By definition, tenants in common investment real estate offers the same tax benefits as individually owned real estate: wealth preservation, cash flow, and long-term appreciation potential. A tenant-in-common investment, however, eliminates the need for day-to-day management and oversight of a property.

A group of accredited real estate investors is identified for this fractional ownership/real estate investment. Each investor purchases the real estate under a tenant-in-common structure, thus these co-owners are able to purchase a more substantial property than they would as individuals. Each tenant in common receives a fractional title ownership deed and title report at closing.

The tenants in common may sell the property when they unanimously elect to do so. Tenants in common may also sell their individual fractional ownership interest at any time, subject to exchange guidelines and/or the lenders approval, either to another co-owner or to a buyer outside of their co-ownership structure. At this point, the selling co-owner may either pay taxes on the gain or execute a 1031 exchange and defer capital gains tax.

While a tenant-in-common investment is not mandatory for a 1031 exchange, it does offer significant benefits. The most important benefit possibly being that 1031 exchangers will have access to institutional-quality property that is not attainable by the individual investor.

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