I would ask for their business plan and project funding timeline and review for reasonableness.
Ask A Question
How can I make sure that the fund or developer will follow the 31-month rule?
I’m concerned that a fund I want to invest in may not be able to complete my investment in 31 months. How can I make sure that the fund or developer will follow the 31-month rule?
Answers
Important question to ask. Depending on your level of control in the project, this may affect your decision to invest in the project. Plus, there are other compliance requirements that must be met. Keep in mind the Opportunity Zone regulations provide exceptions for not meeting the 31-month rule, such as if the delay is caused by waiting for governmental approvals for the project. But if the delay doesn't meet one of the exceptions, you should make sure you understand the risks and consequences of the developer not meeting the 31-month rule as well as other compliance requirements.
You could require that the fund manager have an outside CPA firm or auditor confirm compliance with the 31-month rule.
This is risk of investing in an OZ fund. You have no control over the manager. You need to trust in the professionalism and competency of the promoter/developer. For this reason, I recommend only using experienced developers who are experienced in managing funds. The Opportunity Zone funds I have reviewed so far do not even indemnify you against the penalties. Right now, penalties are allocated against investor income. I would love to see the managers take on that liability as part of the operating agreement. The new regulations do give us some relief. If a project is delayed because of unforeseen delays in getting approval, the 31 months can be extended by the delay.
DISCLAIMER:the information found on this website is intended to be general information; it is not legal or financial advice. Specific legal or financial advice can only be given by a licensed professional with full knowledge of all the facts and circumstances of your particular situation. You should seek consultation with legal and financial experts prior to participating in any aspect relating to Opportunity Zones. Posting a question on this website does not create an attorney-client relationship. All questions you post will be available to the public; do not include confidential information in your question.