Real Estate Investing in Opportunity Zones
Opportunity Zone Investing
Redbrick is one of the largest Opportunity Zone (OZ) sponsors with approximately $1.7 billion of OZ projects delivered or under development. We are pleased Congress made OZ a permanent part of the IRS tax code in the One Big Beautiful Bill Act in July, 2025. OZ continues to be a powerful tax tool for investors harvesting short and long-term capital gains while also attracting capital to underserved communities. According to Economic Innovation Group (EIG), OZ incentives nearly doubled the amount of housing added to communities over a five-year period since 2019 and more than 350,000 new units have been added above and beyond what would have happened without the incentive.
What is the Impact of OZ Tax Incentives on Investment Returns?
This hypothetical example compares an urban OZ investment to a non-OZ investment over a 10-year hold.
Assuming a $1 million investment and a 13% annual return, OZ tax benefits—including tax deferral, a 10% basis step-up, and a tax-free exit with no recapture—may add approximately 500 bps of return and ~$1,000,000 of additional value at exit. To achieve a 13% annual return over 10 years in an OZ investment, you would need to earn ~19% on a non-OZ investment.
| OZ | NON-OZ | |
|---|---|---|
| Capital Gain | $1,000,000 | $1,000,000 |
| Initial Capital Gains Tax | None | ($300,000) |
| Initial Investment | $1,000,000 | $700,000 |
| Investment Value After 10 yrs. (assumes 13% annual return) | $2,175,848 | $1,524,800 |
| Distributions During Hold | $569,130 | $400,022 |
| Tax Benefits from Deductions | $353,117 | $247,028 |
| Payment of Deferred Gains Tax (Year 5) | (270,000) | $0 |
| Capital Gains Tax at Exit | None | ($247,440) |
| Depreciation Recapture | None | ($80,490) |
| Less Initial Investment | ($1,000,000) | ($700,000) |
| Net Dollars After Taxes at the End of 10 Years | $1,828,095 | $843,920 |
| After-Tax Net IRR | 12.8% | 7.9% |
Key Dates for OZ 2.0 Investments
- Gains realized after July 5, 2026 and invested on or after January 1, 2027 may qualify for OZ 2.0 benefits.
- Investors generally have 180 days from realizing a short or long term gain to invest all or a portion of the gain in a Qualified Opportunity Fund.
- Exceptions apply, especially for partnership gains reported on a K-1. Consult a tax advisor.