Neighborly is an investment company that allows investors to invest in communities seeking funding for internet infrastructure. More specifically, it focuses on bringing fiber broadband access to disadvantaged communities in the U.S. by way of direct investments in its qualified opportunity fund (QOF). As of now, investments in this QOF are only open to accredited investors, though this may change down the road. If you have questions about investing in these and other unique asset classes, try consulting with a financial advisor.
What Is Neighborly, and How Does It Work?
Neighborly’s goal is to increase nationwide access to broadband infrastructure. To do this, the company has created a qualified opportunity fund, or QOF, called the Neighborly Infrastructure Opportunity Fund. Through this, individuals can directly invest in the projects that Neighborly runs.
Part of what gives Neighborly the potential to be a valuable investment is its QOF. These funds provide significant tax incentives to funds that invest in economically distressed areas of the country known as qualified opportunity zones. These were created as part of the 2017 Tax Cuts and Jobs Act to spur economic growth.
Neighborly is currently partnering with three communities: Stockton, California; South Portland, Maine; and Maine’s Katahdin Region. The firm hopes to expand to more cities across the country in the near future.
Note that Neighborly originally focused on municipal bond investments before pivoting to its current focus on QOFs. At this time, the company no longer offers access to these or any other infrastructure funds outside of the aforementioned broadband fund.
How Can You Invest With Neighborly?
Neighborly isn’t open to just anyone who wants to invest in fiber broadband infrastructure networks for communities. You’ll need to apply to gain access, and you’ll only be considered if you’re an accredited investor. Here are the main ways you can become an accredited investor:
- You must have at least $200,000 in individual income or $300,000 in joint income during each of the last two calendar years. You need to further demonstrate that you can maintain that level of income during the upcoming year.
- If you have either an individual or joint net worth that surpasses $1 million, you can also be considered an accredited investor. This net worth calculation must exclude the value of your primary residence.
Should You Invest With Neighborly?
Neighborly is trying to connect communities with fiber broadband infrastructure, which can spur economic development. If impact or socially responsible investing (SRI) is of interest to you, Neighborly might be a good place to start.
Another potential reason to invest with Neighborly is that QOFs offer major tax incentives through President Trump’s 2017 tax bill. For example, if you invest in a QOF for a decade, you’ll only have to pay taxes on 85% of your capital gains during the seventh year. After that, you’ll get to skip out on capital gains taxes. QOFs are a relatively new asset class, so it could pay to be ahead of the curve.
Neighborly occupies a fairly specific corner of the market. Because of this, there aren’t really similar platforms through which you can invest in broadband infrastructure projects.
The History of Neighborly
Now located in San Francisco, Neighborly was established by MIT graduate Jase Wilson in 2012. Prior to and during his time at Neighborly, Wilson worked throughout the local community support industry. Most notably, he spent time at Code for America Brigade and Luminopolis.
Wilson’s original idea for Neighborly was to further open up the municipal, or muni, bond market to individual investors. Municipalities often sell bonds when trying to raise money for big projects, like transportation expansion or new parks. Through Neighborly, Wilson wanted to give people a way to directly invest in the public infrastructure of their communities. Unfortunately, this asset class is heavily occupied by select traders and other middlemen, making it difficult for normal investors to buy in.
However, this muni bond trading platform Wilson envisioned never came to fruition. Neighborly developed a working platform using blockchain technology in 2017, but the U.S. Securities and Exchange Commission (SEC) needed more information before they could go live. The SEC ultimately cleared the platform, but Neighborly had already abandoned it. While it’s unclear exactly why, the high costs associated with navigating the highly-regulated municipal bond market likely didn’t help the endeavor.
Any money you invest in Neighborly’s QOF goes directly towards financing for fiber broadband network infrastructure. That can obviously have a huge impact on any community, but particularly for those that aren’t especially wealthy.
So although Neighborly’s business model has pivoted dramatically from what it originally was, it has retained its desire to have a positive impact on American communities. If you have questions regarding whether you qualify as an accredited investor or if the Neighborly Infrastructure Opportunity Fund is a good fit for your portfolio, consider meeting with a financial advisor.
Tips for Investing
- Although the potential returns that investing can garner steal the headlines, you can’t forget about taxes. For insights into what you can expect to pay Uncle Sam out of your returns, stop by our capital gains tax calculator.
- While it’s possible to build a portfolio of investments yourself, a financial advisor can be a big help, especially if you’re looking to invest in more unique asset classes like qualified opportunity funds. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
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