Is Shared Ownership Better Than Individual Investment?

Real estate investment isn’t a one time adventure. Instead, it’s a life-long journey. Once you step into the shoes of an investor, you start thinking like one. You invest in one property, then in another, and then in another. The process continues this way. Though investing in real estate is a lucrative option that nobody can deny, there is also a high degree of risk. Irrespective of how precisely you plan your investment, there are always some unknown elements that might impact your business.

Shared ownership helps minimize risk.

There is no doubt that individual investments fetch more profit. However, the risk is also at the top. Whereas, shared ownership like TICs or DSTs, not only guarantee a profit but also contain the degree of loss by dividing it in among all investors. A TIC or Tenancy-In-Common is an investment strategy that allows investors to co-own real estate properties and share the profit. A TIC can have as many as 35 investors. Similarly, a DST or Delaware Statutory Trust lets you invest in big investment-grade properties along with other investors. However, unlike a TIC, a DST can have a hundred or even more investors.

You can mix a TIC or DST investment with your 1031 exchange.

If you are planning a 1031 exchange, there is good news. You can invest in either DST or TIC and still qualify for a 1031 exchange. When you invest in a DST or TIC, you invest in real properties. Therefore, as per the 1031 exchange rules, you can sell your investment property and reinvest the proceeds into a DST or TIC. This way, you can defer capital gains taxes and enjoy a steady flow of income. You can speak to a TIC 1031 Exchange advisor to understand how you can mix a 1031 exchange and TIC investment. Similarly, DST investment professions can guide you on how to invest in DSTs as part of a 1031 exchange.

If you are tight on budget, go for shared ownership.

For investors, who are not backed by mammoth capital, shared ownership could be the best option. Since you need some funds initially to make your investment work, co-owning a property can help you save some capital, which you can put in the new property.

However, if that’s not the condition with you, individual investment is for you.

 

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