A new type federally qualified investment vehicle known as an opportunity fund allows individuals and entities facing capital gains taxes to defer and reduce their tax bite, while paying no additional tax on appreciation of the investment. The only catch is that investment has to be limited to designated areas known as opportunity zones, and the real estate investment requires significant capital improvements to the asset (generally ground up construction).

➤➤ Join the GlobeSt.com ADAPT: Opportunity Zones conference September 16-17 in Baltimore, MD The new national conference series is aimed at identifying Opportunity Zones across all property types and geographic regions. This first-of-its-kind event will educate, connect and celebrate the investors, developers and owners with the people behind the planning and decision-making, such as architects, consultants, academics and, most importantly, municipal officials. Click here to register and view the agenda.

It sounds like a great deal for investors, and it is. But in the rush to defer gain and supercharge yield, it's important to remember that these deals have to pencil out. Otherwise not only the yield but the initial investment can be at risk.

What Are Opportunity Funds?

Opportunity funds were created by the Congressional Tax Cuts and Jobs Act of 2017 to encourage affordable housing and business development in economically struggling communities. Opportunity Zones have been designated nationwide by Federal and state economic development authorities.