In a TIC arrangement, you own a fractional share of the property. Similar to a share of stock, you are given a fractional share of the whole investment. A group of investors is organized into a TIC structure and is then able, as a group, to aquire a large property. Up to 35 owners can enter into this sort of partnership and each owner gets voting rights. Each partner is given a percentage interest in the property, and then receives this fractional share of cash flow, tax benefits, appreciation, and depreciation on the asset. The fractional interest in the investment is passed along to the owner's heirs, rather than being absorbed by the remaining owners, as a joint tenancy arrangement would work.
A TIC arrangement can satisfy the requirements of a 1031 exchange, if done properly. In 2002 this type of ownership started becoming popular after the IRS issued guidelines on how a joint property venture can satisfy a 1031 exchange. A 1031 exchange, for those who don't know, is an investment timed and structured in such a way that it allows the owner to legally defer the capital gains taxes on the sale of another property.
A TIC arrangement allows you to avoid the hassles of property and asset management (since a third party will have this responsibility), while reaping the benefits of real estate ownership. Additionally, by only owning only a small portion of one large property, this leaves the investor with additional capital to enter into other TIC arrangements in order to diversify their property holdings.
If you're interested in hearing more about how a TIC investment can benefit you, or how you can get involved in one, contact me! I have contacts at a company with a proven track record in structuring these types of deals.
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