Today we are talking about Opportunity Zones. You may have heard about them. You might have even heard they are the next BIG thing in real estate investing. They represent a tax break for real estate investors as an incentive to bring economic development to underserved areas. I had a chance to speak with Jillian Sidoti and Nancy Tegeder of the law firm of Trowbridge and Sidoti out of southern California.
How to contact us
Twitter and Instagram @FlippingAmerica
Call our National Comment Line: 404-369-1018, ext 1. Leave your message or your question.
Email your questions to firstname.lastname@example.org. Please always tell us where you are from. We like to know where the show is being heard. And let us know how you found out about us if you don’t mind.
- Lunch with me every Wednesday. Baraonda
- My latest article in Forbes is out. bit.ly/findredeals.
- The FAN is here!
- Would you like to invest in the Flipping America projects across the country? Coming soon you will be able to for as little as $100. That’s right, Flipping America is partnering with Ground Floor Funding to create a crowd-funded platform where you can invest in the deals we are doing here. The fund will pay out a 8% preferred rate of return and can go as high as 16%. You can make money with me, the Flipping America Guy.
- Flipping America App is in the app store. You can listen to the show, read the show notes, and the entire catalog of shows is now available to you. It’s a free download and there are no upsells or in-app purchases. Free to download, free to listen. Go ahead and give it a try and drop me a line and let me know what you think.
- Want a quick analytical tool to tell you how strong a potential fix and flip deal is? Download the Property Grade app. You answer 10 simple questions about the property and the app instantly tells you what you can expect to make, your return on investment, your return on cash, and then the program gives the project a letter grade using the proprietary Flipping America Investment Property Grade algorithm.
Ram Realty CEO isn’t buying into Opportunity zones, says “Anyone who has [Opportunity Zone properties] for development thinks they’re sitting on gold, but if you are trying to underwrite and make sense of the project with today’s rents and costs, it’s very challenging for these areas”
Fund sponsors and their investors began buying assets in Opportunity Zones en masse this past month, their enthusiasm triggered by the U.S. Treasury‘s mid-April release of a second tranche of proposed regulations for the tax-sheltering vehicles.
U.S. Opportunity zones are incredible tax savings zone for Entrepreneurs.
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) designated Opportunity Zones in 18 States.
Top 10 opportunity zones in the US
Facts about Opportunity zones
The Opportunity zone program in New York State
Trump’s Opportunity zone rules deliver on investors’ wish list
Treasury issues second set of highly anticipated opportunity zones guidance
In a former warehouse on a dimly lit street in the South Bronx, developers sipping Puerto Rican moonshine listened as a local official urged them to capture a new U.S. tax break by rebuilding the decaying neighborhood.
The U.S. Department of the Treasury and Internal Revenue Service (IRS) approved Michigan’s application for Opportunity Zones — areas eligible for tax benefits aimed at spurring private investment, economic growth and jobs in the state’s distressed communities.
Ben Carson explains benefits of investing in ‘Opportunity Zones’ for areas facing economic challenges
Opportunity zones resource center
Opportunity zones map tool
The Real Estate Opportunity Zone Meeting
Speaker: Eric Willett
Your Questions: Send emails to email@example.com
- Carlton, Chicago, IL “I’m getting back into investing and thinking about Atlanta. What are the opportunities I should be considering there?”
- Tracy, Senoia, GA “I’m interested in reserving my ZIP code on the FAN. Is it $100 for every ZIP code?”
Comment Line calls and Questions
Call 404-369-1018, press 1 and leave your message!
Motivational Thoughts for the day
- “There is no amount of money that makes time irrelevant.”
Expected Air Date: 6/1/19
[0:17] The show that teaches you how to make money in real estate wherever you are whatever your situation there is an opportunity for you flipping America is sponsored in part by American IRA
founded by investors for investors on the web at American Ira. Com.
And by Braswell Capital Solutions commercial lending made easy on the web at Braswell Capital Solutions. Com,
and now you’re sad flipping America guy Rodger Blankenship thank you Kathy today we are talkin about.
[0:51] Trinity zones you may have heard about them.
You might have even heard that they are the next big thing in real estate investing they represent a tax break for Real Estate Investors as an incentive.
To bring Economic Development to underserved areas I had a chance to speak with Jillian sidoti and Nancy,
check order of the law firm of Trowbridge and sidoti out of Southern California and in a few minutes they’re going to answer a lot of the questions that
you may have or may not realize that you have about opportunity zones but first let’s jump right into this,
and cover the news and some information about opportunity zones.
[1:35] HR One signed into law on December 22nd 2017 created a new tool for Community Development designed to provide tax incentives to help unlock investor capital,
the fund businesses in underserved communities the law allows investors to defer up to 9 years paying tax on gains.
Those gains are invested in qualified opportunity funds that intern invest in economically distressed communities designated by the governor of each state to qualify,
the game must be invested in the qualified opportunity fund or qof
during a 180-day. That begins on the date of the sale or exchange that generated the game
the deferral is temporary the game must be recognized on the earlier of December 31st 2026 or the date of the investment in the opportunity fund is it sold
the date the opportunities fund is sold or exchanged.
[2:35] The amount of gain includible is the lesser of the amount of gain originally deferred or the excess of the fair market value of the investment over the taxpayers
basis in the investment okay that’s the official definition of
an opportunity Zone and what this basically is it allows you to defer paying taxes on your capital gains if you reinvest that money in one of these areas is this a good idea
the next question is is this a tax break for the rich well.
I just love that these tax breaks are always called tax breaks for the rich folks I just want you to think about this for a minute okay if you’re poor.
In this country you don’t pay taxes.
[3:22] And if you’re not poor then maybe you’re considered rich in fact in this country if you make enough money to pay taxes then you are among the 2% wealthiest people in the entire world.
[3:38] Are you talking about rich relative to the rest of the world are you talking about rich relative to the rest of the United States well if you talk about rich the relatives of the rest of the world every single tax break that we offer is a tax break on the rich but every text,
that is offered by the government or put out there is a tax break for people who pay taxes.
[3:58] Now let’s see if this is an unfair advantage to the rich then let’s just think about this mental exercise here for a moment.
Let’s say you’re rich by whatever definition you want to use you decide to expose some of your wealth.
To an investment in an opportunity Zone.
Here’s something that the opportunity zones are they the people talking about opportunity zones are careful not to necessarily say the opportunity areas that are designated as opportunity zones are generally.
Distressed areas risky areas in real estate investor lingo we call him warzones
they may be Rife with crime and gang activity and you may purchase a property there that gets repeatedly broken into by young people old people gangs copper Hunters whatever
you’re opening yourself up to a lot of risks and it may not be,
I’m the greatest investment there is out there all this in exchange for the possibility of saving a few dollars on,
your capital gains so what I’m trying to highlight here is these people are putting their own money at risk.
[5:15] And when you go to put your own money at risk one of the things that you do is try to.
[5:24] Contain or mitigate that risk how do you do this well,
you look for better areas you look for safer areas you look for better schools you look for a lot of things that indicate that the long-term Community hear it. Long-term future of this community is bright.
What would motivate an investor to invest in a blighted area.
[5:51] Nothing that’s why they remain blighted that’s why,
tax incentives are offered because those incentives could possibly outweigh the enormous risk you take.
[6:07] They’re for people who invest in these areas deserve a text break they have no other reason to come to these areas.
[6:14] I hope you can understand that I don’t know if I could make it more clear.
[6:19] Is this giving some sort of an unfair advantage to wealthy people know what it’s doing is giving people with money and decisions to make about where to put that money gives them an incentive to put that money where it could do a lot of good.
And theoretically help some people out.
[6:37] Tell the interesting thing is the governors of each state are responsible for identifying the areas to be designated as opportunity zones
opportunity zones must be certified by the US Department of the treasury and are required to hold at least 90% of their Assets in qualified opportunity Zone businesses and or business property,
if an opportunity fund fails to meet the 90% requirement then the fund must pay a penalty for each month it fails to meet the investment requirement now the.
[7:04] As I said these are selected by the governor and here’s an interesting little side note.
Just because it’s low income doesn’t necessarily mean it’s high crime and this is where.
You Savvy listeners ought to be paying attention it’s possible that an area could be low income but also still be relatively safe to put your money
and so this is an opportunity for you to defer taxes on your capital gains for you know up to the next nine or 10 years so you want to be paid paying attention this no not everyone
believes that opportunity zones are great thing if you look around you’ll find some people painting the idea because.
And actually there are some links to some different stories in the notes to the do today show but you’ll be you’ll see people painting it because,
of the areas where you have to buy the properties they just don’t see the risks as being worth it definitely,
your tax savings should be.
Almost a secondary consideration I know you wouldn’t be looking there if it wasn’t the first consideration but
the first and foremost I would suggest that you find a deal that works at the deal that you feel relatively comfortable about and the tax savings.
[8:20] Of course you’re just a bonus now we’re talking here about long-term buy-and-hold not Fix and Flip.
Then we’re going to take a break and after we get back I’m going to talk to Julian and Nancy and then we’ll wrap up the show about with more information about opportunity zones here we go.
[8:47] You never know what’s around the corner
but you can be confident that you’ll be ready for whatever comes your way Legal Shield and ID shield look out for you so you can get back to living life
LegalShield is a prepaid legal service for individuals
businesses for a low monthly rate you get comprehensive legal coverage entire law firm of professionals they can help you with a variety of issues and provide advice whenever you need it.
Protect it for a number of legal issues and assistance with common legal needs just go to Rodger b helps. Com right now to sign up that’s Rodger V.
Dot-com Legal Shield protection for every part of life.
[9:34] Many people are just now finding out that not only can leave with stocks mutual funds and gold in their Ira their Ira scan also invested up vast amount of alternative assets,
like real estate mortgages tax liens Private Stock and the list goes on.
We are at the plant Benefit services in American Estate and Trust Company if the nation’s industry leader in self-directed IRA has been helping people self-directed Ira as per yearly 35 years.
Go to full control irs.com for more information and to download the free guide that’s full control irs.com.
[10:16] Nancy and Gillian welcome to the show thank you for having us so glad that you took time from your schedule to join us and okay I got to ask you how’s the weather out there in Southern California is raining.
So it’s super nice today this before but I was
I did a speaking engagement Southern California several years ago and I took a flight out of Chattanooga for some reason they still have they set it up and I flew most of the night and I got there like 4 in the morning and I got up at 6 in the morning I was at a hotel in Riverside,
and I was so groggy when I got in I really didn’t know where I was and I stepped out onto the.
Balcony of the hotel that morning before my event I stretched out some in this is the greatest weather on Earth this is beautiful
this is fantastic and then my driver pick me up to take me to the event where I was speaking and I thought to myself well about a billion other people seem to agree with me this is the greatest weather on Earth.
God’s right hand side the city of Riverside.
Okay okay very cool yeah and I think Riverside County has better weather than San Diego despite with San Diego hotel you really okay
okay well yeah we make with what’s the temperature out there right now.
[11:41] Flu 1880s okay well you know in San Juan it’s 71 right now.
and in the mountains of Highlands North Carolina elevation 4000 ft it’s 72 you know I’ve got my little all these places on my phone I track the weather but we’re getting off the subject to talk about opportunity zones all right.
This is a show about opportunity zones and we’ve got lots of questions about him so we need to Dive Right In because the clock is ticking.
Now you guys that you’re a law firm and you do some work with opportunity zones but now let me play like someone is completely,
uninitiated and start from the beginning I don’t care which one of you talks just bring you talk say your name so the list doesn’t listen to can’t see you and then tell us okay first of all what is an opportunity Zone.
[12:33] So this is Nancy by the setup they designate not time so I can pass in the jobs at.
This option to create opportunity zones throughout the United States so the governor of each state went and found areas that were economically distressed.
[12:53] And they got these areas certified to be opportunity Zone and the idea of setting these up is,
I will get into this more I’m sure but if they want they want to stimulate investments into these areas and,
instead of distress there usually lower-income and they want to help the economies in this area and so that’s how this whole opportunity something came about so there in all 50 states they’re already all set,
the entire country of Puerto Rico is also considered an opportunity Zone what stimulates investment.
Yes so I question what happens if if you have capital gains,
and you invest into these opportunity Zone area as you get some deferrals and some other incentives so
I’ll just jump into the specifics of what happened so if you are an investor you have capital gain and you put it into this fund and you leave it in an opportunity Zone finder this area of distress.
For up to 5 years then you actually get to reduce the amount of taxes you will pay on that capital gain.
[14:09] So I sold the building that I own an interest in and,
I’ve got this capital gain do I have to pay capital gains taxes on it or can I avoid that am I avoiding paying the capital gains tax by dumping it into an opportunity Zone.
You are avoiding a portion of it and furry song so let’s let’s just do an example essay you get a hundred thousand in capital gains.
[14:33] Pay your tax right now or you can find an opportunity Zone to invest in and you get to defer paying any tax on that hundred thousand dollars.
And you have that deferral last until 2026.
At that point then you would have to pay the taxes on whatever that capital gains Mount is however.
There are some predictions that are available as well to reduce amount of tax if you would pay on the call at the marshmallow test,
for five years,
then at that if you pull out about 5 your point without then at that point you would only have to pay capital gains on 90000 get a 10% reduction.
On what you take if you want to keep it in a little bit longer to the 7-year Mart.
Let at that point you actually would pay capital gains tax on only $85,000 so you get a 15% reduction.
[15:35] So those are the first two incentives the deferral of paying anything till 2026.
And then the second is this up to 15% reduction.
The reason Jenny call that the marshmallow test is there is a video out there about these little kids they did a study on and they would leave them in a room with one marshmallow and say if you can hold off on eating this for like a minute or two.
They will come back and give you a second marshmallow and they leave the room and some kids would eat it right away,
other kids would wait and come back and get a second marshmallow so the longer you keep your,
capital gains in the better the
well I was thinking about that while you were talking and in my mind I was already creating a model on the spreadsheet or using a financial calculator in that involves tax rates in the time value of money but I’m not going to work it out right here on the.
I did pretty well because sometimes you know what they do to take the cash earlier and it just depends on really what the what the payoff is a lot of it depends on your situation to okay but now.
That doesn’t mean I can take my honey Grand and just throw it into some rental house because it’s in an opportunity Zone does it.
[16:51] Not exactly so in order to set it up the right way to take advantage of these benefit.
You have to create an opportunity Zone fund and you can either do that as a corporation.
Our partnership and LLC so even if you’re investing your by yourself,
you still have to create an LLC or some type of entity to run that capital gains through I’m just going to be called a qualified opportunity fund
got it all right now in order to do this can it be one person LLC that you defended yourself.
Yes I can be that way all right then who decides whether it’s qualified or not.
There is a form that you have to fill out with the IRS self-certifying but that’s what you do.
And you also when you create your entity in your operating agreement you say that your purpose is to act as a qualified opportunity fund.
And when you form your entity at the state allows you to put a purpose in those formation documents then you can put it there as well actually very.
[17:52] Simple to start off being qualified as when the train comes in when there’s lots of different rules you have to comply with
to continue as what you need the law firm of Trowbridge and sidoti
it’s really like if you think about doing your taxes.
A lot of ways not always been in a lot of ways it’s beyond our system and it’s the same shear and it doesn’t become a problem until you’re caught.
And you don’t want to get caught so you definitely want to make sure that it’s setup correctly you’ll ever seen the Steve Martin piece on how to make a million dollars and I’ll pay any taxes on it.
Know how that go too young to remember Steve Martin oh he just stands there is as well first you make $1000000 like that’s the easy part you said damn just.
Don’t pay taxes that works right up until you get caught,
all right so I guess your firm helps people with the with the setup of this and also the the compliance issues going down the road.
[19:02] Right yeah so we have a lot of clients or just wanting to do their own project but the majority of our clients are also those who want to pull investors and other people’s capital gains into their qualified opportunity.
Okay now A little birdie told me in and we’ll just call her Jillian you guys do some things to help people put their money together and syndications.
That’s alright that’s pretty much what we focus on is where
people who are looking to raise capital for their deals you know you can’t just go around asking people for money you got to have proper paperwork your investors have to have
the proper disclosure they need to be fully informed investors and it’s your job to fully inform them,
so we helped put together those documents those risks that the where what when how how much.
Sure that it’s complying with Securities laws cuz the last organization
the last two organizations you want beating down your door are the SEC and the FBI and they’re usually followed by the IRS so you
need to keep those those people out of your business you really have to make sure that your investors are filling forms
and actually have done jail time not because of anything they did wrong but because somebody in their firm was doing something wrong and the
the SEC said you should have known.
[20:31] People that went to jail because they should have known that’s kind of scary and so definitely it it’s good to pay a little bit to make sure you have all your ducks in a row all right.
So you’re are you talk about like private placement memos that sort of thing I don’t know how is is it
it tells the story of the investment it actually tell the pretty depressing story of the investment unfortunately,
a private placement memorandum in the other and that’s normally supported by a document known as the operating agreement if you have an LLC and that tells you how the company is run.
And then it’s all tied up with a little bow with something called a subscription agreement in the subscription agreement is a agreement between you the company
any investors on on that they’re agreeing that they read the private placement memorandum they understand and agree to the operating agreement and and they are going to invest in accordance with your terms and conditions.
[21:31] Very nice explanation thank you for that and then.
I sometimes tell people you know you if you want to know what the BPM is it’s telling you all the ways that you can lose all your money
people often say to me you know I don’t want to give this my investors are never going to invest if it if they see this and my aunt
my answer is always the same know that’s not true first of all doubt they’ll appreciate your honesty number one and number two. Shows a Savvy investor that can take that. Document and discern the difference between,
truth in and risk and and then the third thing is is your PPM is not a marching piece it is it is a legal document and should be treated as such,
right right and anybody that’s that has any experience in putting money into one of these has seen them before and they also know when they,
see the projections on the pro forma that looks like a check mark that it’s time to run.
Experienced operator Unity 5 just a regular Securities offering.
[22:50] I tell him is it’s basically the same thing you still need your ppme still in the operating agreement still need the subscription agreement we just add in sections discussing the qualified opportunity fund still treated like the security.
Okay well I have several more questions about this including couple of curveballs I won’t throw at you but after we take a little break pay some bills okay.
We’ll be right back.
[23:32] Braswell Capital Solutions is the number one source for investor-friendly residential and commercial real estate loans across the u.s. we offer a variety of loan
programs designed to meet the unique needs of Real Estate Investors we provide fast reliable and Professional Services so that our clients clothes quickly in order to take advantage of great deals
beat the competition and get great rates and competitive terms without sacrificing service contact us today at 800-577-1959 and visit us on the web at Braswell Capital solutions.com.
[24:02] Hey flipping America listeners have you ever walked into our property and said I have no idea what it will cost to repair this home those days are over
with ultimate rehab estimator you now have the tool you need to calculate repair costs as if your contractor was in your pocket designed by Real Estate Investors,
for Real Estate Investors ultimate rehab estimator just needs to know their properties measurements and what you want to do it produces a statement of work
adult materials and includes a deal analyzer which helps you determine if the deal is really a deal and the Abba just for labor cost in sales taxes by your state
using the properties of code alternate rehab estimator is for all Real Estate Investors new and experience
just visit ultimate rehab estimator. Calm and click on plans and pricing we have for plans all designed to meet the needs of your real estate business ultimate rehab estimator works on every device you have and wherever your property is.
Contractor in your pocket today at ultimate rehab estimator.
[25:18] We’re back I’m Rodger I have with me Nancy tegeder and Jillian sidoti.
they are with the law firm of Trowbridge and sidoti in Riverside County California and probably not really within reception range of ours are.
Broadcast partner in Long Beach but still in that same general area thank you again for joining us today and we’re talkin about opportunity zones now I realize that this question maybe one that you don’t.
Feel like it’s your your purview to answer but
I wonder if you could weigh in on this for me I’m Christian and doing the research leading up to the show I I tried to find a naysayer and there really aren’t that many but I found one investor in South Florida
who says you know the opportunity Zone sounds great and the tax deferment sounds great the problem I see is the areas you have to put the money.
It just underwriting those areas presents a whole another set of challenges.
And we’re facing a lot of issues with that we have a lot of people come to us very interested really excited but then when they get down to finding the deal.
It’s not always working out the way they help because.
[26:40] I’m recommending in and telling her clients as first trying to deal that works don’t just go look in an opportunity Zone because that’s the location where the deal is.
If you happen to find a deal that’s good and make sense and it is an opportunity zones and that’s just an added bonus that you can taste your whole deal on.
The incentives that come along with the opportunity Zone,
and of course have to work and then you got sing in our places you generally speaking don’t even want to drive through let alone.
We’ve got a neighborhood here in Atlanta that I drove over to you know that everyone said it’s the next up-and-coming thing and I went to a meeting over there.
About anime with a developer and a foundation that was doing some work really good things they’re doing but as I drove around the neighborhood I was kind of being stared at you know by some of the gentleman that were standing on the street corners
and then I came around the corner and saw a store and I kid you not the name of the store was the hood Mart.
[27:50] So that that told me where I was.
And the told me to keep it and stay in the car and keep the doors locked and that’s where things end up snout
looking you find where some big names are investing in the opportunity zones and then they’re looking for secondary areas near where a lot of money.
Right and that’s a that’s a very good approach and one of my little sayings I didn’t invent it but maybe made it famous it’s the early bird that always gets the worm but it’s the second mouse that gets the cheese.
[28:27] That’s so true that it’s kind of gross but it is true and you you really don’t want to be the first pioneer into an area but if someone else is doing it then follow them and
but now we’re talkin about a buy-and-hold strategy were not talking about fixing and flipping here because you got a hold all these properties for lease five years right.
The marshmallow test remember I know it’s a little bit before the Brady there’s incentives that come at 5 and 7 years and those are actually very small compared to an even longer hold spell
once you hit it the 10-year mark.
Then any appreciation on that property after the 10-year Mart you wouldn’t pay capital gains tax on so I’ll do another example if you buy a property this year lifesafer,
$100,000 and you keep your money in for 10 years and when you sell it in 10 years it goes for $200,000.
You would not pay any of the preacher a capital gain tax on that hundred thousand that appreciate it.
Potential for tax eating really comes after that 10 year mark the five and seven or nice little.
[29:40] Daylight hang out there and it said about you but really really long that are going to walk away with the most money okay well that’s good because really when you’re when you’re buying a a good nice cash flowing assets you want to hold on to it for a long time anyway.
I’m alright so I know that this is a question that’s burning in lot of our listeners Minds right now how do I find out where these tax owns the opportunity zones are.
Right well so you can basically just Google opportunity zones there’s math that are out there is it
you can have her over in different areas so that is out there finding opportunity Zone funds,
a lot of people who are currently own property in Opportunity zones think this is a good time to raise their prices because it’s so and so there’s a lot out there right now.
[30:40] And we can help you find some depending on your specific that’s a good segue before we get too far afield and I forget to do this I want you to tell everyone now how they can reach out to you guys how they find you.
Oh you can check us out at crowdfunding lawyers. Net and if you go to our Facebook page to crowdfunding lawyers or private money Rockstar we have a ton of free.
Stop videos articles road maps for raising private Capital all things you need to know how to raise money for your deals private money rockstar.com.
Yes Frank okay well that’s pretty good all right you know my research team gave me a lot of things about where these opportunity zones are and I got one big spreadsheet with census tract data.
I just want to see the visual I just want to see you don’t map
yeah there’s a map yeah if you go to the IRS website it’s right there you can literally get an actual nap on irs.gov and a fossil pop up.
But just because it’s color to certainly doesn’t necessarily mean it’s an opportunity Zone you want to go and read what that text box that they will specifically say whether it is opportunities or not.
All right but you said all of Puerto Rico.
Call Puerto Rico Puerto Rico is on sale to go to go to the auction and buy an office building in Puerto Rico and lease it up for 10 years and longer in,
[32:21] I’m sure that creative people are coming up with all kinds of ways to apply this and then do the math on it right and it we probably going to circle around and get get back to that little later on now.
You guys are a little bit atypical because most of my gas because most of the guests that are on this show or Real Estate Investors in some Niche were another but I’m going to throw this question out to you both anyway and I want both of you to answer this one,
because as I sit here and interview people and I have a lot of fun doing this I meet people.
Whoever just been on incredible journey through their lives to get to the point where they are now but when it comes to Real Estate Investors almost none of them in fact.
To Aid a person none of them are doing what they always thought they would
when I want to ask you when you were a little kid like an elementary school in Spring start thinking about what you wanted to be when you grew up what was that.
[33:22] He start Nancy I don’t even remember what I wanted to be a duck I wasn’t a Securities attorney I’ll give you that.
I don’t think I have this but I wanted to be a rockstar.
I was going to be like this is what a rockstar set out to do and then I realized I didn’t like being poor.
So it’s either feast or famine.
[33:53] And I music industry Anna I had dropped out of law school to pursue a record label start a record label and then I I realized I just I can’t I can’t live off
dollar menu anymore I I was literally living off the McDonald’s dollar menu that’s not even an exaggeration and so I got my butt back into law school but I really didn’t want to be a lawyer.
To be perfectly Frank so I I.
Every single real estate investing firm in Southern California or at least in San Diego if I could work for them and and a real estate firm down there gave me a chance and that’s when I started my real estate investing career
when the market turns last time and we were selling off properties to try to you know how did against any kind of
foreclosure that’s when I started practicing law it was just a natural transition cuz I was I was raising money for our deals in the firm and then.
When we sold all our deals and we knew we weren’t going to be buying for a while that’s when I transition to helping other people.
Are you sure they were legally compliant raising money for their deals okay Nancy that something about.
I don’t remember as an adult I would love to be a professional snowboarder.
[35:17] That’s amazing at snowboarding I love you.
Alright people ask me why I got into real estate investing I tell them sheer desperation and a lack of communicable job skills.
That that’ll put people into some situations but I guess that’s why I’m not really in favor of having the government try to make anything easy for our young people.
They need little difficult they need little challenged everybody needs to eat beans out of a can of diamond.
Society as a whole is making a difficult all right so you guys are fans of the opportunity Zone and you’re helping people set up to take advantage of it and you giving us a couple websites
crowdfunding lawyers. Net and private money rockstar.com now you’ve also said
everything correct me if I’m wrong so I’m coming back to this that almost anyone can just.
Set up an LLC and fill out some paperwork with the IRS to become a qualified opportunity fund and if you want to pool money together.
[36:41] You just have to follow the normal rules of pulling pooling money together and then that entity.
[36:48] Submits to the IRS okay so couple questions to wrap up our time together what are the ways that Trowbridge and sidoti really can help make a difference in this process for people listening to us right now.
I say the first one is call us we can talk through your specific situation and we can help you decide whether.
A single member LLC is the way to go or if you’re ready to do a bigger fun where you’re investing where you’re finding these opportunities those we really can help you with deciding what structure to use.
Once we figure that out then of course we can help you with all the documentation that feeling talked about.
[37:27] Anything dad I was just wondering if you want to know if you wanted to weigh in there
well it’s just you know you really you have two things at play here right and you’re dealing with two Behemoth governmental agencies the IRS
and Securities Exchange Commission and they’re both very very scary so my recommendation is you know we are flattered if you hire us,
but if you if you decide to go in a different direction just make sure whoever is helping you knows not just the rules with the IRS
but also the rules with raising Capital the rules surrounding what a disclosure document looks like what a good PPM looks like what a good operating agreement looks like because
you don’t want to be in litigation for years to come with your investors with random government agencies.
It is not a life of fun as you well know Rodger,
yes all right folks if you want more resources information about our guest today I’ve got there
websites in the show notes also a ton of Articles and research that our research team is put together and it’s all in the notes for the show today I want to thank you Nancy and Jillian for taking time to join to stay thank you again for super fun
all right we’ll talk again soon.
[39:01] If you’re a real estate investor.
[39:04] You owe it to yourself to get a profile on the fan the flipping America Network it’s at flipping America network.com.
The profile is free if you’re a buyer a landlord a rehabber you enter what you’re looking for.
Particularly the ZIP codes of interest you don’t have to sit on the app
all you have to do is tell us what you’re looking for your profile includes your cell phone number which will verify and when a property is posted in the zip code you’re interested in your going to get a text message that says,
look what just hit the fan everyone should register.
All 43,000 ZIP codes in the United States are included and you could be finding your next property just by listening for your text tone we call it snap click sold because.
If you are a seller.
[39:58] You can download the app will anyone can download the app and in the App Store it’s called flipping America Network all one word no spaces you download the app flipping America Network.
And does a seller you could be at the property negotiating a deal with someone that you want to wholesale you can take a few pictures of the property that’s the snap.
Then you can click to upload this property to the fan put a little information about the property there and.
Immediately that property will get texted,
to however many investors have expressed an interest in that zip code you no longer need to manage a mailing list you don’t have to go out and put together your flyers in your brochures or create
ads for Craigslist or other sites just posted in the fan it may be sold by the time you get back to the office that’s why we’re calling it snap.
Click sold www.dot flipping America Network. Com register now.
[41:15] One of the questions that has already come up his can the governor just pick any spot they want,
for an opportunity Zone and of course you know this is a federal program and they may give the governor’s some choice but they are not going to let them have complete control of course here are the government today,
definition of what can be designated opportunity Zone low income Community census tract,
are the basis for determining eligibility the definition is the same as that used for the new markets tax credit program and low income Community census tract as an individual poverty rate of at least.
20% and median family income.
[41:58] 80% of the area median that’s from section 45 d subparagraph e up to 5% of census tract,
that do not meet the definition of a low-income community
can be designated under an exemption exempt census tracts must be contiguous with low income Community census tracts that are designated as opportunity zones and the median family income of the exempt
track must not exceed 125% of the median family income of the designated low income
Community census tract with which it is contiguous okay
show a lot of words in there but all of these definitions and all of these things are in the show notes what you can access by listening to the app listening to the show through the app.
[42:47] Now for those of you that have joined this on iTunes we’ve we just recently post started posting the show on iTunes where
thrilled to have you thank you so much for listening and we want you to continue to listen on iTunes because that ranking there helps us we’re already under the top 150 we made it as high as 120 inch
we’re on our way to the top 50 on iTunes I just know it anyway but if you download the free app in the app store flipping America
you have access to all of our show notes and I’ve got a wealth of resources about opportunity zones in the show notes for today including some of these definitions I pulled up one thing and I mention this during the interview it’s just a massive
spreadsheet that shows all of the census tracts in the various States and not particularly helpful because you know if I say.
[43:36] Huntsville Alabama.
You if you’re a geography nerd you might be able to visualize that or if I say Atlanta Georgia you can probably visualize that but if I say census tract and then give you a 6 digit number you have no idea,
at I don’t nobody really tracks things by census tract numbers so I don’t know how useful that spreadsheet actually is but I guess you could probably plug that census tract into a Google Search and I could tell you right where it is so you never can tell.
[44:06] In the notes I’ve got the original language I’ve got some updates I’ve got Federal guidance documents and if I tried to read those to you on the air it would be sure to put you to sleep but,
they’re all there,
complete package information but I want to point out another article and I suggest that you really pull this one up when you’re looking at the notes it’s from funrise are you can just go to fundrise.com ice education class blog – post / the top 10 opportunity zones in the United States.
[44:33] Interesting story the end result
this legislation is 57% of all neighborhoods in America were up for consideration is opportunity zones and more than 8700 census tracts are now designated as opportunity zones according to the Brookings Institute the expansive reach of the opportunity Zone Program throughout the country now offers many new tax advantage options for investors
and entrepreneurs to explore diverse,
opportunity Zone investment options drinking game about how many times I say opportunity Zone on this show right
maybe we should have led with that okay but I’m going to go ahead and send skip to this and give you the 10 areas number one is Oakland and,
I have not heard of this little part of Oakland but Keynotes one of my all-time favorite little birds is this place in Atlanta called Cabbagetown I just think what were they thinking when they called it that but here’s a new one Oakland including West Oakland.
Uptown jingletown and Coliseum industrial know what happens in jingletown is that where they make up the tunes for all of the new commercials,
I don’t know Los Angeles including downtown and South Los Angeles and those of you that have been there know that South Los Angeles maybe one of those areas that.
We were talking about earlier that might be kind of dicey San Jose.
[45:59] And that’s Market Almaden Washington Guadalupe East Northside Jackson Taylor and Mayfair.
[46:08] San Diego Golden Hill South Park in Barrio Logan Seattle Beacon Hill and the International District.
[46:18] Opportunity zones in Portland the Pearl District and Central East Side now that intrigues me because I’ve been to Portland and I didn’t see the whole lot of really dangerously bad areas maybe it was just because you know
we weren’t taking there but didn’t you have Phoenix downtown Tempe Chandler and Mesa.
[46:39] In Nashville you have East Bank Five Points 12 South and Edgehill in Atlanta
Bankhead Grove Park and English Avenue now I can speak to this because I’m in Atlanta and dealing with his Grove Park is getting a massive new park
built out of what used to be a rock quarry site that turning it into a lake and water reservoir and a beautiful very large.
Who’s playing in the area and so investors are already rushing to grow.
And much of what you want to do in Grove Park is now in an opportunity Zone sounds like something somebody out of consider.
Intent note to self and staffers in New York City.
It’s Brooklyn now it’s not all of Brooklyn it’s certain census tracts in Brooklyn but it’s a bunch of them.
They’re just getting scared at all throughout their when you look at this article in fundrise you’ll see,
the neighborhood center highlight on map honorable mention Houston Gridiron Midtown and downtown.
[47:43] To sum it all up of the more than 8700 underserved census tracts that are part of the opportunity Zone Program those based in or near growing neighborhoods of expanding cities,
our position to benefit and likely immediately.
From current growth trends of their cities if you’re interested in learning how you can invest in Opportunity zones and take advantage of the capital gains tax incentives available to investors learn more
fundrise opportunity fund here and they give you a link to that I had to put that in there but of course you can just stay tuned because there’s a qualified opportunity Zone funding option coming to you very soon from you friends at Living America.
[48:23] Senators Cory Booker and New Jersey Democrat who’s running for president and Tim Scott a South route to South Carolina Republican plan to introduce legislation requiring the IRS to collect
data from the tax break recipients that would be the qualified opportunity funds okay to show how their Investments are altering economic conditions in their opportunity Zone
nothing in this says that your tax break is dependent on you demonstrating.
Some sort of acceptable alteration of economic conditions but the fact that they want to know means the government sticking their nose in this so watch this folks I don’t know what stage this.
This bill is in or if it’s going to pass or it’s already been killed.
[49:15] That would concern me Booker and Scott were early backers of opportunity zones in Congress but their proposal would require the IRS to compile data about how many funds have been created what assets they own how many jobs have been created
and how poverty levels have changed you know I’m going to say that I’m fine with the idea of opportunity zones.
Course in preparation for the show done a lot of reading about it and I am fine with giving a text right to the people who put their own Capital risk.
But I’ve got some.
News that may be a little distressing I quote Jesus himself who said the poor you will always have with you.
[50:01] I realize there are things that we can do to help let some people out of poverty and I realize that there are things we can do to give people a helping hand and
create opportunity for everyone
to achieve and of course I’m on the record as stating that the type of free enterprise and capitalism that has existed in the past in the United States
slowly being chipped away at but that type of free enterprise and capitalism has done more in the short 250 year History of the United States to
heal the problem of poverty and the grip of poverty in
for a generation 4 generations of people than everything else that’s been tried in the history of humanity the answer is in more freedom more free enterprise more capitalism but.
No matter what you do there are people who will remain poor.
[50:55] When Jesus said that I think he was just stating a fact that was a fact then and a fact now he was not intending it as a criticism and I don’t intend it as a criticism there were there are people that are gripped with a
mentality of poverty and nothing is ever going to change that mindset a few will escape a few always do.
Dayton to escape no matter what the obstacle or the incentive but,
there are people who are mired in poverty who have no intention of trying to look at their life or the world and in different way.
And are going to remain for the poor you will always have with you.
If there comes a Federal Regulation that I as a qualified opportunity fund must.
Present evidence that we are creating jobs and lifting people out of poverty I’m going to think again.
[51:53] I believe that such legislation would have a chilling effect on the opportunity zones and many of the more cautious investors would probably just
move on to other things because in the opportunity zones your your returns could be lucrative but you’re,
results are a lot less predictable.
[52:15] You can go to Enterprise Community. Org or you can just look at the show notes and.
If you cook around enough you will find an interactive United States map that shows and kind of an orange color the opportunity zones that exists and you can look in your state and see what’s available and.
Perhaps you will see something that that is an opportunity Zone that corresponds with relatively low crime rates and maybe even a a nice standard of living or,
okay it’s going to be an aerie that’s for bit but it may be an area that represent significant opportunities maybe you could pick up an apartment in a in a.
Low crime area that is an opportunity zone or maybe you can you know this,
I don’t think that any asset classes are excluded so perhaps it’s a grocery store shopping center office building.
[53:11] This show is not intended to be everything you ever needed to know about opportunity zones but we wanted to give it a good once-over and I think we’ve done that
I think we got a couple of minutes left so let’s turn our attention to some questions from our listeners and folks I didn’t do the announcements because I did want to make sure we get through the topics today but as always if you have questions about real estate or real estate investing.
Send them to questions
at Roger Blankenship. Com that’s questions at Roger Blankenship. Calm and keep in mind that if you’re ever in town in Atlanta
on a Wednesday and or a Thursday please come have lunch with us on Wednesday at baraonda Italian restaurant and on Thursdays at City Tap restaurant right in the heart of Midtown
great restaurants great food great environment and the subject of most of those meetings is determined by the questions and issues that.
Come to the meeting with you so we look forward to seeing you there and so I’m giving you how to get it so I might as well get the rest he knows where to find us and follow us on Twitter and Instagram please at flipping America we are at flipping America on Facebook
look up flipping America Network and you can come to our public page there and.
Stay in touch with everything that we’ve got going on and it’s quite a bit.
[54:34] Carlton from Chicago Illinois says I’m getting back into investing and thinking about Atlanta what are the opportunities I should be considering there
now this sounds like an atlanta-based question but I’m putting it on the show because it’s an answer that will serve all of you well you just need to ask yourself this question what are the opportunities.
Telling the bike wherever you are and what you need to do is.
Can you get your self familiar with the market in that area by talking to realtors get to some networking event
find out which areas and price points are hot that’s what’s moving and then what you need to do in those hot areas now I gave more specific information to Carlton off the show but as you find out the area is that are moving quickly in the price points that are that are moving their selling the best that’s where you want to focus your
efforts in marketing for a deal.
Looking for something that you can buy that’s how you determined what you should be doing but it’s not necessarily just single family homes either.
It’s good to get a grip on everything that’s going on with where people want to live.
[55:44] How people want to live do they want condos do they want Townhomes there a certain areas in it in the Metro Atlanta area where
I wouldn’t consider a townhome if you gave it to me well if you gave it to me I turned into a rental but
no one is going to buy it no one buys townhomes in certain parts of the suburbs around the city of Atlanta is that true in your area I don’t know but I do know what’s true in my area I know that
and in certain parts of town I just wouldn’t even look at a townhome or condo.
Ends in the city it’s a little bit different story that’s just a matter of knowing what’s going on with your local market.
[56:24] So after you get to some meetings and meet with some investors and course this gentleman was doing the right thing there yet you want it.
Also get out and meet with some Realtors and get them to introduce you to some contractors to see what your possibilities are start putting together your team,
it’s especially if you’re going to be doing this remotely as the gentleman from Chicago is going to do if he is going to invest in Atlanta.
Tracy from Senoia Georgia says I’m interested in reserving my ZIP code on the fan.
Is it $100 for every zip code and the answer is yes you can reserve okay this basically put this question on the show because it gives me a chance to talk about,
the fan a little bit you can reserve any zip code in the United States.
And by preserving it you get a 48-hour exclusive preview of any property that’s posted a like a first look or a first right of refusal
no one else in the fan will know that that property is posted until 48 hours in one second you’ll get the text message says look what just hit the fan and it 48 hours if you can get the property under contract no one else will ever know it was even there.
[57:34] So that gives you an edge and you can reserve this in any zip code in the United States for $100 a month.
That you may go a month or two sometimes without coming up with a deal but I have routinely in my career forked over $1,000 for a good deal and sometimes $5,000
so I can take down this deal and make the money and it’s so if you’re out at several hundred dollars before you get a deal that’s really not a bad proposition would you give up $600 to.
End up with the deal where you make 30000 I think almost anyone would do that.
So that’s kind of the thinking behind it and I encourage you go to www. Flipping America network.com.
And click on reserve a zip code and pick one for yourself and if it isn’t already taken keep in mind we only sell each zip code one time.
And that person gets it until they quit paying for it.
All right that music means we’re out of time for today folks thank you so much and will talk to you again very soon.
[58:50] Stock quote for today is from our good friend Mark delfine who said there is no amount of money that makes time irrelevant that’s a good one buddy.
[59:01] This thought is brought to you today by the foundation for Renewal working together with communities across the country to bring lasting life change and impact.
Find them on the web every Newell fund. Net and is always your gift in any amount is very much appreciated and tax deductible.
[59:31] You’ve been listening to flipping America real estate investing for everyone if you have any questions about real estate send them two questions at flipping America network.com,
listen three times a week on stations across the country or on the flipping America app free in the App Store,
make sure to like us on Facebook find and follow us on Twitter and Instagram and keep your eyes open opportunities are everywhere.