Tenancy-in-common or TIC is a shared ownership investment strategy under which two or more investors co-own one property. A TIC investment lets small or medium-sized investors co-own large investment-grade properties along with other investors. A TIC can have as many as 35 investors. Don’t mistake a TIC investment with joint tenancy. They differ in many ways. As a TIC investment is a real estate investment, it qualified for a 1031 exchange. It is loosely termed as 1031 TIC Investment.
Benefits of TIC Investment
- Low investment – As mentioned earlier, a TIC can have up to 35 investors. Due to its large structure, a TIC accepts small investments too. As you co-own a property along with other investors, the cost of the property gets divided among all the investors and not on one.
- Regular flow of income – When you sign up for a TIC Investment, you ensure a steady income, appreciation, tax benefits, etc., for yourself. TICs usually have prominent tenants with high credit ratings, which means chances of default are very less.
- Less expensive – As several investors co-own the same property in TIC, managing and maintaining a TIC property isn’t that expensive.
- Choose your heir – You can choose your heir in a TIC. There are only a few investment strategies that allow investors to choose their heirs, and TIC is one of them. Your heir will receive the property title and shares after your demise.
- Own entire property – When you invest in TIC, you own the entire property and not a portion of it. Every co-investor is the owner of the TIC property.
Though a TIC investment comes with several benefits, there are a few drawbacks too. For example, when it comes to mortgaging a property, things get complex in a TIC arrangement. As every investor is the owner of the entire property, the mortgage documents must have the signature of every investor. Plus, if in case any investor refuses to pay their share of loan interest, the other investors must keep paying the interest on the loan. In case of a default, the lender can claim the entire property.
You can use a TIC investment to close your 1031 exchange –
1031 exchange investors often look for alternates to close their exchange. As identifying a replacement property within 45 days requires a tremendous amount of effort, many investors fail to come up with identification before the deadline, which puts their exchange in question. If you’re also looking for an alternative, you can use a TIC investment to close your 1031 exchange. As a TIC investment is considered as a real estate investment, it qualifies for a 1031 exchange. If you live in Seattle, you can go through 1031 exchange Seattle rules and see how you can close your 1031 exchange using a TIC investment. Whether you do a 1031 exchange or go for a TIC investment, we recommend you speak to an advisor or 1031 exchange expert.