TIC Tenant In Common Property

Has anyone invested in this type of property?

I am interested as well. I heard it is the latest thing.
Anybody?

TIC’s are absolutely compatible with 1031/1033
exchange requirements. By using the tenants in common format (TIC) – an individual investor can have a part ownership in an institutional-type property. As an alternative to sole ownership of real estate, a 1031 buyer can invest in a large commercial property along with other unrelated investors, not as limited partners, but as individual owners. Each co-owner receives an individual deed at closing for his or her undivided percentage interest in the entire property. Each co-owner has the same rights a single owner would enjoy.

If you need help finding these types of properties, let me know. Good Luck!!!

I think if you talk to people who have looked into this type of investment (other than brokers looking for commissions, see post above), you'll find there's a lot of wariness about it.

There are several issues: 1) I would worry a LOT about your ability to exit from this, when you want to, and at a fair market value. This is NOT a liquid investment. 2) There are a number of deals I've seen that involve what I would almost call self-dealing on the part of the organizer -- they bought the property from one of their affiliates, at a nice profit for the affiliate, or it's managed by an affiliate, or some other way by which they collect profits in a non-aparent manner. 3) I've seen folks raise a number of IRS-related issues about these. I believe that there is no definitive IRS ruling on these types of deals, so you could be in for some nasty tax surprises later. If anyone tells you otherwise, ask to see a copy of any relevant IRS rulings.

So, while I won't go so far as to say don't ever invest in one of these, I will say do a LOT of due diligence, and be very careful!

CT

Charlie Tango is right about doing yor due diligence. As with all investments, some of these are good deals and some are bad. I have seen a lot of these that are sub-par with little time left on the leases, or an anchor tenant that is not up to standard. Do your homework!

Thank you for all the replies. All are true. Here is what I have learned over the last 4-months of trying to find the "right TIC". First, you must be sure you don't need the money for a while. Secondly, there are fees, lots of fees. However, you need to realize, someone else is putting together 20-50 million in financing, and managing this property. They don't do this for free. I've also learned, the TIC industry is pretty new, but there are some companies that have been in this industry for a while. I am going to stick with those type of companies. Finally, I have been pretty impressed with the brokers and real estate advisors I have dealt with. They all seem very concerned with providing all the information (due dilegence). One other thing, I still believe in diversifying my portfolio, so when I do my TIC, I am going to do 2 or 3-properties in different parts of the country, with maybe even different sponsors, to reduce the risk. Good luck to all.......

I'm an investment adviser for a major firm, and can second that caution. TIC's are set up to make money. They make that in many different ways (ie paper fees, mgmt, driving up purchase prices, etc). Please be very careful. They got a bad rap in the late 80's early 90's for a reason.

I do work for a TIC sponsor and actually agree there should be careful due diligence on each offering. The due diligence should not only go to the asset but to the sponsor as well.

Every investor has different risk/return requirements - Some sponosrs do only NNN while others are about equity preservation - I believe TICs are a viable and strong alternative. I would underscore due diligence as I would any real estate investment.

I bought a TIC just over a year ago through www.for1031.com They have been great, however, I agree with the due dilligence. Make sure it is the right investment for you. I researched the sponsor (conducted a D&B search) and read page-for-page the Due Dilligence package.

Diversify is an understatement. If you do get into one of these, make sure the numbers work on the property your investing in. I think some of the TIC sponsors stake their reputation on past practice/performance, then get themselves into trouble by growing too fast.

I've found my property to be good. I invested in a multi-unit shopping center with two incredibly good anchors. Just read the contracts and understand that most of them make their money up front.

In my case, I knew going in that they inflate the price of the property, which I knew going in and understood that they need to make money too. What I didn't realize and should have caught, was that the loan was interest only, so the TIC sponsor making the loan payments is not going to principle like I presumed.

Overall, I'm happy with the results to date, I feel I can get out fairly quickly if I need to, however, at this point it is serving the purpose intended which is monthly rental income with NO work.

Good luck.

In any TIC investment, it is important to have a legal opinion from a nationally recognized law firm - not a local law firm, stating a high "should opinion" that the property you are investing in will meet an IRS audit. Reputable sponsors have sought stuctures to meet the 15 guidelines set out by the IRS Rev Proc 2002. Most sponsors don't fully comply. This could jeopardize your 1031 exchange.

While there are many highly qualified local attorneys, a Nationally recognized firm will have bearing in DC. That is an opinion.

Sponsor's should be researched, but when you find a structure that works, it no longer matters who the sponsor is - since you are investing in the real estate. Unless of course you choose a sponsor that does leasing/management and asset management as well. I am always wary of a sponsor that has all of the control over the financial health of the asset. There should always be more than one set of eyes on an asset. Otherwise there is no real checks and balances.