QOZ investment involves typical risks of traditional real estate investment, including illiquidity and concentration risks associated with local markets. Investors must read and understand all risk disclosures in the applicable full-disclosure private placement memorandum (PPM) that would accompany any QOZ fund. These risks include but are not limited to:

  1. Illiquidity – There is currently no secondary market.
  2. Tax status including immediate tax liabilities and penalties.
  3. The substantial fees associated with the investment purchase outweighing the tax benefits.
  4. The use of leverage in real estate
  5. The speculative nature of the investment
  6. The fractionalized ownership and investment contracts as securities
  7. Unguaranteed property
  8. The potential loss of the principal investment

There are substantial risks associated with developing property in a qualified opportunity zone that permits investors in the QOF to qualify for available Opportunity Zone tax benefits. There are tax risks associated with an investment in a QOF, including the possibility that government regulations regarding opportunity zone investments may change.

Please also note that QOZ investments are available only to accredited investors. The Security and Exchange Commission defines an accredited investor as an individual with either greater than $1 million in net worth (excluding the equity in your principal residence) or net income for the last two years of $200,000 or greater ($300,000 if accreditation is based on a married couple) with a reasonable expectation of such earnings in the current year.