Andy Hart Develops an Opportunity Zone Checklist with ThinkAdvisor

Mar 20, 2019 | News/Media

The idea of opportunity zone investing is rapidly increasing in popularity. In fact, according to the National Council of State Housing Agencies, more than $18 million worth of investment plans in these zones has already been announced before IRS regulations have even been finalized.

Are opportunity zones actually a good investment? ThinkAdvisor recently spoke with Delegate Advisors Managing Partner Andy Hart to develop a checklist that can help investors answer this crucial question.

The first aspect to consider when analyzing an opportunity zone investment through a fund structure is the quality of the fund manager. Alignment of interest between the fund manager and its investors is highly important. According to Hart, this alignment is much more likely if the fund manager is also an investor in the fund and “has skin in the game.”

Next, it is important for potential opportunity zone investors to examine the individual deal(s). “First and foremost read through the documents,” explains Hart. “You need to be sure they comply with the regulations, not that the fund ‘will comply’ with the [regulations] when they’re finalized.”

When examining the deal(s), it is also important to determine if the fund plans to invest in real estate markets that have already experienced price inflation due to the growing excitement around opportunity zones, such as parts of New York City. For example, Hart reports that the seller of a piece of real estate located in an opportunity zone recently hiked the price by 20% simply because it was located in an opportunity zone.

Another question to ponder: does the fund/investment manager have processes and procedures in place for independent verification of compliance regulations?

When referring to the legislation that grants opportunity zone funds the ability to certify themselves by filing a form with their federal tax return, Hart warns, “Trust but verify… You don’t want to rely on the manager for self-certification.”

Lastly, Hart believes investors should be wary of excessive fees, which can be common among real estate fund managers.

Read the entire ThinkAdvisor article here.