Alternatives for Exhausted Landlords?
TIC vs. Rental Property
If you’ve owned a rental property you’ve very likely grown weary of landlord responsibilities. Phone calls in the middle of the night, tenants trashing your investment, or simply the “Terrible T’s” of landlord life: toilets, tenants, and trash. Many landlords don’t know there are alternatives to rental properties that provide consistent cash flow without all the management headaches.
If you’re a landlord, please imagine the following situation. Your tenant just signed a 10-year lease. Under this lease, the tenant will be paying the property taxes, homeowners insurance, all utilities, and all upkeep on the property. In short, if there’s an issue with the property, they don’t call you – they fix it on their own. Not only that, your tenant’s billionaire parents personally guarantee the rent payments. Sound too good to be true?
If the previous description sounds like an unbelievable reprieve from the landlord life you’ve been living, Tenant in common (TIC) properties are an alternative you should strongly consider. TIC investments have been a popular choice and a saving grace for the wave of landlords looking not only to utilize a 1031 exchange and defer capital gains taxes but also retire from landlord duties. Much of the real estate in the US is owned by baby boomers so TIC’s have been a go-to option for burned-out landlords since the late 90s.
Life As A Landlord
Many investors begin their journey by purchasing a single rental property. They did a little work, found tenants and fixed things as they broke. Over time, they built their portfolio to multiple properties, all the while juggling the nuts-and-bolts management tasks.
At some point, this approach to rental property management becomes overwhelming to most investors – especially if you’re nearing your desired retirement age. But it limits you in other ways as well.
You’re likely to stop purchasing additional rental properties, even if you have the financial capacity to do so, because you don’t have the time or energy to take on more management tasks.
You can hire a property manager to take care of things for you but, even when you’re not responsible for handling small repairs or finding tenants, you’re still on the hook for making most of the decisions about the property’s management. As a sole owner, you also bear all the liability and risk associated with your properties.
Tenants-In-Common (TIC): A Passive Alternative To Rental Property
TIC investments are a popular alternative to self-managing your rental property portfolio. Under a tenancy in common arrangement, you own a fractional interest in, most commonly, investment-grade commercial property with a Fortune 500 tenant. Many of these TIC properties have investment minimums of $100,000 which allows investors to not only access a higher grade of property with relatively little money, it allows increases security through diversification.
As fractional, deeded interest in the property, TIC owners still benefit from depreciation. Another added bonus is that landlords’ net rental income will likely be more with a TIC than it was with their rental property.
1031 Exchange Place Helps Landlords Simplify
At 1031 Exchange Place, we help exhausted landlords simplify their lives.
We assist clients with their 1031 exchanges and help them understand and explore replacement property options that provide secure monthly income – without the management headaches. These investment-grade properties allow for access with a low investment threshold. With a national tenant in place to handle the potentially burdensome property tax, repairs, maintenance, etc., you can avoid many of the most common unexpected financial liabilities you’re currently battling, along with the laborious management obligations.
Contact our experienced advisors today to learn more about how we can help you diversify your investments, reduce your hands-on financial and management responsibilities, and defer your capital gains tax liability through 1031 exchange transactions.
We'd love to guide you through the 1031 process, let us know how we can help!