TIC PROPERTIES . . .
Tenancy in Common (TIC) investments allow joint
ownership with other investors in real estate such as office
buildings, shopping centers or apartment buildings. Tenant in
Common (TIC) is a form of holding title to real property. It
allows the owner/owners to own an undivided fractional interest
in the entire property. The appeal of TIC replacement properties
for 1031 exchanges has caused the market to balloon in recent
years to an estimated $4 billion industry. It has become the
preferred investment choice for real property investors who wish
to defer capital gains via a 1031 exchange and own real property
without the management headaches. Management headaches are
eliminated because TIC offerings are packaged with professional
management and financing already in place.
Under the TIC co-ownership structure, you will own an undivided
fractional interest in an entire property and share in your
portion of the net income, tax shelters, and growth. Further,
you will receive a separate deed and title insurance for your
percentage interest in the property and have the same rights as
a single owner. Because TIC opportunities are often packaged
with management and financing in place, TIC investments offer
superior efficiencies in the identification, acquisition,
financing, closing, and operating stages of real estate
ownership.
Furthermore, fractional ownership provides you with the ability
to diversify your 1031 Tax Free Exchange into more than one
property and to participate in potentially larger, institutional
quality properties. Thus, small investors in one area of the
country may participate in large industrial, commercial, and
residential property investments all around the country with
professional management.
TIC investments provide simplicity by eliminating active
property management headaches. Individuals who are tired of the
day-to-day burdens of being a landlord or who own land and would
like an income producing property will appreciate the following
benefits of a TIC investment:
-
Cash flow is generally paid monthly and is
tax-sheltered via depreciation pass through and interest
deductions. You may also share in the appreciation of the
property when sold.
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Minimum equity requirements as low as $100,000
allow you to invest in high quality, institutional grade
properties. Otherwise, it may be prohibitive for you to acquire
property with a billion-dollar credit-worthy tenant guaranteeing
a long-term lease. These low minimums also allow you to
diversify, which can reduce your risk by allowing investments in
different locations, with various property types, tenants,
industries, etc.
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National real estate companies that structure
these TIC programs acquire (identify and locate, evaluate,
arrange financing, etc.), manage (maintain, lease, collect rent,
service mortgage), and sell the TIC properties. They have a
vested interest in the performance of the property. These
companies have strong track records extensive experience in all
sectors, types, and locations of real estate.
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TIC investments enable you to replace the
required debt on the 1031 when needed. Accredited investors
assume non-recourse (no personal guarantee) financing existing
on the property. You can invest in properties that have no debt
or in ones with up to 75% leverage.
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TIC investments provide the flexibility to avoid
the taxable boot if your preferred real estate doesn't allow you
to meet the full debt and equity requirements.
TICs are best known for their use as replacement properties for
§1031 exchanges. This is because a ready inventory of TIC
properties allows an investor to easily identify properties
within the 45-day identification period, acquire within the 180
days, or have a "back-up" property in case their preferred real
estate falls through. Although primarily used as replacement
properties for §1031 exchanges, many investors also use these
acquisitions for cash and IRA investments. Structuring all
offerings with "non-recourse" amortizing debt and passive income
makes them ideal choice for many investment scenarios.
Tenant in Common or “TIC” allows the owner/owners to own an
undivided fractional interest in the entire property. Under IRS
revenue procedure 2002-22, this co-ownership of real estate can
be treated as a form of holding title to real property. The TIC
structure allows up to 35 investors to own and control the
property, not a third party. For most investors, it provides the
first ever means for ownership diversity, both in location and
type, of their real estate portfolio. TIC investors may benefit
from:
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Interest in a significant real estate asset,
(perhaps larger than alone)
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Percentage ownership (title and deed)
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Prearranged financing
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Non-recourse loan structures
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Passive rental income
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Tax benefits of traditional real estate
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