INVESTING IN TIC PROPERTY

A TIC is a form of real estate ownership in which multiple persons have an undivided, fractional interest in a property.  A TIC interest qualifies as like kind property in a real estate exchange and during the past few years has become an attractive alternative for many exchangers.

Characteristics of TIC interests.

TIC ownership shares are not required to be equal. Each co-owner receives an individual deed at closing for his or her undivided percentage interest in the entire property and shares "pro rata" in the income, tax benefits, and appreciation of the property.
 

Reasons for considering TIC ownership

►  Higher Grade Properties. Through TIC ownership, an investor can purchase ownership in an institutional-type property with a minimum investment. These properties can attract tenants with greater financial strength and stability than possible for the individual landlord which can produce more reliable income and growth potential.

►  Non-recourse Financing. The mortgages on many TIC are non-recourse, so there is no personal liability on the loan. The loans are also usually assumable by an individual investor allowing the investor to structure an exchange so there is no reduction in debt which could result in taxation.

► Professional Management. TIC properties are typically managed by large, well respected management companies.

► Diversification. Due to the low minimum investments in TIC properties, a buyer can decrease risk by diversifying into different properties in various geographic areas and types of property.

► Speed and Simplicity. When a property is offered for TIC investment, the negotiation process is typically complete, and survey, rent rolls, etc. are completed and available for review. All due diligence inspections are complete and ready for review. The closing can be completed in days, not months.

► Ownership Allocations. TIC owners typically receive monthly rental payments, sale proceeds and the depreciation tax benefits in proportion to their percentage ownership in the property.

► Alternative Identification. If an exchanger has only one primary property identified as replacement property and does not want to invest the time or incur the due diligence expense to identify a second or third property, identification of a TIC interest provides insurance if the primary property cannot be purchased.

How do you exit a TIC investment?

There are two ways: one sell your interest to another owner: or two, wait for the TIC to sell the property. When a TIC interest is sold the seller can elect to pay the tax due on any gain or set up another exchange and roll the equity into another TIC or any other real estate investment.