Investing in real estate was probably one of the best investment decisions of your life. Now, current vacancies, demanding tenants, and minimal income are several issues that are compelling many investors to seriously consider other alternatives.
A TIC investment is a form of property ownership where multiple investors pool their funds to own an undivided interest in real estate. As a TIC owner, an investor has an undivided fractional interest in one property and shares in a portion of the rental income, costs and deductions, liabilities, and asset appreciation (if any). Each TIC owner receives a separate property deed and title insurance for their portion in the property investment.
The IRS allows you to 1031 exchange your rental property so you can eliminate your day-to-day property management and defer your capital gains taxes. These TIC Properties, allow investors to pool their equity and invest together into institutional grade properties that are capable of attracting national credit rated tenants with long term triple net leases.
TIC ownership allows accredited real estate investors to trade their single family rentals, duplexes, apartment complexes, land, or commercial property for institutional grade properties. These properties are generally stable income producing properties that are able to attract tenants with greater financial strength and stability. The TIC structure as outlined by the IRS, Revenue Procedure 2002-22, allows up to 35 individuals to invest together in a single property with a percentage ownership. Each investor owns a percentage based on their investment. Each investor is entitled to their percentage of any appreciation when the property is sold. Accordingly, this allows an individual investor to participate in the ownership and benefits of a much larger property with national credit rated tenants and professional management without the day-to-day management. National tenants are typically well established business with a long and profitable track record. Better tenants should have a strong credit rating based on a history of paying their bills on time.
Diversification can be achieved by property type (Office, Apartment, Retail, etc) and by geographical area. Instead of owning/renting a single family home to a single tenant, you may own part of a 300 unit class "A" apartment complex that includes professional management.
Exchangeable properties include single family rentals, duplexes, apartment complexes, farms & vacant land, & commercial property. These are generally class "A", stable income producing properties that are able to attract long term tenants with greater financial strength and stability.
Exact dollar matching allows you to invest a specific amount of equity into a TIC property based on your needs. For example, if you receive $220,000 in equity from your relinquished property, you may invest that same amount of $220,000 into your replacement property. To totally defer gains, you must trade up or equal in value and equity. Otherwise, the remaining amount may not be deferred. To continue with this hypothetical illustration, if you receive $220,000 in equity from your relinquished property, and reinvest only $200,000 in a replacement property, the remaining $20,000 may be subject to capital gains tax under Cash Boot. As with any real estate there are risks that should be considered before making a decision, real estate is illiquid, and there are significant tax risks with any exchange.
Selecting a Qualified Intermediary: From the simplest exchange to the most complex, we have built our reputation on expertise, financial strength, and customer satisfaction. If you have any questions, I can be reach at 925-212-1727 or email me at email@example.com.
Wai-Yew "Andrew" Lam, President
Adelphi Retirement Management, Inc. / www.AdelphiRetirement.com