Advantages of 1031 Tenant In Common Exchanges
Tenant in Common (TIC) arrangements are a popular option for real estate investors interested in 1031 exchanges. Investing or utilizing property held for investment or productive use in a business or trade is allowed under Section 1031. Investors with less than $1 million can benefit from TIC properties because they offer passive cash flow, diversification, and more conservative investment.
The 1031 Exchange Place has been providing tenants in common properties to investors since 1997 below for some of the primary benefits of tenant-in-common investments.
The 1031 Exchange Place has been providing tenants in common properties to investors since 1997 below for some of the primary benefits of tenant-in-common investments.
Largest Selection of TIC Properties?
- Low Minimum Investment
In a 1031 exchange, 28% of capital amounts are less than $500,000. Many 1031 investors are excluded from the triple-net lease (NNN) market due to the high entry price of around $1,000,000. These exchangers can access investment-grade real estate through tenants in common ownership for as little as $50,000. - Diversification & Safety
A typical 1031 exchange involves the taxpayer identifying three potential replacement properties and purchasing only one. As a result of TIC ownership, many properties can be identified and acquired, decreasing risk. - The flexibility of leftover funds or a backup plan
Tenants in common are also considered for 1031 exchanges because of their flexibility. The proceeds are applicable if the taxpayer identifies a TIC property as one of the replacement property options. The taxpayer can also invest “spill-over” money in TIC properties if money is left over after another closing. - Decreased Tax Risk
Due to the possibility of reserving an investment position in a TIC property after the identification period, investors can avoid capital gains taxes. - Existing Financing
It is usually possible to assume tenants in common properties without qualifying or paying loan assumption fees because they already have non-recourse financing. - Speed
Due to eliminating negotiations, loan qualification, credit checks, and appraisal work, TICs can close quickly. - Liquidity
As a result of maintaining a secondary market of tenants in shared ownership interests, investors can choose well-established properties, and owners can liquidate their shares. - Simplicity
A tenant-in-common investor receives a monthly check without the hassle of managing his investments on a day-to-day basis. - Safety An individual landlord may not be able to attract tenants with the same financial strength and stability as those in common properties.
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