4 Reasons a TIC Investment Makes Sense Right Now
By: Karlin Conklin, IMG Principal & Executive Vice President
What is TIC ownership?
Tenancy in Common (“TIC”) is a real estate ownership arrangement in which there are two or more (10 maximum) co-owners. Each co-owner has a separate legal title to their undivided interest which can be exchanged or sold.
Below are four reasons a Tenancy in Common may be the right investment strategy for you right now.
1. You want to defer capital gains taxes
The US tax code gives real estate investment and ownership favorable treatment from depreciation, interest and expense write-offs, to capital gains deferral through the 1031 exchange process. An exchanger can not only invest in a high-caliber, income generating, professionally managed syndicated property, but can defer Federal, and in most cases state, capital gain and depreciation recapture taxes.
In 2002, the IRS issued formal guidelines for Tenancy in Common (“TIC”) ownership structures to satisfy the “like-kind” requirements of 1031. Since then, thousands of real estate investors have used TIC investment properties (as an alternative to sole ownership) for 1031 exchanges.
Investors Management Group, as Sponsor, designs its offerings to meet current IRS guidelines and to accommodate the time-sensitive needs of 1031 exchange investors.
2. You desire diversification in your portfolio
Think of Tenancy in Common property ownership as a “strength in numbers” approach. It allows multiple purchasers to combine their equity, thus providing access to investment grade real estate. Co-owners can also seek out properties a variety of emerging cities and suburbs across the United States. In fact, exchanging property across state borders is a common thing TIC investors do.
Especially during an economic downturn, investors desire this kind of diversified real estate portfolio.
3. You have no desire for hands-on property management
Many investors looking for steady cash flow seek a Tenancy in Common ownership structure in order to be freed from the day-to-day management hassles of sole ownership.
Each Tenant in Common is on title and benefits from legally proscribed involvement and voting rights. However, after an apartment asset is acquired, the Sponsor typically oversees the asset and third-party property management, and makes improvements to add value to the apartment community. Having sophisticated asset management results in a higher quantity and quality of tenant. The investor group enjoys a “hands-off” ownership experience.
Throughout the entire ownership period, a Sponsor delivers detailed property performance reports, personal investment information and annual tax forms for each Tenant in Common.
4. You value real estate expertise in a skilled sponsor
A Sponsor sources investment properties, conducts due diligence, arranges financing, provides asset management and accounting reports and executes the final disposition – all for the benefit of its investors.
Investing with an experienced Sponsor with a proven track record provides an opportunity for you to:
- Invest in larger or more exclusive properties with the potential for better returns
- Grow equity over the long term in well-located apartment properties, known to provide the best risk-adjusted returns in the industry
- Benefit from connections within a group of successful investors and nationally known industry experts
IMG’s Tenancy in Common investment offerings are structured as 506c securities. The minimum TIC (co-owner) investment is $500,000.
For more information about 1031 exchanges or buying apartments as a Tenant in Common, contact our Investor Relations team at (747) 262-5600.