Opportunity zone fund investments are back. Granted, they never went away, but after generating a great deal of attention a few years ago, much of the excitement surrounding them died down.

However, investors are starting to pay attention again, with lawmakers in Washington, D.C., mulling proposals that could have significant implications for wealthy individuals and families.

An opportunity zone is an investment program created by the Tax Cuts and Jobs Act of 2017 giving tax advantages to certain investments in lower income areas . Qualified opportunity zone funds allow individuals to roll gains from any capital asset into under-invested communities and defer the income taxes until Dec. 31, 2026.

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Moreover, anyone who stays in such a fund for at least 10 years receives a stepped-up basis on that investment’s return.

On the surface, these benefits seem tempting. However, as financial advisors ponder deferral strategies for their high-net-worth clients who may be impacted by potential tax hikes, they need to understand some of the red flags associated with investments in opportunity zones.

Let’s consider the following:

1. The train has left the station. If the beneficiaries from pandemic-induced migration trends (think downtown Austin, Texas) are tier-one real estate markets, most opportunity zones are in pockets of the U.S. that are considerably less attractive from an investment perspective.

Therefore, even as some of these areas may have experienced an opportunity zone-fueled boom, that real estate is likely fully valued at this point. That leaves limited future upside, which is a problem given that investors must tie up their money for years to take advantage of the tax breaks.

2. The costs. Even low-cost, passively managed funds come with fees, whether to pay managers/advisors or tackle legal, marketing or accounting expenses.

And opportunity zone funds tend to have a lot of them, including product distribution, management, development and loan fees, as well as syndication costs. As with other types of investments, these fees will eat into returns, a point made worse by the fact that there are few proven fund managers/companies in this space.

3. The risks. Though every investment entails some level of risk, the timelines associated with opportunity zone funds create an extra layer. Once the tax deferral period ends in December 2026, many will likely cash out soon after, which could cause the value of funds to decline. That, in turn, will render the stepped-up basis in the 10th year somewhat of a moot point since many of the projects associated with these funds could experience negligible gains — or even lose money — over that period.

4. The time crunch. New opportunity zone funds are hard to establish even in the best conditions because it’s challenging for sponsors to deploy capital within 180 days, which is the time allotted to investors to roll over their gains and realize the tax benefits associated with them.

Anecdotally, we’ve reached out to several accountants on behalf of clients. They’ve all indicated that the overwhelming majority of these projects never get off the ground due to property identification concerns.

Of course, there are other tax options for high-net-worth investors.

It often makes sense for wealthy individuals to defer gains on real estate, company stock or other assets. That said, opportunity zone funds are not the answer.

Better options include so-called 1031 exchanges (real estate), 1045 exchanges (qualified small business stock), installment sales or a range of charitable giving strategies. As a rule, it’s never a good idea to allow the tax tail to wag the investment dog.

Though opportunity zones generated a buzz when first introduced four years ago, the fact is they’ve always been more about hype than substance when it comes to tax planning.

Therefore, even as the tax code could undergo some significant changes in the coming weeks, it’s best to keep them at arm’s length.