4 Reasons a TIC Investment Makes Sense Right Now
By: Karlin Conklin, IMG Principal, Co-President & COO
What is TIC ownership?
Tenancy in Common, or a “TIC” as it is called, is a type of real estate ownership in which there are two or more co-owners. In this ownership structure, each co-owner has a separate legal title to their undivided interest. Each interest can be exchanged or sold.
Below are four reasons an investment with a national TIC sponsor may be a great strategy for you right now.
1. You want to defer capital gains taxes
The U.S. IRS tax code gives real estate investors and TIC owners favorable treatment from depreciation, interest and expense write-offs, and capital gains deferral through the 1031 exchange process. An exchanger can invest in a high-caliber, income generating, professionally managed syndicated property. In addition, an exchanger 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 with a national sponsor 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. We specialize in sourcing 1031 exchange replacement property for our clients.
2. You desire diversification in your portfolio
Think of Tenancy in Common as a “strength in numbers” approach. It allows multiple purchasers to combine their equity, thus providing access to investment grade real estate. The Tenants in Common (or, “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 landlords seek out TIC investments with a sponsor in order to be freed from the daily management hassles of sole ownership.
Each Tenant in Common in a sponsored real estate acquisition is on title and benefits from legally proscribed involvement and voting rights. But after the property is acquired, the sponsor typically oversees the asset and third-party on-site management. They also oversee renovations which add value to the apartment community. Sophisticated asset management results in a higher quantity and quality of tenant. The TIC investors, or co-owners, enjoy a “hands-off” experience with a sponsor.
Throughout the entire ownership period, the 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 TIC sponsor sources investment properties, conducts due diligence, arranges financing, provides asset management and accounting reports and executes the eventual sale of the property – all for the benefit of the co-owners. At IMG, we personally co-invest on the same terms as our clients in every property we acquire.
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
- Maximize your multifamily portfolio, known to provide the best risk-adjusted returns in commercial real estate
- Benefit from connections within a group of successful investors and nationally known industry experts
IMG’s TIC investment offerings are structured as 506c securities. The typical TIC (co-owner) investment is $750,000-$3 million+.
For more information about 1031 exchange properties or buying apartments as a Tenant in Common with a sponsor, schedule a no-obligation intro call or email us at firstname.lastname@example.org.