What are TIC Investments & How TIC 1031 Exchange Benefit Me?

What are TIC Investments?

A TIC stands for tenancy in common, which is also known as ‘fractional ownership’, ‘tenants in common’ and ‘co-tenancy’, whereby two or more individuals co-own a real estate investment without a right of survivorship. Unlike joint tenancy, co-ownership, whereby each co-owner’s fractional ownership passes to the other upon his death, a TIC investment enables each co-owner to select who will become heir to his or her ownership interest upon death.

TIC investments have lately become a very popular method of ownership in various real estate frameworks. This occurred since the IRS came out with a ruling recognizing specific tenancy in common structures as valid 1031 tax exchange vehicles.

Resort developers, home and vacation home buyers are also taking advantage of the tenancy in common structure.Traditional ‘time shares’ doesn’t give investors legal title to the real estate which is certainly a disadvantage.Under the TIC investment structure, each owner will receive a separate legal title to the percentage of ownership they own in the real property.

However, the types of TIC investments this article deals with are percentages in an undivided property rather than specific units.The real estate deed the investor owns title in also states their percentage ownership and not specific units or apartments.

How will a TIC investment 1031 tax exchange help me?

Perhaps you currently own a highly managed investment property.Even though your familiar with the intricacies of owning and managing real estate and enjoy the cash flow, you are tired of the constant headaches that accompany it.You are fed up with the aggravation from your tenants, repairing and maintaining the building and outside premises, paying insurance and property taxes.You have become very motivated concerning selling your investment but worried about taxes and other issues.

You own management-intensive real estate, yet appreciate its benefits. Although you are comfortable with real estate investments and have had good returns in the past, you do not like the daily headaches that can accompany real estate management. You are ready to give up the hassle of dealing with tenants, maintaining facilities, paying property taxes, etc. The thought of possibly owning real estate and letting someone else manage the asset while producing stable cash flow is very tempting.But you don’t want to be faced with heavy capital gains tax on the sale.However, by purchasing a TIC Investment via a 1031 deferred exchange, this is exactly what you can achieve.

By exchanging into a TIC investment, via a 1031 exchange, you can sell your highly intensive managed property, defer the capital gains tax and acquire an institutional grade property with the potential to create a secure income stream with appreciation.Owners of TIC investments don’t have to be inconvenienced with management responsibilities as the TIC sponsor retains a manager to handle all aspects of the asset.

It is even possible that the cash revenue from the new 1031 replacement property will be higher than the relinquished property.You can possibly derive cash revenue that could be up to 60% sheltered from the depreciation of your new basis in your TIC investment.

You won’t have to pay capital gains taxes until the 1031 replacement property you acquired is sold.It is also possible to pass ownership upon death to your heirs and allowing them a stepped up basis valuation avoiding capital gains taxes in the estate planning. Please always seek professional advice from your CPA or Attorney on these matters.

TIC Buyer Beware.

TICs should be offered as a security with appropriate due diligence and transparency of all Sponsor fees. We recommend you avoid a TIC that is not packaged as a security. Tenants in common structured as securities are offered through Registered Representatives who are appropriately registered through and associated with an actively registered broker/dealer that is a member of the NASD (National Association of Securities Dealers). Offerings are sold by a Private Placement Memorandum only, and are offered solely to pre-qualified Accredited Investors.

Recommended TIC Referral

If looking at TICs we recommend you only purchase TICs from a professional who is both real estate licensed and securities licensed. If you would like to be put in contact with a Registered Representative that has access to tenants in common’s sold as securities nationwide, please contact our office.

Disclosure

Certain real estate professionals affiliated with Westwood are dually licensed and therefore have their securities license to sell TIC properties. These professionals are Registered Representatives with MICG Investment Management LLC. Westwood Net lease Advisors and MICG Investment Management are not affiliated in any way.

MICG Investment Management LLC Branch office at 5121 Center Street, Suite 100, Williamsburg VA 23188

To be connected to a licensed TIC representative call 866-638-1031 ex 102 (Susan Gitt)

Westwood Net Lease Advisors is a Leading U.S. Real Estate Investment Brokerage Firm Selling "Single" Tenant Triple Net Properties (NNN Properties), Shopping Centers, NNN Office and Industrial Buildings, 1031 Exchange Vehicles & Other Alternative Passive Real Estate Investments.