Tenants In Common Properties

Written by Linda Alexander
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Tenants in common (TIC) is co-ownership of real property. Investors own a fraction of real estate, and receive a deed for their fraction. It allows the average person to have partial ownership in a commercial property. Every co-owner receives a deed for his or her percentage in the entire property, and has the same rights as a single owner would have. Normally, commercial property begins at about $1 million, but for as little as $250,000, investors can own a piece of an institutional property.

A few years ago, the government allowed TIC property to be exchanged in a 1031 exchange. Investors can now perform a 1031 exchange on 100 percent of their fractional ownership in a TIC property for TIC ownership in a replacement property. The IRS sees TIC properties as real estate while the SEC sees them as securities. That is why property managers offering TIC investments typically issue prospectuses when selling fractional ownership.

Tenants in Common Examples

An example of a TIC property would be one store in a large shopping center, an office in an office building, or a section of an industrial warehouse. As this concept grows, more and more larger commercial properties are becoming TIC properties. TIC properties allow every day investors access to a world previously reserved for those with deep pockets.

Benefits of owning tenants in common property include passive income, long term income, no property management duties (properties are professionally managed), diversification and flexibility. Existing owners can easily liquidate their TIC interests, or perform 1031 exchanges to trade up their fractional ownerships. Qualified intermediaries can easily locate replacement property for your exchange so you can defer paying capital gains tax.

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