Why Tenants in Common Properties (TICS) are the Wisest Choice in Today’s Uncertain Real Estate Marke

Today’s investors are facing a real estate market and investment environment that many find simply overwhelming.

Fresh off the giddy highs of one of the strongest and longest bull runs in real estate (1995-2005) investors now face credit contraction as a result of the failings of the collateralized mortgage obligation (CMO) market.

Not only have real estate investors had the rug pulled out from under them in terms of their expectations of equity growth, the real estate market has quickly turned from a seller’s market to a buyer’s market.

To make matters worse, while interest rates for real estate financing have risen, US Treasury and CD rates have fallen.

Real estate investors and investors in general have few safe havens except tenants in common properties (TICS) to which they can turn.

Fortunately the IRS has not repealed or modified Internal Revenue Code (IRC) Section 1031.  Real estate investors can yet take advantage of the only gift that the IRS still grants to US taxpayers – the fully tax-deferred 1031 exchange.

TICS TO THE RESCUE

Individual investors, now more than ever, need to think like institutional investors.

Institutional investors know that the biggest and best class A institutional grade properties maintain their value better than any other class, in both good markets and bad.

Individual investors need to fully grasp the reality that bigger is indeed better.  Bigger is safer.  Bigger is more stable.  Bigger is less risky.  Bigger properties have the best chance of growing net operating income (NOI) and as a result, increase the probability of a good profit upon final disposition.

Tenants in common properties (TICS) are the only way for individuals to pool their equity together with other like-minded investors, then add a conservative amount of leverage (50 - 60% LTV) in order to purchase and own institutional grade investments ($20M and greater). 

With tenants-in-Common property investments, real estate investors and 1031 exchangors can well-afford to accept less for their down-leg property since they can put that equity to work immediately in a tenants-in-common property.

When the TIC properties employ segregated cost accounting, the net cash-on-cash return can be twice the cash-on-cash return of smaller, lower class and much riskier investments. 

 In addition, tenants-in-Common property investments are easy to own thanks to professional property management and asset management for auditing and oversight.

In today’s market the return of equity is just as important as the return on equity.  And that’s what you can count on with top quality tenants-in-common properties.