Querty – Let’s not get focused on TIC’s specifically as they are just one specific vehicle that fits a specific situation: 1031 exchange into a passive real estate vehicle.
If this is not your specific situation, there are many other options open to you to achieve the same goals of passive, institutional-quality real estate investment.
There are traded REITS, non-traded REITS, diversified funds, llc/limited partnerships for single properties, and sole ownership.
No one of the items above are horrible, or perfect, by definition. However, your specific circumstances will dictate which one, or two, fit your needs best.
Once you determine this, then its a matter of sourcing/filtering the managers who run these operations, and then understanding the individual properties within the pool/s.
Only then, should one pull the trigger.
We come from the institutional pension fund advisory world so our predjudice is towards high quality cash flow AND protection of principal first, captial gains while important, are secondary.
The theory being that even if you ‘lose’ money in ‘real’ terms (meaning inflation exceeds cash flow yield) in the out years, you still have your principal in place to keep taking shots when opportunity presents itself.
As for nnn Class “A” properties I would say you are on the right track with the nnn part but be cautious about the allure of the class “a” generality. Remember that nnn is not magic. The tenant factors it into their total cost of occupancy and risk profile. They won’t just pay nnn charges because we ask them to.
The concern with fancy “A” buildings is that they are expensive to operate, and buy. Thus the lease rates are HIGH. When rates are high, vacancy rises in down times and you NEVER get that rent back…EVER.
Each time a tenant leaves, your dividend check drops $1:$1. Then they must drop their lease rate to fill it up so your dividend never returns to where it was and you never get that lost dividend income back.
Plenty of Class ‘A’ bldgs have been crushed. Take the John Hancock Tower in Boston. It was just sold at the foreclosure auction at 50% of what the last buyer paid for it…1/2 off the Hancock Tower!!!
Vacancy is the #1 enemy of real estate, thus find property where your vacancy risk is as close to zero as possible and you’ll be light years ahead.
