What should you expect out of a TIC investment?
✔ Low investment
✔ Own entire property
✔ Institutional-grade properties for low investment
✔ Regular flow of income for long-term
✔ Tax deferment on account of a 1031 Exchange
Tenancy-in-common is also referred to as TIC. In a TIC property, two or more investors share undivided ownership of the same property. That’s why they are called tenants-in-common. TIC is beneficial for small or medium-sized investors. Its large structure enables them to own institutional-grade properties along with other investors. The number of investors in a TIC is limited to 35. Tenancy-in-common differs from joint tenancy in many ways.
Every investor in TIC properties owns an undivided interest in the same property. Therefore nobody can claim ownership to a specific portion of the property. Every investor in TIC enjoys equal ownership in the property. In case of the death of one of the investors, their share in the property is automatically transferred to the beneficiary of their choice. However, this is not the case in joint tenancy. In joint tenancy, if an investor dies, then their share in the property is automatically divided equally among other owners.
In TIC, if an investor dies without naming any beneficiary in the agreement, then their share in the property will go through probate. However, it’s totally up to an investor whom they want to choose as their heir. They could also choose to divide their share in the property among other investors. Though no co-tenant can claim ownership to any specific portion of the property, their ownership interests may vary. For example, Andy, Samantha, and William are tenants-in-common and own the same property. However, Andy and Samantha may own 25% of the property each, whereas, William could have 50% of the property under his name. The ownership interest of an investor depends upon their investment. Therefore, more investment means more ownership interest. On the other hand, in joint tenancy, every tenant enjoys an equal interest in the property.
Though TIC and Joint Tenancy differ significantly, both can be dissolved in similar ways. For example, one or two investors can buy out others and dissolve tenancy-in-common at any time. Moreover, an investor can also file a partition action in case other co-investors aren’t willing to sell their ownership interests. A Joint Tenancy is also broken in the same way. Either one or two investors can buy out other co-investors, sell the property, and divide the proceeds equally among themselves or an investor could also file a partition action in case of any dispute.
✔ Low investment – As TICs have up to 35 members, investors can acquire institutional-grade properties even upon making a significantly small investment, which certainly isn’t possible if they would invest individually.
✔ Regular flow of income –Tenants in common usually enjoy a regular flow of income, appreciation, tax benefits, etc. Since TIC 1031 properties are commercial buildings, investors are likely to find high credit rated tenants for their properties.
✔ Less expensive –As deposits and other payments are divided among all co-tenants, buying and maintaining TIC properties is likely to be less expensive than it would be in case of individual investment.
✔ Choose your heir – Tenants in common have the right to choose their beneficiaries, who would receive their share in the property on account of the death of any of the co-tenants.
✔ Own entire property – Every investor in TIC owns the entire property and not any specific portion.
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