Historically there have been two types of fractional ownership products referred to as Tenant In Common or TIC properties: the Securitized TIC and the Real Estate TIC. With a healthy real estate market and the resurgence of 1031 exchanges, there are an increasing number of people in search of a TIC property for their 1031 exchange. However, securities professionals have almost completely abandoned the TIC structure in favor of other structures. That being said, there are still a number of TIC sponsors who’s deal structure has withstood the test of time. 1031 Exchange Place can been in the 1031 business for over 20 years and can connect you with the largest selection of TIC’s available today.
A tenancy in common investment is an investment in piece of real estate which is co-owned with other investors. Some think of it as “crowdsourcing” a piece of real estate. Because the taxpayer holds a deed to the property as a tenant-in-common, this type of investment has qualified under the like-kind rules of IRS Section 1031 since Rev Proc 2002-22. This type of an investment appeals largely to exchangers who are tired of managing their rental properties. The appeal is in large, national tenants, long-term, long-term leases, net leases, and secure investment that provides predictable monthly income.
Access to Investment Grade Real Estate
TIC properties and the low investment minimums give 1031 and cash buyers access to high quality, institutional grade, NNN properties that otherwise are only available to larger of real estate investors.
The NNN lease structure combined with professional, third-party property management frees the investor from the headaches and hassles of day-to-day management.
TIC sponsors are typically long time real estate professionals that perform extensive demographic research and market analysis on each area where properties are located. It’s in their best interest to make sure that the business leasing the property is likely to succeed in that location and that the real estate has the potential to appreciate over time. Each investor has access to this pre-packaged due diligence information.
Greater liquidity or ability to resell
New buyers do not have to qualify for an existing loan as there is no debt against the property which makes the process of reselling a TIC interest much easier.
With investment minimums as low as $50,000, an investor can purchase more than one TIC property in order to diversify in their exchange.
Steady Monthly Income
The tenant corporation guarantees the lease payments to the property owners for the term of the lease. It’s simply direct-deposited to your bank account each month.
As with other real estate, another huge benefit to TIC owners is their proportionate share of depreciation to claim against property income on their tax return.
TIC owners receive their pro rata share of any capital appreciation of the property when it is sold. The appreciation of the underlying real estate asset is a component of the overall return on investment.
Convenience Off-The-Shelf Nature
Because there is typically no financing involved, purchasing a TIC property is very painless process. You simply select a property from current inventory and the dollar amount you want to purchase. This makes TIC’s a great backup replacement property option in case other options fall through after an exchanger’s 45 day deadline has past.
Save on Fees/Expenses
There are typically no closing costs, records a warranty deed to transfer ownership to you and sends you a prorated rent check based on the very day you sign. Additionally, investors save on appraisals and other costs associated with other types of real estate investments.
Available to All
Unlike with securitized TIC or DST investments, you do not have to be an accredited investor to purchase a real estate TIC.
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