Government ruling opens new investment doors
Most people know it simply as a law that generated a tax cut, but the Tax Cut and Jobs Act of 2017 also created a golden opportunity for real estate buyers and sellers to participate in a program designed to reward the improvement of economically disadvantaged areas across the country.
The disadvantaged areas are called "Qualified Opportunity Zones" (QOZ), and the opportunity is the realization of significant tax breaks for buyers. Sellers benefit too.
The concept is simple: Those who use realized capital gains to invest in and improve property in a QOZ will receive tax breaks that include:
- A deferral of federal taxes on capital gains until Dec. 31, 2026, or the date of sale
- A 10% reduction in the taxes due on the deferred capital gains that are invested and held for 7 years
- No federal taxes on the capital gains earned on the appreciation of the improved QOZ assets if held for 10 years
Depending on the size of the investment, the tax breaks could be tremendous.
A win for sellers too.
While the Act is proving beneficial to investors, it can be a boon to sellers too, but only under the right circumstances.
In the traditional real estate transaction, a price is established for a property, it's listed, and offers come in from people in the immediate area. That is the model that has worked for decades.
But thanks to innovation and technology, there is another option for QOZ sellers to consider; one that can enable the property's value to be decided not by a limited number of local buyers, but by the national real estate investment marketplace.
This option is an online real estate auction and it is a major opportunity for property owners in a QOZ to realize the true capital potential of their holdings.
In an online auction, the traditional sales model with all of the traditional struggles is jettisoned for a streamlined, 24/7 version that can be accessed by qualified buyers from any computer or mobile device anywhere in the world.
Using an online auction, QOZ property owners can sell their property based on the worth to each individual bidder, many of whom are motivated by different factors. One potential buyer may be on a deadline (real or hidden), while another may have a strategic investment plan that depends on a healthier tax incentive from the purchase of the property.
In either case (and more), both are willing to pay more, and the online auction lets QOZ sellers reap the benefits.
Anything that can and should be done through the traditional sales model is done through an online auction, but with a significant increase in both the exposure to buyers and the level of convenience.
The online auction represents a rare opportunity for QOZ sellers to maximize the return on their investment while they support local community improvement.
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