Benefits of Multifamily Investments in Qualified Opportunity Zones

February 18, 2021

The substantial tax advantages provided by the Tax Cuts and Jobs Act (TCJA) will likely lead to a significant influx of capital to multifamily investments in Opportunity Zones. In addition to traditional equity and large institutional investors, Opportunity Zones have opened the door to a whole different group of investors. With this new program, small investors and family offices can profit from the same type of quality multifamily deals traditionally reserved for institutional investors.

A “Multifamily in Focus” research paper pdf https://mf.freddiemac.com/docs/opportunity-zones.pdf was recently released by Freddie Mac. It compares a hypothetical investment under the tax structures offered by both traditional and Opportunity Fund circumstances: a traditional investment that provides an 8 percent annualized return may correlate to a return of more than 12 percent if invested in a 10-year Qualified Opportunity Fund (QOF). Similarly, the paper projects that a five-year investment in a QOF would increase yield from 4.6 percent to 7.4 percent. In addition, opportunity zones can be combined with other various tax credited projects, such as historic district tax credits, affordable housing and/or other state and local incentives.

The Opportunity Zones program signals the beginning of an exciting new chapter for multifamily investing and creates a win-win situation for the communities, developers, and investors involved.

2 minutes
Ashley Dillard, CCIM

Senior Director

Ashley has an extensive knowledge of the Chicago commercial real estate market. After graduating from University of Kansas with a degree in architectural studies, she worked in Kansas City as a commercial leasing agent at a 2.1 million square foot office park. While working for an institutional owner, she learned valuable skills such as client reporting, communication and accountability.

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Opportunity Zones By The Numbers

8,764 CENSUS TRACTS

The total number of census tracts certified as Opportunity Zones by the U.S. Treasury.

$6.1 TRILLION

Potential unrealized capital gains eligible for Qualified Opportunity Fund investment and tax treatment.

$100 BILLION

Treasury Secretary Steven Mnuchin’s estimate of private capital that will flow into Opportunity Zones.