Leveraging equity loans to invest in real estate is nothing new.  Those of us with a substantial size portfolio with stocks and securities have contemplated this vehicle before.  But to leverage our stocks for opportunity zone investing, via a stock loan, is a different approach.  For one, we are not going to get the same tax advantage savings as laid out by the IRS.  However, you could fair better than a Qualified Opportunity Fund by simply following the money.  Here’s how.

It is well known most assets are expected to stabilize five years after lease-up.  With an Opportunity Zone investment, to defer tax on an eligible gain, you must invest in a Qualified Opportunity Fund in exchange for equity interest (not debt interest) within 180 days of realizing the gain.  Your investment must be held for ten years before you can make an exit, tax free.  We’ve also learned you can make an exit from an Opportunity Zone investment before the ten hold is satisfied as long as it is role into another Opportunity Zone project.  We can only hope the market would be favorable when its time to make an exit.

If a biotech or pharmaceutical company decided to invest in an Opportunity Zone the property value in the surrounding area will shoot up over night.  At which point your investment would remain whole for the next ten years or until your grandchildren decided pull out of it.  But since most Opportunity Zones are in distress a white glove approached is taken for an investment that would have the most impact.  This is where leveraging equity loans come into play.

Upsides To Leveraging Equity Loans

• You increase your family’s security by the fact of reducing your concentrated risk
• No cross-collateralization; the stock is the collateral
• You get all the benefits of appreciation if the collateral increases in value
• It’s a private transaction
• It’s a non-recourse loan
• It does not impact your Personal Financial Statement
• Fixed interest rate
• Loans from $1MM-$500MM

By leveraging equity loans to invest in Opportunity Zones you are not beholden to a ten year hold.  If the market is ripe to make an exit in three years then thats your call.  You can roll your gain into another investment vehicle, as per usual.  For one cannot know where things will be in ten years.  It may behoove you to to stay in the investment for fifteen years or more if there is an good corporate tenant in play.