Today we’re going to talk about turnkey real estate investing and opportunity zones.
Bob Nelson, Eugene real estate investment broker
Bob Nelson: Periodically, you’ll see in the newspaper here on the news or discussion between wise and knowledgeable investors, the term turnkey. What does turnkey mean? Well, if I was offering a property for sale and you could acquire that property from me and it was considered to be turnkey, it’s literally I’m taking off my shoes, I’m stepping away. You’re giving me a check, you step into my shoes, and it’s fully functional, fully operational.
There’s really nothing you need to do to contain and maintain the return that would exist on that property restated. It’s ready to go. what is not so turnkey? Well, how about if I had a piece of dirt? You had to build the improvements on that thing, so you buy the dirt from me. You take on the risk of getting the building permit, paying the system development charges, lining up contractors hoping that there is no cost over runs, lining up the mortgage.
There’s all kinds of things that could in fact go wrong because there’s a lot of moving parts. That is not a turnkey situation and be very careful with the concept of opportunity zone investing. That’s a hot buzz term built into the Trump tax plan. It’s been in effect now for the better part of two years. It is an interesting thing. It’s designed to direct private capital to improve areas that each municipality or each governmental entity has designated their opportunity zone.
The Eugene-Springfield area has opportunities zones, not necessarily the 100% locations, but those areas that may be either a little bit depressed or areas that are deemed to have opportunity, but nobody’s particularly done development in that thing. So they’re attempting to stimulate that with a tax abatement process whereby if you sell a property rather than paying tax to the government in the form of capital gains taxation to the federal and state level, rather than doing a tax deferred exchange, you’ve decided to invest in an opportunity zone.
But be careful because of the opportunity zone investment doesn’t produce, you still owe the tax bill. Call me and I can discuss that further if you’d like.