August 18, 2019

Wealth Matters: Is an Opportunity Zone the Right Investment for You?

Picking an investment fund will help establish your strategy. PTM Partners, which was started by three real estate developers who had met at the real estate developer LeFrak, is focused on developing properties on the edge of opportunity zones in major metropolitan areas.

The fund’s first two projects are a 360-unit development in Miami and a 454-unit apartment building that was a former F.B.I. office building in Washington. A third site, in St. Petersburg, Fla., is under contract.

Mr. Tillman, the chief executive, said his firm’s strategy was to take opportunity zones and overlay demographic data like wages, home size and other economic measures. The goal is to select markets “where long-term growth factors are present or in some areas they have already commenced,” he said.

SoLa Impact has a different strategy: investing with a social conscience. It is raising its third fund to invest in housing in Compton, Watts and other low-income neighborhoods in Los Angeles.

“Our investors were very attracted to the social impact of what we were doing,” said Martin Muoto, founder and managing partner. “In Fund 3, two-thirds of the investors care about social impact and one-third are primarily motivated by tax avoid.”

And that’s fine by him. “These are folks who wouldn’t normally invest in Compton or Watts, but they’re invested and they’re allowing me to do my work,” Mr. Muoto said.

Both funds hope to sell their investments in the 10th year. Mr. Tillman believes he has identified areas that will still be strong then, while Mr. Muoto is banking on the continued need for basic housing and the attention the 2028 Summer Olympics will bring to Los Angeles.

Real estate is an inherently local market, so they both could be right. But investors should consider the downside, and whether the tax break is worth it.

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