Tenant in common investments are an excellent strategy for maintaining a real estate presence within an investment portfolio, without the obligations of day-to-day management. The success of tenant in common investments and the investors’ desire to retain their tenant in common ownership is underscored by national statistics demonstrating investor attitude toward this strategy: in a three-year period a mere ten TIC investors of the registered 4800 opted to exit their tenant in common investment prior to the sale of the property.

The reasons so few investors seek an early exit are straightforward. First, TIC investors are seeking investments in institutional-quality real estate that does not require direct management responsibilities, but does provide a stable monthly income. Additionally, the majority of TIC investments involve a 1031 exchange, allowing investors to defer capital gains taxes on their previous real estate sale. In both scenarios, the TIC investment was a well researched and considered strategy that an accredited investor would fully recognize, and appreciate, as a longer-term investment.

This fractional ownership of real estate can take many forms. Before investing in a tenant in common investment, however, investors should thoroughly research the sponsor, ensuring that the management team has significant experience in real estate. Investors must depend on this experience to ensure that the sponsor fully understands the market and the opportunities/challenges before them. Investors should also weigh the sponsor’s commitment to the property. Sponsors who pre-capitalize the acquisition, that is they do not depend on the TIC investors for funding, obviously believe in the property’s potential — so much so that they are willing to own it.

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