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As a generation of real estate investors enters a life stage in which the day-to-day management of property is more a chore than a challenge, the tenant in common investment strategy is becoming increasingly popular.
A tenant-in-common investment is a fractional ownership or co-ownership of investment property. Various property categories are offered for tenant-in-common investments including office, industrial, retail and even vacant land.
All TIC sponsors, whether attracting 1031 exchangers or other real estate investors, must adhere to the TIC guidelines set forth by the IRS in 2002. From that point forward, however, the philosophy and approach can differ dramatically. FORT Properties, for example, is one of the few pre-capitalized sponsors of TIC offerings in the industry. Rather than optioning a property and “raising equity” from future TIC owners to finance the transaction, FORT Properties purchases the property outright. Only after closing does FORT Properties begin offering fractional ownership interests to accredited investors.
A tenant in common investment can satisfy IRS guidelines for 1031 exchanges, qualifying as a “like kind” exchange; hence providing investors with two key advantages:
- The fractional ownership of a TIC opens up a new world of institutional-quality real estate to investors which they could not have hoped to attain individually providing the opportunity to preserve their investment capital, obtain a predictable income stream and move to a passive role in this investment.
- Investors can defer capital gains taxes on the sale of property, provided all of the 1031 regulations and timeframes are followed.
Because the IRS limits TIC
offerings to 35 investors or less, the investment range is in line with the financial needs of individual investors.
For more information on tenants in common, please click here.
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