The gulf coast was pounded two years ago with Hurricanes Katrina and Rita respectively. Many people lost their homes and everything they owned in those homes. The damage was so bad that the President declared areas hit hardest by the storm as Disaster Areas. Because of this declaration and the complete devastation in some areas of the storm, there are now opportunities for some people to invest in commercial real estate and benefit greatly due to this tragic disaster.
The Go Zone, or Gulf Opportunity Zone is an incentives based program to lure investors into this part of the country and invest in the building and rebuilding of commercial properties. Areas most hard hit by the hurricanes, known as the Core Disaster Area, makes up the locales of the Go Zone. These parishes were the ones where the devastation was the greatest. Buildings were under water, high winds created problems by sending foreign objects into the buildings shattering glass and the very structure of the building. High winds tore roofs from buildings as well as doors and other parts susceptible to wind damage. Instead of having standing buildings when the skies finally cleared and the waters receded, there were sticks, stones, and structures that were no longer complete. This is where the devastation was greatest, residents either fled or were rescued, and businesses were torn to the ground. Now, several years later, rebuilding is ready to take place and the government has offered the aforementioned incentives to draw interest back to this wind torn location.
Commercial contracts awarded in the Go Zone are complete with governmental incentives. Go Zone tax exempt bonds were created to allow for interested investors to invest in commercial properties and some rental residential properties, and public utility properties. These bonds will provide monies for the construction, rehabilitation, or re-construction of the aforementioned properties. These bonds are tax exempt so the person doing the investing will never have to pay taxes on the money that they borrowed from the government. The interest rates that come along with these bonds are extremely low. This will allow for anyone who is willing to invest a little to get a lot in return. These investments are required to be paid back, but the amount paid back overall will be considerably smaller than a conventional loan that will charge you a much higher interest rate than the Go Zone bonds will.
Owning a structure in this way will help to ensure that the areas hit hardest by Katrina and Rita will have an opportunity to bounce back economically. If no businesses return to those areas, their financial situations will not improve much. Having commercial businesses in these locales will help them grow and thrive and perhaps become stronger locations in terms of business than they were before.
The offer of these Go Zone bonds do have a time limit. They will not be offered until every piece of land has been rehabbed. The acquisition of Go Zone Bonds must adhere to the following rules in order to be received by an investor:
- At least 95% of the monies received must go to the restoration or construction of the property.
- They must be qualified by the state for their appropriate purpose
- They must be issued before Jan.1,2011
This means that those interested in the redevelopment of Louisiana and other areas hit by the hurricanes have a limited amount of time left to apply for and receive these bonds. Four years may seem like a long time, yet to take a commercial project from start to finish will take many months if not longer. When you add several commercial projects to the list, it is easily seen how the four years can fly by like they were standing still. This is a great opportunity for investors, but serious investors should not wait to take advantage of it.
Businesses that are able to take advantage of this great offer include: office buildings, hotels, retail stores, warehouses and other buildings that have been zoned as commercial and will be used for commercial purposes. The bonds will cover materials bought and much of your integrated equipment and fixtures, but they will not cover movable equipment. Be sure to clear this with your tax attorney before moving forward. For a short time, these bonds will be available to those interested in private owned businesses and other developments, but still for commercial use. Any small business whose capital intake was ultimately lessened because of the hurricanes will also be able to benefit from the Go Zone bonds. They will be able to borrow money tax exempt and pay it back at the same interest rate as those that are constructing or reconstructing.
The offer of the Go Zone bonds is the offer from the government. For many areas, there are also other incentives being offered. When the incentives are combined, this becomes an even more lucrative opportunity for investors. This is an attractive offer for anyone. For some looking to relocate, this is a great opportunity to start brand new and make a wise career choice at the same time. You will have invested in property that you may choose to maintain, rent out, or sell. In so doing you may have a steady income, or you may choose to cash out on your investment immediately. Either way, you will have created a winning situation for yourself.
In the rehabilitation of the Go Zone, people are coming together to bring commerce back to the area that was hard hit by Mother Nature. At the same time they are making an investment in their future. The federal government has made that job easier and more rewarding by offering incentives that fall within certain regulations discussed above. This opportunity will not last for long, be sure to take advantage of it and be a part of this amazing process.
Tony Seruga, Yolanda Seruga and Yolanda Bishop of [http://www.maverickrei.com] specialize in commercial and investment real estate. As of May, 2006, they and their partners are managing over $600 million dollars worth of new projects.
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