborhood and the overall demographics for the area. Not to go too far on the rural versus urban thing, but I believe that one of the things that we're seeing is this opening up of different areas with working from home. We're seeing some companies are letting people work from home. We're seeing this expansion of companies thinking of being perhaps a little more decentralized and less just on corporate campuses, and that may unlock some different opportunities as well.

Kevin Vandenboss: Both on the developer, somebody starting a fund and someone investing in the fund is really important to look at that. Like I said with the other one, you just put a nice building in the middle of a bad area and it's not going to work out. There has to be a master plan, the whole grand scheme there. If you're looking at it, you got a five million dollar project, started a fund, raised five million dollars to do the project, and hope for the best, that's not going to do a lot. The whole area really has to have a plan for it. I think, hopefully, a lot of people that we're starting a fund or developer realize that, somebody ready to invest into a fund really needs to look at that. I think, like you said, what else is that developer would do? Who else might be participating in that area? Because no matter how great that might look on paper, we're going to build 200 units apartment rentals. It's going to run through this much and that might look great, but without that surrounding area being redeveloped, it's all for nothing.

Deidre Woollard: I know that recently it came out that the White House announced that the 75 billion had been invested in Opportunity Zones so far. That's significant in relatively short period of time. It's less than three years. That's obviously there's been a lot of enthusiasm. Some people have said that they thought the program would be larger than that. Obviously, COVID-19 has had an impact. But I wanted to talk to all of you about what you think the future of the program will be? We talked a little bit before about it potentially being extended. One of the things I've seen people talking about is, will they create more Opportunity Zones, or will the opposite happen where they start looking at some of the zones and say, "Okay, maybe this zone isn't eligible anymore." If it's grown too much. Want to know what all of you think about what the future could hold for this program.

Matt Frankel: I'll go head and say, I think that $75 billion figure whether that grows at a faster rate or not depends on how many people have capital gains to invest. What I mean by that is, if you think over the last six months, has anybody really had capital gains? I think I know my portfolio really hasn't. I'm back to even right now but it depends. The point being if the stock market goes up by 20 percent next year, you're going to see a lot of people with capital gains they need to put to work. If real estate of the average home price in the US goes up by five or six percent next year, you're going to see a lot of investors with excess capital gains they need to put to work. It depends on how well our investments do, first of all, but it's a pretty popular program so far and for good reason. I guess it's going to depend on how it's actually helping, if it's achieving its intended objectives is really what it's going to come down to. Yeah, obviously $75 billion, people are getting some major tax breaks on this. But is it really helping these neighborhoods? I know that's a topic for another podcast but it's going to come down to all the information that we have on whether or not it's actually achieving its objectives.

Liz Brumer-Smith: I think you summed that up perfectly. I think that's a huge factor and if we'll see more activity in this or not, and I think it's just too early to see. Development projects take time. A lot of this is redevelopment or repurposing of existing buildings in blighted areas, sometimes it's developing a ground-up project and those take time. Until we can actually see and test and find data on not just profitability of the project but the ultimate success in its original objectives, I think that's going to be the biggest factor there. I also don't know that they'll expand the census tracts. I think until we get more data, I see this staying pretty firm unless we do see a large market swing that needs to incentivize more activity into more areas. Then if we do see that big turn out, I wouldn't be surprised to see them make adjustments but right now, I don't see that being very likely.

Kevin Vandenboss: I imagine that. Anyway, it hasn't been around for that long, so I don't think anytime in the near future you should see it going there. When you look at Section 179, bonus appreciation is temporary [inaudible 00:40:03] event, how long those have been extended in the state available. I don't want to get political or anything, but I know there's talk of exec or the 1031 exchange, the future that possibly being on the table, depending on the outcome of the election and if the Opportunity Zones are put on that chopping block as well, then this will be one of the only available deferral strategies left. It could really turn into a huge thing but hopefully, it doesn't become so big that they want the tax revenue back.

Deidre Woollard: I think that's a good point. I think, Liz, you're right. Because the original program was set to, there's that 2026 deadline. I feel like at that point, that becomes that natural inflection point where there's going to be enough data that everyone can go back, look at it, see what the program has done so far, and then figure out what it can do in the future. I wanted to also ask all of you what other resources you've been looking at for Opportunity Zones. Liz, you mentioned the EIG. I've looked at Novogradac has a lot of information on the funds that have come out and keeps track of how many Opportunity Zone Funds there are overall. Are there any other resources that any of you are finding really helpful?

Matt Frankel: Like I mentioned that I've seen on some of the major crowdfunding platforms, they have a lot of Opportunity Zone Funds. I like this especially for people who aren't really comfortable with evaluating real estate investments yet, because these are very highly vetted projects, especially the really reputable sites, they do their homework. That's a good source to look for, especially if you are relatively new to real estate investing.

Kevin Vandenboss: Absolutely, I agree with that. Mostly what you said as far as these projects being vetted between the crowdfunding sites and seeing what's going on in your community, depending on if you are investing in real estate locally. These new funds usually make some headlines. There's talk of them locally. It looks like your project, you can get a double benefit there, profit from the fund and then it's helping your real estate value. In between looking for some of the best opportunities out there, definitely the crowd funding sites. But definitely keep an eye on your local markets as well. It's always good to help your own community and profit from them as well.

Deidre Woollard:: I love that. I think that's actually a nice place to wrap this up. [MUSIC] Thank you all of you for your time.

Kevin Vandenboss: Thank you.

Matt Frankel: Of course. Thanks for having us.

Deidre Woollard: Thank you for tuning into the Millionacres Podcast. I hope you like today show. If you enjoy this episode, please consider subscribing to your favorite podcast provider. If you have any questions, please feel free to drop us a line at Stay well and stay invested. [MUSIC] People on this program may have an interest in the deals, offerings, or services they discuss and Millionacres or the Motley Fool may have a formal recommendation for/or against. Always consult a certified tax professional before acting on tax advice, and do not buy or sell assets based solely on what you hear. [MUSIC]