Tenant-In-Common investments provide the bridge between individual investors
and institutional-grade triple net leased office, retail, industrial and
multi-family properties.
A popular choice among real estate investors seeking replacement property for
their IRC Section 1301 tax deferred exchange is Tenant-In-Common (TIC)
ownership. Under this ownership structure, the investor can own an undivided
fractional interest in an entire property and share in their portion of the
net income, tax benefits, and potential growth. Furthermore, the investor will
receive a separate deed and title insurance for their percentage interest in the
property and have the same rights as a single owner. Tenant-In-Common
opportunities are often packaged with management and financing in place and can
offer efficiencies in the identification, acquisition, financing, closing and
operating stages of real estate ownership.
Tenant-In-Common investments extend the 1031 exchange
benefits and provide the bridge between individual investors and institutional
triple net leased office, retail, industrial and multi-family properties.
Whether you're looking to defer capital gains tax, diversify, or consolidate
real estate holdings, increase the leverage on your investment, or even relocate
your investment to another market, this can be achieved through a 1031 Exchange
into a Tenant-In-Common investment.
TIC transactions
feature:
Identification: Fractional ownership provides you with
the ability to diversify your 1031 tax deferred exchange into more than one
property and to participate in larger institutional quality properties. Working
with some of the nation's leading real estate providers, CapWest Securities is
able to provide one of the largest ready inventories of Tenant-In-Common
properties. Such a selection allows individuals to easily identify properties
within the 45 day identification period, acquire within the 180 days, or have a
back-up property just in case.
Management: Tenant-In-Common
investments provide simplicity by eliminating active property management
headaches. Tenant-In-Common opportunities are often packaged with professional
management in place whose principal objectives reside in the implementation of
budgetary controls, approving marketing objectives and allocating capital
resources to maximize the value of each property. Managing these
responsibilities effectively is essential to creating appreciation and positive
cash flow.
Equity Requirements: Accredited investors may invest in
high quality institutional grade properties with typically stated minimum equity
requirements ranging from $250,000 to $750,000. Low minimums may allow you to
diversify, which can reduce your risk by allowing investments in different
locations with various property types, tenants, and
industries.
Extensive Due Diligence:
The due diligence conducted on Tenants-In-Common properties is extensive. The real estate sponsor, the
lender, and the securities industry each perform thorough analysis to determine
if the ownership structure is viable and whether the property is physically
sound, economically profitable, has a likelihood of increasing in value, and can
generate sufficient income to repay the debt obligation.
Financing: Tenant-In-Common investments enable you
to replace the required debt on your 1031, if needed. Investors typically obtain
non-recourse (no personal guarantee) debt in properties with leverage ranging
from 50% to 75%. Occasionally, some Tenant-In-Common investments are even debt
free.
Estate Planning: Real estate investment property generally
qualifies for a one time step-up in tax basis to fair-market value upon the
death of the owner, which effectively eliminates the capital gain and
depreciation recapture tax during your lifetime. Qualification for an estate
valuation discount may apply.
Holding Periods: Most investments
have a 4 to 7 year holding period, however, in some instances you will find
estimated holding periods as short as 3 years and as long as 10 years. Each
property investment has a calculated life expectancy that will vary according to
the market, investor appetite, leasing activity, available financing terms, and
other relative factors.
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While a 1031 Exchange offers a unique
opportunity to reinvest gain and receive tax deferral and growth potential, it
is not a simple transaction and is not for everyone. When evaluating whether a
1031 Exchange is right for you, you should consult your tax professional
regarding the specifics of your situation.
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