In a Tenants in Common (TIC) structure, each of the co-owners gets an individual deed at the time of closing reflecting his or her undivided percentage interest in the entire property. TICs have been around for a while, and they have begun to gain more favor with those doing 1031 Exchanges. That’s because so many Exchangers have found it nearly impossible to locate replacement properties within the strict 45 days given by the IRS. The IRS seldom gives additional time to meet this requirement.
Using a TIC gives investors a lot more flexibility and diversification. Let’s say, for example, that you sell a small apartment building you’ve owned for 10 years and your equity is $300,000. Depending on any debt you still carry on the property, you could probably purchase a new investment of around one million dollars.
While that may seem like a lot of money to work, there is a chance that you still could not qualify to purchase an A- class property on your own. Investing that $300,000 in a TIC, though, could get you a million dollar interest in an institutional grade property.
Using a TIC you could become a passive investor in something like a luxury hotel or resort, office complex, apartment complex, or medical facility. This diversification could potentially assist you in reducing risk and increasing the value of your portfolio.
Additionally, it could also get you into a C or B class “heavy lift” value add project, without you having to do the heavy lifting. So you can realize the forced appreciation that these types of projects can offer without having to do the work. Instead, the full time professional asset management team is working to implement the business plan, while you enjoy the resulting increase in value of the asset.