TIC (Tenants In Common) Investments

[clearfund]

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.

[34f3f3f]

Clearfund, I am a passive investor so am open to all opportunities that are low risk, cash flowing, and stable. I accept the lower returns profile. One of the problems many fixed incomers are facing is months and months of flat rates, and uncertainty. REITS are part of an investment portfolio, and “so is Real Estate” I hear you say, but my view is actual bricks and mortar are an important tangible aspect of any portfolio. What are llc/limited partnerships for single properties, and sole ownership? Why are TICs only used for exchanges?

[34f3f3f]

Clearfund, I am a passive investor so am open to all opportunities that are low risk, cash flowing, and stable. I accept the lower returns profile. One of the problems many fixed incomers are facing is months and months of flat rates, and uncertainty. REITS are part of an investment portfolio, and “so is Real Estate” I hear you say, but my view is actual bricks and mortar are an important tangible aspect of any portfolio. What are llc/limited partnerships for single properties, and sole ownership? Why are TICs only used for exchanges?

[34f3f3f]

Clearfund, I am a passive investor so am open to all opportunities that are low risk, cash flowing, and stable. I accept the lower returns profile. One of the problems many fixed incomers are facing is months and months of flat rates, and uncertainty. REITS are part of an investment portfolio, and “so is Real Estate” I hear you say, but my view is actual bricks and mortar are an important tangible aspect of any portfolio. What are llc/limited partnerships for single properties, and sole ownership? Why are TICs only used for exchanges?

[34f3f3f]

Clearfund, I am a passive investor so am open to all opportunities that are low risk, cash flowing, and stable. I accept the lower returns profile. One of the problems many fixed incomers are facing is months and months of flat rates, and uncertainty. REITS are part of an investment portfolio, and “so is Real Estate” I hear you say, but my view is actual bricks and mortar are an important tangible aspect of any portfolio. What are llc/limited partnerships for single properties, and sole ownership? Why are TICs only used for exchanges?

[34f3f3f]

Clearfund, I am a passive investor so am open to all opportunities that are low risk, cash flowing, and stable. I accept the lower returns profile. One of the problems many fixed incomers are facing is months and months of flat rates, and uncertainty. REITS are part of an investment portfolio, and “so is Real Estate” I hear you say, but my view is actual bricks and mortar are an important tangible aspect of any portfolio. What are llc/limited partnerships for single properties, and sole ownership? Why are TICs only used for exchanges?

[clearfund]

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.

[clearfund]

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.

[clearfund]

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.

[clearfund]

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.

[clearfund]

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.

[(former)FormerSanDiegan]

“TIC” – what a funny name. When I hear it, I immediately think “blood-sucking insect”.

[(former)FormerSanDiegan]

“TIC” – what a funny name. When I hear it, I immediately think “blood-sucking insect”.

[(former)FormerSanDiegan]

“TIC” – what a funny name. When I hear it, I immediately think “blood-sucking insect”.

[(former)FormerSanDiegan]

“TIC” – what a funny name. When I hear it, I immediately think “blood-sucking insect”.

[Author]

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