Delaware, with its rich history and strategic location, presents a dynamic landscape for real estate investors. Understanding the various tax and financial incentives available can significantly impact your investment decisions and outcomes. Whether you're a seasoned investor or just starting out, Delaware offers a range of programs designed to encourage investment in different sectors of the real estate market. From revitalizing downtown districts to fostering sustainable development and preserving historic properties, these incentives not only boost your investment potential but also contribute to the broader economic and community development of the state.
We sat down with local expert Dan Bond to review some key programs that can help you maximize your real estate investments in Delaware, ensuring you make informed decisions that align with your financial goals and the state's growth initiatives. Check out the full video here, and view the highlights below (each program’s website is linked in the title)!
Revitalize your real estate investment in Delaware's heartlands with the Downtown Development District program. This initiative breathes new life into 12 designated municipal districts, including Wilmington, Dover, and Milford, offering a lucrative 20% offset on capital construction costs for both new constructions and rehabilitations. The Delaware State Housing Authority (DSHA) administers this program, complemented by city-specific incentives like reduced property taxes and fee waivers. The program is divided into two: Large Project and Small Project set-asides, catering to projects of varying scales with minimal application hassle for smaller projects.
Elevate your investment portfolio with the Catalyst Fund, a unique opportunity leveraging American Rescue Plan Act funding. With a focus on transforming vacant or blighted buildings and developing new homes for low- and moderate-income buyers, this $20 million fund is a boon for new and emerging developers. It guarantees a modest profit margin and offers construction financing through Cinnaire, along with a sales gap subsidy from DSHA. The program, prioritizing developers with real estate development training, ensures a maximum developer fee of $20,000 per property.
3. Renewable Energy, Energy Efficiency Grants & Tax Credits
Go green and gain with federal and Delaware incentives for sustainable home construction and renovation. These incentives encourage the integration of renewable energy and energy-efficient features, like solar panels and geothermal heat pumps. Delaware's Sustainable Energy Utility (SEU) and programs like Energize Delaware offer rebates and guidance for using energy-efficient appliances and systems, aligning with the ENERGY STAR program requirements. Builders can also benefit from Federal Tax Credits for incorporating renewable energy or energy efficiency components.
Preserve the past while profiting in the present with State and Federal Historic Tax Credits. If your property is part of the National Register of Historic Places and adheres to the National Park Services' rehabilitation guidelines, you could be eligible for tax credits equal to 20% of renovation costs. While the State credits are transferable, the Federal ones are not, and a five-year ownership post-rehabilitation is mandatory. This program, though paperwork-intensive, offers a unique avenue for investors in historic properties.
Explore the tax-efficient frontier of Opportunity Zone investing, a national initiative aimed at uplifting economically distressed areas. By investing capital gains in Qualified Opportunity Zone Funds for a minimum of 10 years, investors can enjoy significant tax benefits, including deferrals, reductions, and write-offs. This program is ideal for investors looking to pool resources and focus on long-term rental properties, particularly in multifamily developments. Delaware offers unique opportunities in this sector, with financing available from institutions like NeighborGood Partners and Cinnaire, focusing on rural and low-income areas.
Conclusion
Delaware offers a diverse range of tax and financial incentives for real estate investors, each tailored to different types of projects and goals. Whether you're revitalizing historic buildings, contributing to sustainable development, or investing in distressed areas, these programs provide valuable opportunities to enhance your investment portfolio while positively impacting the community. As a real estate investor in Delaware, tapping into these incentives can be a game-changer for your investment strategy.
If you have questions about any of these programs, please reach out to our team. We have helped many investors successfully navigate these programs and would love to help you in your investment journey! Send an email to cheers@theparkergroup.com or give us a call at (302) 217-6692.