Newly created federal opportunity zones are all the rage in real estate investment circles across the country, and Austin opportunity zones are especially attractive. With Austin’s continued expansion and job opportunities, the commercial properties within these opportunity zones are poised to become the next hot commodities for developers and investors. Yet, for all the excitement, there still exists a lot of uncertainty about what these zones offer, how they effect property values and how to best take advantage of these properties. Read on for Little City Investments’ guide to Austin opportunity zones.
What is an Opportunity Zone?
Opportunity zones were created across the country as part of the 2017 Tax Cuts and Jobs Act. They are meant to bring much needed development to low-income census tracts and offer investors significant tax cuts and delays: Up to 15 percent of capital gains invested can be tax exempt, if investors keep it in the zone for at least seven years. If they keep the money in the zone for ten years, all future capital gains from the property are tax-free. These tax advantages obviously make investment in opportunity zones quite attractive compared to stashing capital gains in stocks or mutual funds. Check out this article for more granular info on opportunity zone regulations.
The 35 opportunity zones in the Austin metro area are particularly interesting because the last census was taken 2010. Since then, Austin has infilled and gentrified at break-neck speed. So while many of these opportunity zones were in “low-income” areas in 2010, that is not necessarily the case now. And even if the area could still be considered “low-income” now, the proximity to Austin makes many of these properties attractive investments even without the tax advantage. Go here for an interactive opportunity zone map.
Where are the Best Austin Opportunity Zones?
Austin has several notable opportunity zones in desirable areas:
- Large swaths of the area North of Hwy 71 headed towards Del Valle is in an opportunity zone.
- Likewise, most of the area East of IH-35 from Hwy 71 to Slaughter Ln falls within a zone.
- In South Austin and West of IH-35, you can find opportunity zones along Stassney, Manchaca and Westgate.
- In East Austin, a large opportunity zone runs through Windsor Park from Hwy 290 to 51st Street, just North of the Mueller development.
- There is also an attractive Central East Austin opportunity zone bounded by MLK Blvd, East Cesar Chavez and Ed Bluestein Blvd.
Do you own a property in an Austin opportunity zone? At Little City Investments we provide fast cash-out refinances of commercial properties and can help you unlock your equity. Request a loan today!
How do Opportunity Zones Affect Property Value?
Because of the tax incentives attached to opportunity zones, there is no question that properties within these zones have become instantly more attractive than before. So it’s a safe bet, that all else being equal, the fact that a property falls within an opportunity zone will increase its value relative to comparable properties outside of these areas.
But at this early point, without significant market data, it is difficult to tell exactly how much opportunity zones affect property value. That said, one could extrapolate a value from the tax benefits (depending on the scope of the project and amount invested): Say you sell some stock that you would otherwise have to pay capital gains on, but instead you invest that in an opportunity zone project? That’s a tax deferral of seven years. How much is that worth? Say you keep your money in that project for ten years and all the capital gains you make on that project are not taxed at all. How much is that worth?
These are real numbers and they aren’t small. Yet because opportunity zones are novel investments, they’re still realizing their potential value. As this investment engine gets more data under its belt, we will see a steady rise in property values–especially in Austin. Likewise, as commercial development increases in these areas, we will also see a corresponding increase in residential property values in the neighborhood. So if you’re thinking about investing in an Austin opportunity zone, now is the time!
Are you interested in purchasing a property in an Austin opportunity zone? At Little City Investments we provide quick hard money loans for residential and commercial purchases. Request a loan today!