How Investors Can Be Part of the Affordable Housing Solution

The Problematic State of Affordable Housing in the U.S.

All over the U.S., Americans classified as low-income are having difficulty finding affordable housing. Across the entire country, millions of people put nearly three-quarters of their monthly take-home pay towards rent. As rental rates continue to increase, the near future does not look promising for Americans stuck in these circumstances.

Many have looked to the local, state, and federal governments for a solution, although it isn’t clear what the answer is. The crisis of affordable housing persists despite the homebuyer assistance programs, tax credits, initiatives, and vouchers that are in place, and which look different from state to state.

One thing is clear: investors can make a difference in the midst of the crisis. The Tax Cut and Jobs Act of 2017, established by Congress, gives home buyers an opportunity to invest in Opportunity Zones and bring relief to low-income Americans.

Opportunity Zones Give Home Buyers a Chance to Help

What is an Opportunity Zone?

Opportunity Zones are clearly demarcated areas containing a low-income population. Each state designates its own Opportunity Zones, which may constitute up to 25% of its low-income areas.

Investors who buy property inside these areas enjoy certain tax benefits, namely, capital gains tax deferment or dismissal, and the allowance to reinvest capital gains income. These advantages are designed to incentivize real estate investors to buy homes in Opportunity Zones.

The goal is economic development in the long-term. Investor funds pouring into low-income communities will ideally create more employment opportunities, business growth, and even more housing construction.

How Opportunity Funds Work

Opportunity Zones have investment vehicles, called Opportunity Funds, that are designed exclusively for investing in houses within the limits of these low-income zones. To qualify as Opportunity Zone projects, the properties have to meet specific criteria, including the condition that they will be considerably enhanced.

To take advantage of the Opportunity Fund, investors are required to allot over 90% of the fund’s assets to the Opportunity Zone property. An investor home buyer who wishes to put their capital gains income in the Opportunity Fund has 180 days to do so.

If an investor holds the property for ten years or more, the capital gains taxes may be waived altogether, but even under that timeframe the capital gains taxes will be deferred. Federal tax can be deferred until the end of 2026 and reduced by no more than 15%.

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    Home Buyers Help Solve the Problem

    To simultaneously take advantage of significant tax benefits and be a part of the solution to the affordable housing crisis, interested home buyers should take the next step and invest in Opportunity Zones. Growth, stability, and new opportunities for underprivileged communities are just three of the outcomes of investing in qualified projects.

    This is a unique opportunity to bring revitalization to specific low-income areas. The more funds an investor allocates to Opportunity Zone projects (via the Opportunity Funds vehicle) the more affordable housing options will exist. On a personal level, this program allows investors the privilege and satisfaction of contributing to the rekindling and rejuvenation of the local community.

    How to Invest in Opportunity Zones

    There are no special licenses or prerequisites to invest in an Opportunity Zone; anyone can do it. Interested investors can locate local Opportunity Zones by visiting the Opportunity Zones Resource page.

    Often, homeowners choose to sell their home directly to an investor rather than take the traditional home-selling route. Selling a house to a home-buying company saves you the trouble and expense of marketing. No preparations, showings, repairs, or inspections will save you time, energy, and money.

    Houston Capital Home Buyers is a house-buying company that purchases houses as-is in Houston, around the state, and even around the country. We have a $26 million purchase record and a twelve-year history of buying homes.

    Your home may be exactly what a Millennial buyer is looking for, or it may be the opposite. Either way, if you are interested in a fast and hassle-free sale of your property, contact Houston Capital Home Buyers today. We will make you a purchase offer within 24 hours of receiving your request and won’t pressure you to make a decision.

    *Thank you to The Washington Post, Cornerstone Home Lending, the National Association of Home Builders, Keller Williams Realty, and The Balance for the statistics and facts used in this article.

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