Tools and Investment

Baby Boomers all over the United States who own real estate portfolios are leaning toward fractional real estate ownership, also known as tenant-in-common investments (TiC).  Boomers simply consolidate their real estate holdings into one clean, easy to manage investment.

The boomers, who are now easing into retirement, have a history of investing in stocks and mutual funds.  Now, however, the thought of a more secure investment is lucrative.  The answer is investment-grade real estate; Tic investments which provide steady income, tax write-offs and a hands-free property management.

In 2002, the Internal Revenue Service released Revenue Procedure 2002-22, a guide that clarified the rules allowing property owners to trade their investment for shares in TiC projects, without paying taxes on gains earned on previous properties.  With that clarification, the popularity of TiC investment has taken off.  In 2003, the value of TiC transactions totaled approximately $1 billion nationally. By 2004, those transactions topped $4 billion in value, according to the industry's trade group - Tenant in Common Association (TiCA).

The surge in popularity is due in large part to the overwhelming benefits that are innate in a TiC investment.  A major benefit of the TiC investment is that it qualifies as a replacement property under a 1031 exchange.  Therefore, all of the built-in-gains from the previous property can be rolled into the new investment, sans taxes in between.  That allows the investor to pool their money completely into the TiC, instead of into taxes.

The TiC investment is typically sold “bundled” with management, due diligence and financing in place.  The prospective TiC investor is offered a clean bundle that includes everything needed to accurately evaluate the property, accommodating the investor in his need for efficiency and organization.

The baby boomers who are used to hands-on management of “tenants and toilets” will find this passive approach to real estate investment a relief from the administrative responsibilities that spawn from the typical real estate investment.