Tools and Investment

TIC which stands for tenancy in common, along with the terms “cotenancy” and “fractional ownership”, describes the various ways in which property can be owned by more than one person at a given time. These terms specifically refer to arrangements where two or more people co-own a portion of real estate without a “right of survivorship”. This type of co-ownership allows each co-owner to choose who will inherit his/her ownership interest upon death. By contrast, the type of co-ownership called “joint tenancy” (in some states though, joint tenancy and TIC are referred as one and joint tenancy is referred to as joint tenancy with right of survivorship) requires that each co-owner’s interest pass to the other co-owners upon death.

The TIC has become a popular style of ownership in many different real estate contexts but we will mainly focus on TIC investing wherein some of its structures are used as vehicles for deferred exchanges.

When an investor wishes to complete a 1031 exchange, but does not want to exchange into another management intensive property, one option available is for the investor is to invest in a portion of a professionally managed, commercial grade property along with several other investors. Tenant-in-Common is a form of holding title to real estate that allows investors to own an undivided interest in property, and thus, if structured properly, satisfying the 1031 requirement for “like-kind” property to be exchanged.

This is nothing new TIC just means co-owning a real estate rather than owning it individually. Some of the benefits of Tenants in Common investment is that when purchasing an investment property as a tenant in common, you as an investor is allowed to invest in larger, institutional-grade properties; and as investor, you potentially increase your net cash flow while eliminating the daily property management difficulties.