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Pros and Cons of Opportunity Zone Investments

Opportunity zone (OZ) investments have an array of pros, ranging from deferred or reduced capital gains tax to tax-free appreciation. However, as with any investment, opportunity zone funds also have a few cons, such as a limited track record and a high buy-in.

The Tax Cuts and Jobs Act of 2017 created opportunity zones to spur development within these communities through incentivizing investors to invest capital into them. Taxpayers may defer tax on eligible capital gains by investing in a Qualified Opportunity Fund and meeting the associated requirements.

Read on to learn more about the pros and cons of opportunity zone investments.

What is an Opportunity Zone?

An opportunity zone (OZ) is a community with economic disadvantages. The federal government recognizes this community as low-income and in need of an influx of capital.

The purpose of OZs and their associated tax incentives is to encourage long-term investments in distressed communities. These investments can lead to an increase in local jobs and economic growth.

Read on to learn how to attract investors to your opportunity zone.

What is a Qualified Opportunity Fund?

A Qualified Opportunity Fund (QOF) is an investment vehicle organized to drive investment in OZs. When investors put capital into the fund, the community is revitalized with the funds and the investor can defer tax on eligible gains.

What are the Pros of Opportunity Zone Investments?

Since their origin following the Tax Cuts and Jobs Act of 2017, opportunity zones have proven to have a few pros. In this list, we’ll discuss some advantages for both the investor and the community.

Deferred Capital Gains Tax

Capital gains are a constant in the investment world. However, OZs provide investors with a loophole that allows them to defer capital gains taxes and use the investment to instead generate passive income.

If the investor makes an investment into a QOF within 180 days of incurring capital gains, they can defer the tax on the invested amount until 2026.

Reduced Capital Gains Tax

Investors can reduce capital gains by staying with qualified OZs projects for years. For instance, a five-year investment reduces the original amount taxed for capital gains by 10%. If the investor keeps the money in the QOZ fund for an additional two years, the capital gains reduction increases to 15%.

Appreciation Without Taxes

If investors keep their investments in the fund for 10 years, the appreciation in the opportunity zone fund investment is not subject to capital gains tax. To clarify, investors must still pay the taxes on the funds from the original investment but there are no additional taxes on the profits derived from the opportunity zone project over the decade.

Opportunity Zones Help More Disadvantaged Communities Than Past Programs

There are currently more than 8,860 designated OZs throughout the United States. This figure far surpasses the number of qualified communities in any past investment incentive program.

Opportunity Zones Bring Funds to Minority Communities 

32 million Americans call opportunity zones home. Of those 32 million, the majority—an estimated 56%—are minority communities. In fact, 30% of those living in OZs are Latinx communities and 24% are African American. Further, 294 OZs fall on Native American lands.

OZs bring capital to areas that may otherwise be overlooked with the intention of revitalizing these areas and improving the lives of the people within them.

The Economic Benefits of Opportunity Zones Will be Long-Term

According to research conducted by the Tax Foundation, “opportunity zones were estimated to cost $1.6 billion in revenue from 2018 to 2027. New regulations stipulate that the program’s benefits would continue through 2047, meaning the program’s revenue impact could increase over time.”

Opportunity Zones Contribute to Environmental Development

In 2019, the United States Environmental Protection Agency (EPA) announced a $65 million grant project to rehabilitate environmental disaster areas within OZs.

What Are the Cons of Opportunity Zone Investments?

In contrast to the list of advantages, opportunity zone investments also have several disadvantages, including:

High Buy-in

The six-figure buy-in is not ideal for many investors.

OZs Aren’t a Short-Term Investment

If you’re looking for active, short-term investments, OZ funds aren’t for you. To earn the high rewards associated with these investments, you have to be willing to play the long game.

Limited Established Track Record

Opportunity zones were created in 2017 and, therefore, don’t have an established history for investors to review and determine risk. While OZs are associated with success thus far, high returns aren’t guaranteed.

Partner with Crivello Capital

At Crivello Capital, we’re focused on making communities better through capital investment. We buy large commercial real estate holdings in urban areas and opportunity zones.

We are focused on the positive impact capital can make in communities and the lives of business owners through:

  • Direct investments
  • Real estate investments, and
  • Alternative lending

Our transparent process and horizontal hierarchy allow us a level of speed and flexibility unrivaled by other investors. Lastly, our no-nonsense approach brings clarity to the transactional world of corporate lending and investment.

Apply for capital with Crivello Capital or read on to learn more about our mission.

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How Do Opportunity Zone Funds Work?

Opportunity Zone Funds allow investors to give back to communities as well as earn some impressive tax incentives. There are over 8,760 qualified opportunity zones throughout the United States. Read on to learn what they are and how to invest in one. 

First, let’s break down some common terms.

Common Opportunity Zone Funds Terms

What is a QOZ?

A QOZ is a Qualified Opportunity Zone.  A QOZ is an area that the federal government recognizes as low-income and in need of an influx of capital.

What is a QOF?

A QOF is a Qualified Opportunity Fund. The key is the Q in QOF; you have to qualify, register, and then invest within a set period of time. QOFs are investment vehicles organized to drive investment in the opportunity zones.

What is a QOZP?

A QOZP is a Qualified Opportunity Zone Property – you don’t have to own that property outright to invest; it just has to be doing business “primarily”  in a QOZ.

What is an Opportunity Zone?

An opportunity zone is an economically disadvantaged and/or low-income community that could benefit from investments and revitalization. Under strict conditions, investments in these communities could be eligible for tax incentives through the Tax Cuts and Jobs Act of 2017. 

How Does an Area Qualify as an Opportunity Zone?

According to the IRS, for an area to qualify as an opportunity zone, it must be characterized by either of the following:

  • A median household income of less than 80% of the median household income of its neighbors, or
  • A poverty rate of at least 20 percent. 

What is the Purpose of Opportunity Zones? 

The goal of opportunity zones and their associated tax incentives is to encourage long-term investments in distressed communities. These investments can lead to the creation of more local jobs and economic growth. 

What Are The Incentives of Investing in an Opportunity Zone Fund?

Three tax incentives of investing in an Opportunity Zone Fund are:

  1. Defer federal capital gains taxes owed today for a period of years
  2. Be eligible to receive a reduction in those capital gains taxes
  3. Be exempted from paying future capital gains taxes if certain investment criteria are met.

How Are Qualified Opportunity Funds Started?

According to the IRS, Qualified Opportunity Funds can be started by real estate investors through several methods, such as:

  • Partnerships
  • Limited Liability Companies (LLCs)
  • Corporations 

And, an entity must:

  • File a federal income tax return
  • Be organized to invest in qualified opportunity zone property
  • Hold 90% of its assets in qualified opportunity zone property

Read how to attract investors to your opportunity zone, here. 

How Do Opportunity Zone Funds Work For Investors?

Opportunity zones provide tax incentives to investors with capital gains. Investors get their money back when the value of the property goes up to fair market value. 

When the investor sells in ten years, the capital gains tax they would have paid is forgiven as a big “thank you” from the government for investing in the low-income area. 

What Are the Benefits of Investing in an Opportunity Zone Fund?

Through investing in opportunity zone funds, investors can reduce the total they pay in capital gains tax. Further, if they keep the property for ten years or more, the investor won’t pay taxes on the appreciation value. 

How to Invest in An Opportunity Zone Fund

According to the IRS, investors must transfer cash or property to the fund in order for the full investment to be eligible for tax benefits. Additionally, investors must meet annual investor reporting requirements and time their investment within 180 days of realizing capital gain to receive the tax benefit.

Consider working with a tax or financial advisor to help you file the correct paperwork, ensure you’re following the appropriate rules and regulations as well as guide you through the process of investing in an opportunity zone fund. 

How to Find Opportunity Funds to Invest In

When researching opportunity zones and opportunity funds, investors may be met by a series of hypotheticals but find very few funds that are actively looking for investors. This happens because opportunity funds are excellent tax protection vehicles–and you have to be in the club to get on board.

What investors won’t see is how easy it is to become a registered opportunity fund.  It’s well within the scope of possibility for most high-net-worth investors. 

Interested in being part of our OZF? We should talk.

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What is an Opportunity Fund?

Who Qualifies as an Opportunity Fund?

Opportunity Funds self-certify with the U.S. Treasury Department.

A certified Opportunity Fund invests 90% of its assets in Qualified Opportunity Zones (QOZ) and must verify these ratios with the Treasury Dept. bi-annually.

Opportunity Zone properties must pass these tests:

  • Must be in a registered Opportunity Zone
  • Must be new construction or…
  • More investment must be made in the property than the purchase price.
  • A business that receives OZ Funding must be located in an Opportunity Zone and do at least 50% of its business there.

How Do Investments in Opportunity Zones Work?

The Opportunity Zones program provides a tax incentive for investors that can be paired with other tax incentive programs. Programs such as the Low Income Housing Tax Credit (LIHTC) program, the New Markets Tax Credit (NMTC) program, and the HTC, or Historic Tax Credits program

To qualify for the capital gains tax deferral, investment in an Opportunity Fund has to be made within 180 days of the sale of the assets being reinvested.

Opportunity Funds cannot hold investor funds for more than 6 months before investing in an Opportunity Zone and if a person should sell to an Opportunity Fund , they cannot hold more than 20% ownership in that fund.

The State of Opportunity Zones


What Designates an Opportunity Zone?

High need and growth potential. Opportunity Zones contain 24 million jobs and 1.6 million businesses. Many areas have already seen some positive economic growth preceding the 2018 OZ designation.

The Zones are prioritized as high-need with an average poverty rate of nearly 31%, and an average median family income of 59% of the area median (thresholds were set at 20% and 80% respectively.

Older structures offer an opportunity for positive impact. With a median age of 50 years, these neighborhoods urgently need reinvestment.

Between 2018 – 2028: Private investors are eligible for tax benefits in return for investing in low-income communities designated by the governor of every state and certified by the U.S. Treasury Secretary.


Opportunity Zones were created by the Investing in Opportunity Act, part of the Tax Cuts and Jobs Act of 2017. This act received significant bipartisan support and was championed by the Economic Innovation Group, a think tank group out of California.

The Investing in Opportunity Act requested that governors select 25% of their low-income, economically disadvantaged areas as “Opportunity Zones” based on the following thresholds:

  • Median family income of less than 80% of the statewide median

  • Poverty rate of 20%

Where are Opportunity Zones?


While Opportunity Zones are found in both urban and rural areas there is a concentration in high-density urban areas. 

Opportunity Zone Demographics

Opportunity Zones contain 31.3 million people (*American Community Survey). 56% of Opportunity Zones residents are minorities, compared to 38% nationwide. Many Opportunity Zones are in high-density urban areas offering opportunities to positively impact the urban housing crisis and create business venues for small business owners.



Click to explore opportunity Zones in your area

*powered by eig.org



Crivello Properties is a registered Opportunity Fund.

We make commercial property financing in Opportunity Zones easy. 

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How to Attract Investors to Your Opportunity Zone

It is not up to outsiders to decide what the right investment is for any given community. It falls to that community to recognize the needs of its businesses. Since 2017 with the Tax Cuts and Jobs Act, governors of states in the US have been able to designate certain areas as Opportunity Zones. Once designated, those community leaders and businesses in that area find there are few resources to discover how to engage Opportunity Zone investors to support them. The EPA outlines five key strategies for engaging Opportunity Zones investors including resources and tips that can help communities attract investment to their revitalization efforts.

Investors in Opportunity Zones are seeking tax incentives to offset capital gains.  While many OZ funds are altruistic, the investors in that fund are often simple seeking a tax shelter. 

The tax incentives of investing in an Opportunity Fund are:

  1. Defer federal capital gains taxes owed today for a period of years
  2. Be eligible to receive a reduction in those capital gains taxes
  3. Be exempted from paying future capital gains taxes if certain investment criteria are met. 

Sometimes an Opportunity Fund is established by an individual investor, such as in the case of our Crivello Capital Fund. Opportunity Funds can invest in projects or businesses in any of the 8,700+ Opportunity Zones, they are not limited to the area in which the fund is created. 

Novogradac is a company that maintains a national database of Opportunity Funds that voluntarily report their investment activities and they reported OFs raising over $12 billion for  Opportunity Zone projects and businesses. Some of the funds invest in projects in a single city or state, and many with a regional or national focus.

Evaluating Community Resources 

In 2020, the Economic Innovation Group released results stating that 40% of Opportunity Zone investments are buoyed up by outside investment from local Development Finance Agencies (DFAs), Community Development Finance Institutions (CDFIs), traditional lenders, tax credit investors, or other government and philanthropic grants. 

Securing funding from federal agencies such as the U.S. Environmental Protection Agency, Economic Development Administration, Department of Housing and Urban Development, or Department of Agriculture helps to attract Opportunity Zone investment.

Strategies for Engaging Investors 

Investors do not need local communities to be experts on Opportunity Zones statutes and regulations. They just need community leaders to align their capital with community priorities. 

Be prepared

Put together a presentation that outlines why you need investment, what your business plan is, how an investor would get paid back and on what timeline. 

Stay in touch

Talk to the OF managers regularly about opportunities, businesses, buildings and projects.  Remember, they are not in your neighborhood, they won’t know who is ready for investment. 

Enlist the big dogs

One idea is to coordinate with local hospitals, universities, or other major employers who likely already have investor relationships. These types of major institutions benefit from a thriving economy, so there is an incentive for them to partner on revitalization efforts, especially in distressed neighborhoods and communities. 

Prioritize 

Pick something shiny and big to invite that initial investment, and more money will follow. Organizations like The Opportunity Exchange provide options for sharing project goals to a national audience of interested investors, and your marquee project will be very attractive to outsiders.

Sell it 

Getting local investors involved signals to Opportunity Funds that they don’t want to be late to the party.  Local investors can get the ball rolling and OZ investors will hop on board

Know what you want

If what you want is a thriving downtown, clarify that goal. If what you want is more green space, be clear not hat too.  OZ funds are more likely to invest if you can articulate the end goal clearly. Many investors have a goal of creating positive impact.