Tenants-in-common (TIC) Properties are High Quality Real Estate that Qualify for 1031 Exchanges

Tenants-in-common properties, known as TICS, help US investors and taxpayers succeed better than with any other real estate investments - and they also enable the utilization of IRC (internal revenue code) section 1031 for fully tax-deferred exchanges.

Tenants-in-common properties enable real estate investors to own much higher quality properties than they could own and manage on their own. 

TICS are groups of like-minded individuals, both accredited and sophisticated, who join together as tenants in common, to own and manage very large, institutional-sized investment properties.

For example, instead of owning 100% of a rental house or condominium, a TIC investor owns an undivided percentage interest in a much larger property.  This must not be confused with vacation timeshares or vacation fractional ownership, which are entirely different – that is ownership of a fractional time-interest.

TIC ownership is a fee simple, deeded and undivided ownership interest in the whole property.  TIC entities earn their exact percentage share of income and tax advantages just as they would on their own property. 

But the difference is that, together with others, they own a much larger, more valuable, more stable and better quality asset. 

Another important difference is that they do not have to manage the day to day operations of the property.  They do not have to handle leases, collections, taxes, insurance, maintenance or capital improvements.  TIC properties are of such large size and quality (class A, $20 million and greater in value) that they require professional leasing, management and asset management for auditing and oversight.  All of these functions are carried out by experienced professionals, chosen for their expertise and cost-effectiveness.  The TIC owners have the power, anytime, to hire and fire these professionals as they see fit.

Still another benefit is that the net cash-on-cash return to the individual owners, investors, TICS, are usually better than the investor would earn on a lower class, smaller asset that they might otherwise own as a sole-owner.  Also, in many cases, the tax advantages are such that no taxes are due on the income derived from the property, since many properties use segregated cost accounting for the maximum allowable deductions for depreciation and expenses.

Yet another important benefit is that each TIC does not have to come up with their own financing since this is already pre-arranged by the sponsor.  Each TIC only needs to verify that they are sophisticated and accredited - that they have an accountant, an attorney, and that their total net worth is $1.5 million or higher, inclusive of real properties, bank balances and time deposits, retirement accounts, cash value of life insurance policies and personal property.

TICS give the benefit of size, stability and potential growth in equity, all while reducing the hassles of ownership to the bare minimum.  TICS enable the investor to get favorable financing at a time when it is very hard for individuals to do so.  At the same time, TICS maximize the net after tax income to the TIC co-owner.