My bias is towards tangible sticks/bricks as well.
A TIC (tenant in common) is effectively a ‘fractional’ share of a property. Thus you personally are on title to 1/24th undivided interest in a property.
To effect a 1031 exchange you must replace your current property with new property at a value equal to (or greater) what you sell. You must also take title to the property in the same way as you held title on the property being sold. You must also ‘replace’ the debt that you had on the old property ($500k loan on the old property, you need a loan of $500k+ on the new property).
Hence the TIC was born as a way to put you on title of the new property, move your equity over, and ‘replace’ your debt with a new loan in your name.
One big problem is that since the property has a loan, your share of the property must be included as collateral for the loan, and you must PERSONALLY be on the hook for the loan, fill out the loan application in YOUR NAME/SSN, and the loan goes on your personal financial statment.
I believe that this adds too much exposure to any client who can avoid it. Our goal is to move debt off of your personal balance sheet as the lost opportunities and downside are too great.
Additionally, as a direct (on title) owner you will face legal liability for any issues pertaining to the property. Again, downside risk with no upside.
The ONLY reason to do this is if you are selling a property in an exchange and need to take title to a new property. If you are simply investing capital then a TIC is likely NOT the answer.
The likely answer is to invest in a property, or pool of properties, with a seasoned manger/sponsor. In this case they will establish a new LLC/LP ownership entity for each property and you will own a portion of the asset via shares (similar to stock in a company) in the single purpose entity (i.e. it has a single purpose which is to own building A).
Here you will be a passive investor who is shieled against lititgation. As in a corporation your sole exposure is your investment amount.
In this scenario, the sponsor gets the loan w/o you having to do anything, and the debt is NOT on your financial statement/balance sheet (again, just like stock in a company).
Operationally, cash will pass through directly to the investors just like the TIC, and the manager will handle all day to day work and reporting to you.
