Jason Hartman hosts Carmen as they discuss current issues with her propery manager such as getting the house rent ready, putting a new tenant in and rent collection. In the second segment of the show Jason brings on guest Mauricio Rauld, Esq, an attorney who specializes in syndications. They go into Opportunity Zones, tax incentives, and the benefits and pitfalls of investing in them.
I first started reading the rich dad books that led me to looking at different motivational speakers. And I’ve stumbled on Jason’s podcasts about seven years ago. And then from then I was hooked. And after listening to him, and I really got a sold on his philosophy on how he looks at the market and real estate in general. And I wanted to jump into seven years ago, but I decided to open up a few businesses that they went pretty well. But you know, I live in New York, so there’s a lot of expenses over there. So those were not as according to plan so now I I saved my money up again, and I’m here.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, double author and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:24
Welcome to Episode 1234 1234. Today, we will be talking with an attorney. And hey, if there’s one bit of advice I can give any of you try to minimize the involvement of attorneys in your life. I say this because they can be expensive. And the worst part about them is, a lot of times, they just don’t do their job. Remember something I remember this from real estate school many years ago. And it’s very unfortunate that things work this way in the world, but it’s called the law of agency, the law of agency and this applies to anybody You hire a property manager and we’re going to talk with one of our clients here in a moment. You’ve heard her on the show before. She’s kind of a client extra. We’ll call it extra. Oh, God, okay, the show is going down the tubes already.
Jason Hartman 2:19
I’m calling it client extra, like those Mexican beers, they have like extra like Corona extra, you know, whatever that means, anyway. Okay. We’ll get to this in a moment, folks, bear with us bear witness. Alright, so we’re going to talk with an attorney. But here’s the law of agency. Here’s what I want you to know. Remember what I learned years ago, and this has come back to bite me many, many times. Is that the principle that is us, right? If we own the property or if we’re hiring the attorney, we’re hiring the accountant or hiring the whatever, we’re hiring someone as our agent. The principal can be liable for the agents actions. And so when I made the attorney reference Yes, attorneys can get us into trouble. You know, they don’t do their job, a lot of times, they will mess things up for you. And then ultimately, you’re holding the bag because they screwed up. This can happen with any type of professional, including a property manager. So we’re going to complain about property managers here a little bit. And our case study will be with my girlfriend, Carmen. She is actually a client. That’s how we met right?
Jason Hartman 3:28
Yes, I agree. Alright, so, I have been, I’m going to say I’ve been mentoring you a bit lately. And it’s sort of with this launch that is coming soon of what I’ve talked about with you the empowered investor community. More coming on this. I know a lot of you have asked about it. We are not ready to launch and we will sell no wine before its time as the saying goes. So we are working on this community diligently. It’s going to provide a ton of resources for investors. If you have property managers, we don’t want you taking any more crap from them, folks. We want you to stand up for them to stick up for your rights and to get the best deals to get good value for your money. And so Carmen’s been dealing with a couple of properties she has and dealing with property managers, and, you know, we were on the cruise in the Baltic Sea, and you were showing me things I’m saying, That’s ridiculous. Don’t do that. Don’t do that. Right. Some of these charges, they just, you know, a lot of you listening, I think you’re just paying for this stuff. Don’t pay for it. Don’t agree to this stuff, get competitive bids, shop around, push back, okay. You just don’t want to be in a position where you’re letting someone nickel and dime you to death. And it’s a little more than nickels and dimes A lot of times, isn’t it?
Yeah. Well, I want to give you a little background as far as where I’m coming from in terms of a being an investor. My original idea Yeah, which I still partially support is wanting to be hands off. My idea of having a property management, it was simply because I did not want to deal with it, which for a while it worked. Until now I’m in the situation where I’m having to deal with them. And it’s probably so much more work than having to do it myself.
Jason Hartman 5:20
Yeah, because if you did it yourself, if you are self managing, you would be dealing direct, whenever in any area of life, whenever there’s an intermediary party in the middle, it can really sometimes it’s beneficial. And look, we got to have intermediaries we live in a complicated world. It’s hard to do things without having intermediaries. But sometimes managing the intermediary person in this case, the property manager can be more difficult than just going direct and solving the problem yourselves. Sometimes delegating makes sense. Sometimes delegating doesn’t make sense. I think the distinction here is when we’re in the position where we have The technology and the resources to easily do it ourselves, we should consider not delegating. And today, because we have all these internet and technology tools, we can do it ourselves much more easily. But tell us about some of these intermediary party frustrations. Is it just the money Carmen? Or is it other things just kind of getting stuff done?
No, it’s a combination of things. So these I’m going to use one of the properties in this case, the tenants stop paying for the rent. And we eventually had to move to an eviction process which the property management deed by themselves since that I’ve been having problems with the property being in terrible condition because I believe that tenants have
Jason Hartman 6:46
pets that pretty much I saw the pictures. So here’s the thing. I saw these pictures, and they said that the property had a dog, a French Bulldog. Great. And then they said didn’t have a dog. I mean, which one is it?
Right. And that’s part of the problem here. So it’s there’s the part where they’re giving me all kinds of numbers, you know, for all these fixes, I mean, and some things they asked, they asked about they, they’re very careful about getting my approval to move forward. And then some others they just do without even telling me. Another frustrating part is that communication, so they, you know, they use a portal that is only limited to a certain amount of people.
Jason Hartman 7:23
Let me stop you there. So these tenant portals that the managers use, I don’t like them very much. They’re great for the managers. I just don’t know that they’re so great for us as the clients. And the reason I say this is the portal can be manipulated. If they’re emailing you, you have that email, when that email comes to you. It’s in your possession. And you have that thread that conversation thread in the portal, they can just change things, right. And so I don’t like that very much. You know, you might think like I’m using all their portals. Now. I’m I’m not I don’t use those portals myself of the managers. I just like them to communicate in the regular methods with me. But it’s like, sometimes the story keeps changing. Right?
Right. And it’s very hard to maintain a chain of communication. I mean, there’s always more than one person evolve. And these portals limit you to their to contacts on yourself. There’s no way to include anybody else, right?
Jason Hartman 8:21
Like us, you can’t include your investment counselor on there. And we want you to rope us into things, folks, we want to be here to help you. We are your support mechanism. And so if you’re communicating with a manager inside of their portal, you can’t see see your investment counselor on the email to get some help. Now, please do not CCS on everything. Okay, only when you really need some help. And that’s one of the things we offer we offer Lifetime support. As long as we’re around. We’re going to be here to support and help you with your properties. But take that to the next level with the empowered investor community that It’s going to be like a deep level of support.
And then with that, I mean, it’s a lot related to communication. You’d like you’d mentioned before before, they originally told me this 10, I had a pair they actually had given a pet deposit. And then on another communication, they said there wasn’t a pet. And that wasn’t on the lease agreement. So very confusing messages coming from the same people. So it’s just taking forever now to deal with the situation. It’s been three months since the tenant stopped paying rent, and the property is still not ready to rent again.
Jason Hartman 9:30
Right? Right. So it’s still not rent ready, but you are, I am glad you are pushing back, which is exactly what I’ve been telling you to do. And listeners, you’ve got to push back. If you are not self managing, and you have a manager, you need to ask number one, I’m going to say it again. I require all my managers to give me the actual quotes from the vendor doing the work now this is not new. I’ve been telling you this for you. Okay, when they give you one of these, say a rent ready quote, for example, they give you maybe a spreadsheet and it shows you this item that item that item. Number one, they’re not itemized well enough. They’re not specific enough. One example on one of yours, right? And we want you to learn from us folks, learn from our problems, okay? Don’t have your own problems learn from ours. And so they sent you a rent ready quote, and it was a spreadsheet. It didn’t have the names of any of the vendors doing the work. I told you to write back and say you want the quotes from the vendors actually doing the work. One of them was changed the air conditioning filter, and service the AC. Okay. I think it was $115. Now, an air filter cost about three bucks. Okay, hey, they’re like nothing. changing them is incredibly easy. Anybody can do it. And I don’t know what servicing the air conditioning means. What does That mean, who’s doing the work? Who is the contractor? Look, folks, you know, I have been litigating with these sleazy property managers that I’ve told you about before, who created, you know, I’m a legend, fake invoices and all kinds of stuff. They set up this shell company to Bill me. And you know, I just called him out. And you know, I’ve been I’ve been fighting this fight and I’m really not doing it on my behalf. I’m doing it on behalf of the industry, okay, because something has got to be done here about this type of abuse, you’ve got to get the invoices from the actual vendors doing the work, because in that example, we don’t know what service the AC means. Who’s doing it. What are they surfacing? What specifically are they doing? You know, it’s like saying, tune up your car. Well, what does that mean? Does that mean, you know, just changed the oil or does it mean a complete diagnostic tune up? You know, when you go into the doctor for a physical exam, there can be a very basic physical exam or very comprehensive one, you’ve got to get the specifics on that kind of stuff.
Just overall, the numbers are so high.
Jason Hartman 12:07
I mean, they’re ridiculous. They’re just quoting, absurd numbers
ultimately just leave me with a feeling that I’m being taken advantage off. And some other part of the deal was the lawsuit against these tenants who have not paid for three months. And this is money that that paperwork is written for that their management company.
Jason Hartman 12:28
My name is nowhere in that contract. And I just don’t know, I mean, would I ever see that money? Well, that is a yet another scam. We believe we have uncovered and we’re going to expose and this is the rent collection. Okay, so more to follow on this. But the basic idea is these property managers and this may be a big thing. It may be going on left and right. We don’t know how significant it is. But basically what they’re doing, we believe is they are going after these tenants suing them trying to collect for back rent and damage, and the owner may be long gone, okay? And they may have sold the property, they may have moved on and change managers, they might be self managing, they’re not in contact with that manager anymore. And three years, five years, whatever later, that property manager collects on a judgment, that is your money, people, that is your money, it is not their money, it is your money. And what I said, because they said, well, we’re going after the tenant. I said, Well, you need to put the owner, okay, you need to put Carmen’s name as a plaintiff, on that court complaint. So that judgment when it comes is in your favor, and they said, Well, we can the contract, the lease was signed between the management company and the tenant. But no, you can name another tenant, okay? I can’t imagine you Can’t do that anywhere in any state. So these are the kinds of things and why we really, really want to teach an army of people to self manage their properties. Now, look, if you’re going to have a manager, and I have managers, okay, so I don’t self manage everything, I self manage some, you know, with the managers good, I love them. And I keep them and I appreciate them. I don’t want to cast a wide net against all managers, but a lot of them are abusing the system. They got their hand in the cookie jar and one way or the other. So we’re going to keep you up to date on all these different things. And make sure you the investors are protected. We thought we’d have time to talk about the new cruise, but I don’t think we’re going to so we’ll mention it but we wanted to play a little video. Anyway, you were raising your hand with another plan.
No, I just wanted to mention one last thing. So I still would like to have you know, a company management properties, especially if you have big portfolios and things like that, but part of the challenge is not how Having necessarily the resources to do it myself, because I simply not in the location. I know I don’t know the contractor things like that. So having a place where I could go and find that information and that support that will be very helpful.
Jason Hartman 15:14
That’s exactly what the empowered investor community is going to be, among other things, and you know, Carmen, interestingly, I’ve hardly talked to you about this at all my plans for this community. We just haven’t talked about it. I know I mentioned it to you, but this is going to be a network a community where human beings to exchange information about the best and the worst vendors in any given area. We’re going to open it for only one market at first, and I’m pretty sure our first market we’re going to do it for is either Memphis or Indianapolis. Then we will add another market later and another market after that. This is going to be something you’re all going to love. It’s going to be great. Okay, look, we got to get to our guest today. But let’s just talk about the cruise so as you probably know listeners, a lot of you emailed me on this, the feds the Cold War is starting up again. I guess. No cruise ships, American cruise ships can go to Cuba now, or American ported cruise ships. They’re all registered in the Bahamas or whatever. So, you know, I’m not being technical here. Anyway, you can go to Cuba, there are Russian warships in the Cuban harbor right now. Crazy stuff going on in the world. So we have changed our cruise. And we have got a beautiful new cruise planned. Go to Jason hartman.com slash cruise. This is a venture Alliance event, but people can come as a guest. It is going to be a fall foliage tour. And it is on a gorgeous, gorgeous, very new ship. Cuba. One of the downfalls is on that Cruise is the big grand incredible ships can’t get into the ports there. Well, hey, now nobody can get in with those Russian battleships there. But um, we’re going to go to Newport, Rhode Island, Boston, Massachusetts, Bar Harbor, Maine. St. JOHN New Brunswick, Halifax, Nova Scotia, these places are absolutely beautiful fall foliage tour October 12, leaving from New York and returning to New York. So Jason hartman.com slash cruise for more info on that. And let’s get to our guests without further ado, and Carmen, just in case we had a new listener to the show. tell everybody where your accent is from you speak four languages, but where’s that accent from? Venezuela? Okay, and I want you to say one word for people, because it’s just really funny the way you said I love it. What is a shirt that bothers your skin, like a wool shirt? At eg eg atcg love it. Okay, without. Without further ado, let’s get to our guest and let’s hear about some important legal and real estate information. Here we go.
Jason Hartman 18:00
It’s my pleasure to welcome Mauricio Raul to the show. And he is an attorney. And he specializes in syndications. He’s been involved a lot lately in opportunity zones. And today we are going to talk about opportunity zones. The Good, the Bad, and the Ugly. Maria, welcome. How are you?
Mauricio Rauld 18:18
I’m doing great. Jason, thanks for having me. Appreciate it.
Jason Hartman 18:20
Good to have you on. So there’s a lot of hype about these opportunities zones. And, you know, I guess any deal can be good or bad, right? What’s going on in this landscape of opportunity zones?
Mauricio Rauld 18:33
Yeah. So this is a relatively obviously a relatively new law. In fact, we’re still in the phase where the government’s kind of trying to figure things out. In fact, it wasn’t just until about a month ago that we came up with the next set of regulations that brought a lot of clarity because a month ago, there was so much confusion and so much gray areas that people weren’t really comfortable moving forward. And so we just now have gotten rules that we feel comfortable moving forward, but by no means is this completely settled this one Part of Donald Trump’s tax reform bill back in 2017. And essentially what it was is the government, the IRS, and the Treasury Department, along with all of the governors of the state started designating particular zones. And these zones are essentially just communities that are really in need of capital, their dilapidated communities, you know, no one’s really investing there. And they’re in desperate need of jobs and desperate need of capital. And so what they did, which is what they often do is they use the tax code to alter our behaviors. As you know, our good friend Tom wheelwright likes to say the tax code is just a series of incentives. They make the government do what they want you to do via the tax code. And this is one of them. And so they’ve given us a lot of tax incentives to put money into communities that we otherwise would not be looking at, because they’re just you know, I was knock on Detroit, Michigan, but I just think Detroit, Michigan, right. They’ve had a really hard time of the last 10 years, in the last 10 years, over the
Jason Hartman 19:54
last 40 years.
Mauricio Rauld 19:57
40 years, and so getting capital and they’re getting economic activity, getting jobs, getting some of these real estate properties that are, you know, really dilapidated, get those renovated? That’s kind of the the idea behind the the opportunity zone and the way they’ve done that is through the tax code and given us some, some pretty nice tax benefits, which I’m sure we’ll go through.
Jason Hartman 20:15
Okay, good. So can you do this alone? Can you just buy a property in an opportunity zone and do whatever needs to be done to take advantage of this tax break? Or is that not possible?
Mauricio Rauld 20:28
Now, so there’s two things that need to happen for you to do an investment and opportunity zone number one, you have to we don’t have to, but in order to get the benefits, you have to take money that is obtained from capital gains. So this is not new money that you just write a check from your bank account. This is money that you’ve sold an asset, whether it’s real estate, you know, stocks, your Ferrari and precious metals, whatever it is, and now you have a capital gain, then it’s that game that you’re going to roll over similar to attend 31 exchange, you’ve got a certain amount of time to roll it over into an opportunity zone in order to make the things that Number one, and number two, and it has to be through what’s called a qualified opportunities own fund. And not to discourage anybody. When I say a fund that basically just means an LLC, for example, that’s a partnership. So you need a minimum of two people, you don’t have to do a syndication or a full fund, or have a million people in it, you know, you and I, Jason, you can get together and start this bond and the two of us can own it and we can then roll our capital gains into this LLC and then that LLC goes out and buys property and fixes it up.
Jason Hartman 21:26
Okay, so why would that be Why can’t you just buy a property? I mean, for example, I remember what I think was a much better deal years ago was the go zone. You were around in the days of go zone, probably remember that. That was a great deal. I mean, what happened unfortunately, is ultimately after the beginning stages, I don’t want to say is toward the latter stages. It was sort of after the beginning stages of the go zone. All the investors came in to take advantage of the tax benefits and they bid the prices up and they opened for Did you know tax incentives always distort Mark? Yes. Okay. And I think the same things definitely happening with opportunity zones you know all these investors rushed in to get the tax break on the go zone. And the people got an early made out like bandits I was one of them. I did well with it, a bunch of our clients did, but after a while, we stopped promoting it, because the deals were starting to look really crappy. And it was like people were doing these dysfunctional deals, just to get the tax benefit. And right I rule is a deal has to make economic sense. Before any tax benefit. If you know the tax benefits a great incentive for sure. But I don’t think you should ever do a deal just based on tax benefits. I don’t know just my rule.
Mauricio Rauld 22:45
Not only do I hundred percent agree but you you you’ve stolen a little bit of my thunder. That’s one of my ugly things in my report that I put the I spent a lot of time putting a report together because I wanted to get in front of this and that’s definitely one of the things I stress that you should never what’s the saying you should never let that happen. tail wag the dog. Yes, it’s good to make yet you want to make sure that the investment stands on its own merits. And, and yes, the tax benefits are great. But I always say, you know, capital gains are free taxes on zero or if you lose all your money, that’s not going to do anything for you. So you’re looking for an investment that’s going to appreciate and bring value to you. And so you’ve got to look at that independently and do the exact same due diligence you would do anywhere else. If you’re going into somebody else’s fun, you want to make sure you’re, you know, doing your due diligence on the sponsor. And if you’re doing it on your own, or, and when I say on your own, in this note with a partner, at least one partner, that you are doing your due diligence on the property and understand what you’re doing.
Jason Hartman 23:35
Alright, so don’t invest just for tax benefits. But where did we start that part of the discussion? So you can’t do it alone? Yeah, what could be the logic of it, you know, the law and the tax law especially is usually kind of has some logic to it. I think it’s rather logical, you know, they want to identify certain things. Why can’t you do deal alone?
Mauricio Rauld 23:54
I was going to argue logic and Congress in the same sentence may not make all the sense.
Jason Hartman 23:58
No, I know that sounds good. It sounds kind of funny to say, but it seems
Mauricio Rauld 24:03
like the answer is, I don’t know, one of the things I can think of is, again, the whole point of this is to drive as much capital as possible to these areas so that they’re definitely encouraging. Not one person to do this, but people that group large amounts of money and put it together. And so I’m guessing that’s part of it. But honestly, I don’t I don’t know specific answers to why it has to go through an LLC or corporation or something and can’t just do it on your own with your own personal no capital gains and roll it over. Yeah, that’s where it’s likely want to encourage funds, you know, and not individual investors. And I’m not sure why that is, they want more they want the most amount of money in those things. I mean, that’s the whole the whole idea behind this is obviously to spur economic activity, so the more money they can get in there, the better.
Jason Hartman 24:44
Okay, so the good the bad, the ugly continue.
Mauricio Rauld 24:47
Yeah, yeah. So the good obviously the good of the tax benefits, right? And that’s really for the way I break this down and because my mind that’s how I always like to break things down the good, the bad, the ugly, it makes it makes these good, these are incredibly and let me just take a step back. I mean, these are incredibly complex tax laws usually have a tax attorneys involved and this is this is really complex up. So I’m trying to distill this and sort of simple ways but this is definitely not a do it yourself project you want to have make sure you have a minimum of really good only an attorney working with you but somebody that’s the CPA, a tax professional, I can help you through like this is a very complex tax law. But the good, the bad, the ugly to me is a good way to organize my thoughts. And so the good is obviously, the tax benefits in this for incentives for you. The first one is deferral. So again, we’re talking about capital gains, right? So you’re taking money that you’ve, you’ve sold an asset, whether it’s real estate, precious metals, what have you stocks, whatever it is, you can sell that and then within 180 days, you must then roll that over into an opportunity zone founder qualified opportunities, own fun, and at that point, you get to defer that capital gains tax until whatever comes first, either December 31 2026, which is approximately seven years from now seven and a half years from now. or whenever you Sell the asset. So obviously, if you sell the asset in your three, then that’s when you’re going to pay the capital gains. And so there’s a deferral benefit for you, it’s not indefinite, it’s not forever. So it’s not potentially not as great as a 1031, which you can potentially do more, you know, almost indefinitely, but it is a deferral, it’s always better to pay taxes later than to pay taxes now, so that’s benefit number one. The second benefit is if you hold that investment in the opportunity zone for a minimum of five years, they will give you a 10% discount on that capital gain. So for you tax geeks out there, it’s technically a step up and basis. So they’ll give you a 10% step up in basis. And so if you had a $200 capital gain, then they’re going to knock that down to $180 in capital gains, if you hold that investment for five years, and again, the idea is they want you to keep that money in the in the dilapidated economic zone as much as possible. So that’s the second benefit, so to speak. The third benefit as if you hold the investment for a couple more years for a total of seven years, then you get an additional A 5% discount on that initial capital gains, so you get a total of 15%. So again, if you’ve got an edge, you probably use better math, if you’ve got $1,000 in capital gains than your base, it will be reduced, and you’ll only have $850 in capital gains. So you’ve got a 50% discount on your taxes, again, a nice little benefit for that. So that’s number three. The last one really is the main benefit, which is if you hold that investment for a total of 10 years, or more than the entire capital gains from that investment in the opportunity zone is tax free. So if you go out there and you buy a single family home for $100,000 and fix it up and 10 years later, you sell it for $300,000 then that $200,000 capital gain will be tax free.
Jason Hartman 27:43
Do you have to sell it in a certain timeframe? Is there like this sweet spot where you got to sell it at these certain points or something?
Mauricio Rauld 27:51
No, you’ve got to hold it for over 10 years. So as long as you sell it technically 10 years on one day, okay, then that’s when that triggers the complete tech capital gains. elimination,
Jason Hartman 28:00
but it could be 20 years later.
Mauricio Rauld 28:02
Oh, yeah, yeah, there is a limit, you can actually it’s I think it’s 2046, where that’s where it kind of stops. And at that point and capital gains you get above 2046, you start paying, that’s your basis stops going stopped going up there. At that point,
Jason Hartman 28:14
I sort of worry about this, you know, phase two of this. We’re on the back end, in 10 years, in a day, a bunch of properties are going to dump on the market opportunity zones, you know,
Mauricio Rauld 28:26
yes. All I know, is, yeah, we were talking about this a little bit offline. I mean, I’m talking a lot about the opportunities zones, and by no means am I here to endorse the opportunity zone and then saying it’s a good deal or not a good deal. I think everybody needs to evaluate them themselves. I’m just trying to point out all the good, the bad and the ugly. And, and certainly that’s just giving a little bit there’s no reason we have to go in order, but that’s certainly one of the bad there’s really a couple of Bad’s which is you brought one up, which is it creates an artificial demand right now money is flowing, people are investing in communities they otherwise would not have invested purely for the tax reasons. And that’s going to drive up prices and this is creating an artificial demand. Number two is just that if you’ve got a rush, and there is going to be a rush, and I’ll talk about that in a second, but there’s going to be a rush of people coming in before the end of the year. And so there’s gonna be a lot of people who are doing it in this, you know, in 2019. So, yeah, in 2029, you’re going to see a, you know, a nice chunk of properties are going to hit the market. Yeah. You know, what happens when you’ve got a flood of properties for sale?
Jason Hartman 29:21
Yeah, that’s been the prices decline. Yeah. Okay. Interesting, interesting stuff. So should someone listening, be thinking, Hey, I should set up an opportunities own fund. I mean, these things are growing like weeds. I mean, it seems like every day I’m seeing some pitch for an opportunity zone Fund, which also scares me because it’s like a mania. Right? And right, I have learned through many years of mistakes to walk away from media’s you know, which are listening, be thinking, well, I should set up a fund, or I should just invest in someone else’s fund. What should they be thinking?
Mauricio Rauld 29:59
Well, that’s a great question. I’m not in the business of giving investment advice but no that’s a great question. I think it’s the same analysis as if you’re looking to invest in real estate I mean, do you go out and buy real estate on your own? Do you go buy single family homes or you know four Plex is or small apartments or do you join? Yeah, you know what I’m gonna say do it on your own direct investor always Yeah, and I think that goes I think that goes to your sort of your personal investment philosophy right. You know, our good friend Robert Helms talks a lot about your personal investment philosophy and direction and some people yeah, some people don’t have the time or the you know, a lot of busy professionals have a lot of money but don’t have a lot of time and so it’s very appealing to partner with somebody who does have the knowledge and the time and other people you know, have the time or don’t trust other people they want to do their own due diligence and have more control over the property and spend the time and they have the time so it’s really an individual decision and just I think depends on your just like any other investment, your personal investment philosophy.
Jason Hartman 30:51
Yeah, where can people find out more from you and you know, any anything else they should know
Mauricio Rauld 30:57
one more thing and then and then they can get all the details of my Reports, I’ll give you the info on the report, if you email me at Ozi at premier Law Group net Ozi. At premier Law Group net, you can get a copy of my full report, which I call the anti lawyers guide to opportunity zones, the good, the bad, the ugly. One of the bads. And and I’m kind of debating whether it’s a bad or an ugly is that you do have this what’s called a substantial improvement thing that you have to do, which means you have to once you buy a property in the opportunity zone, you must invest the same amount of money that you that you attribute to the building, you have to invest that in the next 30 months. So if you buy a real estate, let’s say you buy a piece of property for $100,000, you determine that $80,000 is attributable to building and 20% is a triple double and then you have to invest an additional $80,000 in the next 30 months into improving that property because again, the idea here is to store economic growth and so they want to create jobs, they want you to hire contractors and stuff like that. So there is that substantial improvement test that you want to keep in mind. So you can’t just invest 100 grand and and walk away you’re gonna have to put a little bit more money into it. So keep that in mind.
Jason Hartman 32:01
Yeah, okay. Okay, good. There must be more things. I mean, we’ve done some other shows on this. And it feels like there’s just more ground to cover. Maybe. And I know you’re not in the investment advice area. But some of the areas that are opportunities zones, some of them are pretty blighted areas, some better than others. Yes. Sort of wonder, Mauricio, are these areas ever coming back how much improvement the opportunities own fun sponsors need to make? I mean, they pretty much need to be developers, it seems like versus investors.
Mauricio Rauld 32:33
The developers are sure this is probably the most attractive for the developers is obviously if you buy a piece of land and you’re going to be putting a substantial amount of money into that building. And obviously construction is expensive. So that makes sense. You know, if you’re buying a huge multifamily, there’s some questions as to whether you know, if you’re buying a $3 million building or even a million dollar building, you know, that’s a lot of capex to put in if you’re going to put another $800,000 into the building. And then the other thing that you I thought you were going to with it but not all opportunities zones are created equal. So the One of the criticisms of this law is that there’s some, I mean, there’s, first of all, there’s an opportunity to zone in every single state and every single major city. So there’s actually an opportunity zone in Manhattan, in LA, in Oakland, and some of these areas aren’t as dilapidated. So do you think when you’re when you’re envisioning this, and so there’s been some criticism, and that’s where I think the rush, you know, obviously, the first ends are going to get those those zones that are a little bit better off. And you are going to get this rush into properties, not only because of the opportunities own, some being better than others. But remember, in order to take advantage of this seven year tax, you know, to hold it for seven years, in order to get that full 15% discount, you have to make your investment by the end of this year. Because in order to hold that investment for seven years, you’ve you’ve got to get it in before the end of 2019 because you’ve got your 2026. So there’s going to be a rush of people who want to get that full benefit. So you’re going to see a lot of people going in, you know, in the second half of this year, and now that the regs have come out, and we’ve got some clarity, but yeah, that’s kind of where we’re at. And like I said, my report goes a little bit more detail and happy to share that with anyone who wants it.
Jason Hartman 33:59
Yeah, good stuff. Mauricio, thanks again for joining us. Really appreciate it.
Mauricio Rauld 34:03
Thanks for me, Jason. Appreciate it.
Jason Hartman 34:06
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