2044 – Investing Smart: The Power of Opportunity Zone Investments with OZPros’ Ashley Tison

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1:05with us right now ashley tyson ashley you are the founder and president of oz pros found on the web at ozpros.com we're going to talk about what oz stands for in this conversation it's great to have you ashley josh it's a honor and a privilege to be here uh thanks again for having me on Absolutely. Well, tell us a bit about OZ Pros and who you serve and what you do. Yeah, so I am an attorney. I like to call myself a reformed attorney. I wanted to stop practicing and actually get in the game. And so I started out with a big firm, a little bit of background, right? Like started out with a big firm, ended up going into a big law firm and it sucked my soul.

1:53And I was like, man, I need to get into where I can actually help people and do some impact work. So I set up this impact investment company and started doing real estate syndications through these things called Tenants in Common. And when the commercial real estate market crashed in 2008, went back to practicing law, built up an M &A shop, and was bringing Wall Street level sophistication to Main Street America, where we're helping business owners buy and sell businesses. As we went through that process, I saw how much money people were leaving on the table. And I was like, man, it's not about how much you make.

2:30It's about how or how much you can sell your company for. It's about how much you keep after Uncle Sam takes his cut of your deal. And I saw all these people just leaving senseless tax dollars on the table. And I was like, listen, we've got to do something in order to correct that. And so we started a succession planning and tax mitigation firm doing consulting for that stuff. And right around that time, I sold my law firm in order to be able to do this. Right about that time was when the Opportunity Zone legislation came out. and it was through the tax cut and jobs act of 2017 and it created this wonderful hybrid of 1031 and private equity as a matter of fact my favorite quote is that it's like 1031 and private equity got married and they had this beautiful baby and they're named opportunity zones and through an opportunity zone you can basically defer capital gains any kind of capital gain long term short term and you can do it after the sale so there's a lot of tax planning techniques that require you to do it ahead of the sale.

3:32Opportunity zones allow you to do it after the sale. And we were able to, I mean, literally we've been able to save people hundreds of millions of dollars in taxes by putting them into and setting up their own fund so that they can take advantage of this, you know, what I think is the greatest tax incentive program ever created by Congress. And we did that and we set up OZ pros in order to do that. And so we take advantage of opportunity zones. And then we use the opportunity zone legislation in order to defer the taxes and help them take advantage of some of the other tax mitigation strategies that are out there to even further reduce and potentially even eliminate the tax bill that they pay.

4:14I need a little bit more help on understanding what opportunity zones mean. Pretend we're a high school class here. And so if you were trying to give us a 101 on this, could you enlighten us. Yeah. So Congress created it in order to incentivize people to invest capital gains, to take capital gains out of the traditional market or out of real estate and put it into areas that are underserved. So they gave the governors the ability to designate up to 25 % of their low income census tracts as opportunity zones. And if you take capital gains, you put them into a Qualified Opportunity Fund, which is literally just an LLC taxes a partnership, and we help people create these captive funds, then you can defer your taxes on that original capital gain.

5:03And then what you invest into comes out completely tax-free after 10 years. And so the growth of your future investment, whether that's real estate or whether that's an active operating business, ultimately gets their taxes eliminated on that new investment. And it was designed in order to incentive people, incentivize people to go into these areas that had historically been underinvested into. So it's resulted in$150 billion worth of capital coming into these opportunity zones, which has had pronounced impact. So the price of homes has gone up in these opportunity zones. There's been massive amounts of development, real estate development, and businesses that have started in opportunity zones that otherwise probably would not have gone there.

5:52What it presents for your listeners is the ability, so if they have capital gains, if they have a tax burden, for us to be able to defer that tax burden and then to get them into whatever their next venture is, whether they're taking money from out of the market or whether they're starting a business or whether they're going out and they're buying a business, we can make it so that the future growth of that comes to them completely tax-free? Yeah. Again, in terms of from an investment portfolio standpoint, yes, there is obviously the, hey, we're actually doing something good here. I think about maybe communities that really have just not seen investment dollars.

6:42And so maybe there's been some degradation in terms of the standard or just what it looks like. I'm curious if there are different risks associated with Opportunity Zone investing, what those risks might be, and also what might be some, not only just intangible returns, but what are the unique returns that that could be had from this sort of investment strategy? Yeah, so, you know, I have that question all the time. Well, aren't opportunity zones in the derelict areas, or people call me and they'll be like, hey, this place is in the this is in the dodgiest part of town, right? This has got to be an opportunity zone.

7:27And a lot of times it's not. And the the governor's got to designate the zones. And there had to be either a low income census track, or they had to be adjacent to it. And this was based off of the 2010 census. And so a lot of those 2010 census tracks that were low income back then have completely morphed. We were talking about it before we went on recording. We were talking about an area that's right across the street from the Air Force Academy. And granted, I don't think that that was a low income census track, but it's exploded recently. And there's a lot of, you know, tracks that have done that.

8:01They were either previously industrial and now they are vibrant, you know, you know, residential areas or just areas that that hadn't got the investment. and now they are getting the investment because of opportunity zones and the values of those are increasing. You know, when you, when you do a real estate deal or when you're doing a business deal, what you're trying to do is create value. You're chasing alpha. And in chasing that alpha, what you're wanting to do is to try to make as much money as you can on the buy. So you're looking for undervalued stuff that you think is going to increase as much as possible.

8:37Opportunity zones create that vehicle, right? Because they're encouraging you to go into these areas that might be a little bit less valued. And then they're also giving you the backside benefit of at least a 20 % savings. So you're going to pay at least 20 % in capital gains taxes on the growth of that investment, sometimes 23.8%. And that's not including state tax. Usually you're in the 30 % range and opportunity zones allow you to eliminate that 30 % tax. and so and going into like your other point right is that there's a byproduct in doing one of these deals you are by very definition helping into incentivize and to help create jobs help create activity help create economic vibrancy in these communities you know a dollar of you know outside capital into these communities usually has between a five to 10 X, uh, you know, multiplier on it with respect to what it does for that community.

9:40And so it's been really exciting to see, you know, the downstream benefit of when people do an opportunity zone transaction, how lives are getting changed. Yeah. Um, Ashley, who would be like an ideal, I don't know if there's like a kind of an investor profile, someone, you know, maybe their situation would just be really ideal for this sort of strategy. Like who comes to mind? Yeah. So anybody that's got a capital gain that is either that they're getting ready to have, or that they've already had within the last 180 days, or if it was through a partnership, we can go all the way back to the beginning of the previous year.

10:19So for 2024, we're able to defer somebody's tax that they had, you know, January 1st of 2023, if they get it in by September the 11th of this year. And so it's anybody that's had that capital gain, they are a candidate. So that's the first realm of folks. The second realm of folks are people that are starting a business, people that are buying a business, right? That, that they're buying it from somebody else. If they can buy that business and move it into an opportunity zone, we can show them how they can make all of the future growth of that business come out completely tax-free. And so those are kind of our investor profiles.

11:00Somebody that's had a capital gain or that's going to, they got a bunch of crypto and they're getting ready to sell it. We can help them to mitigate the taxes on that or somebody that's getting ready to start the next Facebook and they want to do so in a way that's going to be tax advantaged, we can put them in an opportunity zone and we can make it so that all of the growth, so let's say they start it for$5 ,000 and it grows and they exit it for$5 billion. All$5 billion is going to come to them tax-free. Very cool. And Ashley, tell me a little bit about how you work with your investors. Like how do folks engage with you?

11:39How do you help them support them? Yeah, so like I said before, I'm a reformed attorney, so I hate sending billable hours and all that kind of stuff to people. And so we've got packages. Our sweet spot is setting up qualified opportunity funds and helping people actually do opportunity zones. And so we've got a package where we set up your fund, we set up your QOZB, we do all the documents associated with it, and we help you with the compliance. And that's a flat fee. People can also engage with us for a strategy call. and instead of getting a bill for that on the back end, they pay for it up front and we can walk through and say, hey, listen, yeah, okay, your stuff's gonna work or it's not.

12:18We've got, for somebody that is one of your clients, we'd love to jump on a free 15-minute phone call with them and have a consultation with them just to kind of see and to take their temperature. We've got webinars. We've got a string of YouTube videos for people that wanna learn about opportunity zones. And then we also do compliance. so we're here to make sure that you're building out your audit trail and that you're building out the backup to the documentation. Because the great thing about this program is that you don't have to ask for permission. You don't have to go to the IRS and say, hey, can I do this program?

12:51Is this gonna work? You just have to do it, but then make sure that you do it correctly. And so that's what we help people do. We help them do it correctly and we make sure that they've got a comfort and a state of mind that they're going to be okay if the IRS comes knocking down the road. Yeah, I am on how many opportunity zones do you think there are in a typical city or state? So a lot of it's going to depend on how concentrated the census tracts are, right? So if you're east, right, those census tracts are very dense because you've got a lot of people in one place. If you go out west, that population spans out.

13:31And so the census tracts are typically larger. But if you go to ozpros.com slash map, you can pull up every Opportunity Zone census track that's out there. And there's approximately 8 ,700 of them. Wow. And they're in almost every urban area and every state. So every state, every territory has one. And usually each state will designate it so that every county has at least one. And so, you know, and there's also a ton of them around college campuses. one of the huge things that we've helped people do is to buy like if they've got a kid that's going to uh to college we've helped them buy airbnb assets inside of that and to package it as an opportunity zone deal so that that way the growth of that asset you know over the next 10 years comes out to them tax-free and um it's been really exciting to kind of see the the gamut of things that people do you know we've got farms we've got like i said airbnbs we've got uh you You know, we've got people that are doing flex industrial centers, you know, and then they're turning them into blue collar incubators.

14:38We've got people that are, you know, it's amazing to see the level of creativity that people can apply to this. And what's really, I think, unique about this place-based economic incentive is that it's not limited to just real estate. So you got typical 1031 where you can defer with that, but all you're doing is deferring within that. And it's got to be real estate based. This allows you a similar arrangement, but it can either be real estate or it can be operating businesses, which I think is the huge distinguisher about opportunity zones. Yeah. Okay. This is all very fascinating. And I suspect that there may be others like me who are a little motivated.

15:20Like, I want to learn more. Sure. And so your website is ozpros.com. Where do people go from here? yeah so literally go to oz pros.com and if you want to find your address go to oz pros.com slash map or you can click on we've got a map link on our website i've been playing with it while we've been talking i see opportunity zones near me now there you go right and if it's blue yeah it's you right so you're good to go if uh if if it's blue and uh and then if they want to if they want to jump on a call with us if they're oz curious uh or if they're like hey man i'm I'm curious.

16:02We'd love to jump on a quick call just to kind of flush out to say, okay, yeah, we can absolutely help. Or if your deal doesn't work. So if you've got like a retail center that needs to be in like the swankiest locations, more than likely, you're probably not going to work. or if you've got something that's, you know, like one of the things they shut down is that you can't form like a stock trading company and then go buy a bunch of stock and then have the appreciation of that come out tax-free, kind of similar to crypto. Now we can, and we have helped people do crypto mining operations, but we'll be able to really, really quickly be able to say, yep, I think your deal will work or no, I don't think that it's probably going to work or it's going to justify, you know, the stuff that you're going to have to do associated with it.

16:47And the key thing for people to understand is that it's not about what your gain is now. It's about what your gain is going to be in the future. So if you've got something that you think is going to grow and you think it's going to massively grow and you're concerned about capital gains taxes going up, which who isn't based upon like what is going on in our country, we got to service that national debt somehow. Right. And so they're looking to go after the rich. They're looking to go after capital gains. And this is a way to effectively mitigate against that. Build wealth, save money on taxes, do well by doing good.

17:22Ashley Tyson, again, you're the founder and president at OZPros, your website, OZPros.com. Go play around with the map, see where the opportunity zones are near you. That's OZPros.com slash map. It's been a great conversation, Ashley. Thank you so much. Thank you, Josh.

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