The sheer ignorance of poor people: A put up or shut up moment for all the underclasses

Updated: May 10, 2019

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The news goes on and on about what was tweeted, who talked to Russia and who didn’t, who was included in the report and who wasn’t. Behind all of this a very important build up is mounting. Money the scale of which has rarely ever been seen is about to move through some of America’s poorest and most in need areas.

If you have money to invest and you haven’t pulled the trigger to get off the starting line. If you don’t have a lot saved up but have been talking about how to help the community this is your chance.

Nipsey Hussle

This must be why they laugh at us…

Whenever I wonder at the arrogance I see displayed by very rich people in the face of people with lesser means, I always wondered what drives that smirk that makes them seem as if there is a joke someone is telling, that only they get. Maybe just maybe, now you will understand that its simply that they can’t understand how people could choose to be so ignorant of opportunities to help themselves.

Over the past few weeks I watched an outpouring of articles and support for the Buy the block movement, and more calls to take back your community, driven in some part by the tragic death of community superstar Nipsey Hussle. But the calls fade fast. The social media presence is almost nonexistent, and the talking points never turn into action just “talking”.

Just learned about opportunities and it made me feel…

I am ignorant, ignorant of so many opportunities right in my face and as I discover what is common knowledge among the financially literate I feel sickened. I call myself someone fully invested in learning what is needed to invest smarter, and to take a greater role in shaping my future. But here I am… unable to take hold of what is common knowledge in my own city. So here I am in my own Nipsey moment and I want badly to have that felling he described in Blue Laces 2 -

it's a special evening

City council meeting, they got Hussle speaking

Billion dollar project 'bout to crack the cement

So one of our investments had become strategic

Summer roll '18, man it's such a season

'Bout to make my partners look like fuckin' geniuses

I always thought that cities and states planned years in advance where the money for development would go. Who would get the contracts and how they would ensure the poor would reap the smallest gains while suffering the greatest losses.

Now I realize that I was only considering my one-sided view of the matter, and that blaming the rich is like blaming clouds for not letting me hold them in my hands. I realize that anyone could know what was going on in their city and could make plans to prepare for what was coming. It simply took information to get disseminated down to you. Whether it was lack of interest in political affairs outside of slapping blame around or little to no desire for the responsibility of managing budgets, I have never stayed close to the parties deciding the future of my own community and for that I feel a deep and enduring sense of regret and disappointment. This behavior epitomized the stereotype that people need to take care of the poor and middle class because they “can’t do things for themselves”. It was this behavior that led to millions of people growing richer and richer while the poor and middle class sat tucked away and content away from the growing opportunities and completely unaware of them.

Let’s talk about Opportunity zones

When the current administration passed the tax bill in late 2017, it was highly publicized for it changes to the tax treatment of real estate, and other asset classes. Along with the tax changes, was a little something called the “Investing in Opportunity Act”. That act established the new opportunity zones program, which allowed states to name specific areas as opportunity zones. The program was designed to help revitalize (gentrify or improve) economically distressed communities using private investments rather than taxpayer money. To invest in an Opportunity zone, you would need to invest in a qualified Opportunity fund. Every state has them, and the local government should have participated in the naming of the tracts that would be labeled as opportunity zones.

Here is a link to the treasury departments map for all the zones:

To qualify for nomination as an Opportunity Zone, a census tract must meet the following low-income requirements as defined by US Internal Revenue Code Section 45D(e):

- A poverty rate of at least 20%; or

- A median family income of:

No more than 80% of the statewide median family income for census tracts within non-metropolitan areas.

No more than 80% of the greater statewide median family income or the overall metropolitan median family income for census tracts within metropolitan areas.

Up to 25% of census tracts of each jurisdiction that met this criterion could be nominated.

An additional 5% of each jurisdiction could qualify if they met a different set of income and geographic qualifications:

A census tract that’s contiguous with a low-income Opportunity Zone; and

A median family income of no more 125% of the median family income of the adjacent Qualified Opportunity Zone.

Under this scope, 57% of all neighborhoods in America were up for consideration as Opportunity Zones, according to the Brookings Institute.

There are restrictions on the types of investments in which an Opportunity Fund can invest.

These investments are called “Qualified Opportunity Zone property,” which is defined as any one of the following:

Partnership interests in businesses that operate in a qualified Opportunity Zone.

Stock ownership in businesses that conduct most or all of their operations within a qualified Opportunity Zone.

Property such as real estate located within a qualified Opportunity Zone.

There are rules that govern each of these three investment options.

The rules for businesses are similar to those of the Enterprise Zone Business requirements.

The types of real estate investments allowed by the program are limited to ensure that the communities are improved with each investment.

The way it breaks down is, Opportunity Funds can only invest in:

- The construction of new buildings

- The substantial improvement of existing unused buildings.

If an Opportunity Fund invests in the improvement of an existing building

It must invest more in the improvement of the building than it paid to buy the building.

Whether the building is constructed from the ground up or improved, the development of the building must be completed within 30 months of purchase.

What is the good about it?

To sweeten the deal, taxpayers who invest in Qualified Opportunity funds are eligible to benefit from the capital gains tax incentives built into the program. Opportunity Zones embody one of the best tax avoidance opportunities of our lifetime. It doesn’t matter where your capital gains came from:

1. Stocks

2. The sale of a business

3. Real estate projects

The Tax Act allows you to take your capital gains and defer them for up to six years by investing them in a Qualified Opportunity Fund. But get this, the deferral of gains is only one of the benefits. For any investment that is held in a Qualified Opportunity Fund for at least 10 years, any capital gains that would otherwise be incurred over that time span are completely forgiven.

Speaking plainly, it means that for a real estate development investment within a Qualified Opportunity Fund, this could translate into almost $.50 of every dollar invested into a Qualified Opportunity Fund retained by the investor rather than paid to the government ten years down the road. Most investors have never seen an opportunity like this before.

What is the bad?

Not all opportunity zones will fit every investment need or be in the desired investment locations. This will require you to dive deeply into what is available, who is taking advantage of the program and more specifically, are they going to stay in compliance. There is a lot of room for scammers to operate in this space as private equity has been given all the regulation as long as they stay in compliance with IRS rules.

Why does it matter to someone that doesn’t have capital gains to invest right now?

- You know where developers are about to pour millions and millions of dollars into an area.

Do you think houses in the area might see in higher than normal increase in value if they were fixed up?

Even if Commercial investing is not your goal, residential investing could see major room for rent increases in the area, so any rental properties developed ahead of the curve could see higher ROI as well as higher cash flow

Those are just the ones I can think of off the top of my head, there are thousands more, if your knowledgeable and understand the forces at work here. This is good for only ten years so the clock is ticking to get started.

Now that you know, what are you going to do?

Step One- identify the opportunity zones in areas you are interested in

Step Two – learn what Qualified Opportunity funds are already available or if you are eligible to start your own.

Step Three – Even if you can’t participate in a fund learn what other ways you can put your money to work for you

Step Four- Check the Nipsey verse below and get inspired:

Engine in the Lambo drownin' out the music

Silk Dior with the flowers, five gold cubans

Champagne while I shop, hope I splurge foolish

Closin' Escrow twice this month, both commercial units

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