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TIC Basics:

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. In addition, it has become the preferred investment vehicle for real property investors who wish to defer capital gains via a 1031 exchange and own real property without the management headaches.

A popular choice among real estate investors seeking replacement property for their IRC Section 1031 tax deferred exchange is Tenant-in-Common Ownership (TIC), also known as fractional ownership. Under this 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 may offer 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 Exchange into more than one property and to participate in potentially larger, institutional quality properties. Tenant-In-Common properties are typically institutional-grade properties, such as office buildings, shopping centers, apartment communities, warehouse/distribution, or industrial property costing anywhere from $5 million to $100+ million. Properties are available on a nationwide basis. 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:

1. 1.  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.
   
2. 2.  Minimum equity requirements as low as $100,000 allow you to invest in high quality, institutional grade properties. These low minimums also allow you to diversify, which can reduce your risk by allowing investments in different locations, with various property types, tenants and industries.
   
3. 3.  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 usually have strong track records and extensive experience in various sectors, types, and locations of real estate.
   
4. 4.  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.
   
5. 5.  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.

TIC's are not for everyone.  Some other considerations  are:

1. 1.  As with any real estate investment, there are various risks including, but not limited to: loss of principal, variations in occupancy which may negatively impact cash flow, limited liquidity, relatively long term hold periods, and limits on management control of the property.