Basics and Benefits of TICs
For those searching for this attractive 1031 option, 1031 Exchange Place, can help connect them with a selection of properties for TIC 1031 exchanges. Here are some basics on these, and some of the benefits they may offer you.
A TIC investment refers to any real estate that is co-owned by multiple investors. TIC investments fall under like-kind rules of tax code section 1031 due to the fact that the taxpayer holds a deed to the property deemed tenant-in-common.
In many cases, TIC investments are best for regular exchangers who own rental properties but no longer wish to manage them. These investments generally bring long-term leases and secure investments from large tenants.
TIC investments have low investment minimums – as low as $50,000 in most cases. This makes 1031 and cash buyers open to high-quality NNN properties that might not have been available to people in this price range in the past – only larger investors would have been able to take advantage, but this is no longer the case. Additionally, unlike the DST format that has grown in popularity, TIC properties are available to non-accredited investors.
Freedom from Day-to-Day Management
As we noted above, the TIC investment is often great for property owners who do not wish to manage their rental properties. NNN lease structures can be combined with third-party property management easily, allowing you as an investor to focus on life outside your investment.
Many investors are easily able to purchase more than one TIC property at a time, what with investment minimums so low. This can help you diversify your exchange.
In most cases, TIC sponsors are real estate professionals with a long track record in the field. These professionals have a great personal interest in the businesses leasing their properties finding success – they want the real estate to appreciate, of course. As such, you’ll generally find fantastic locations within TIC investments.
Great for IRA/401k
Many aren't aware that properties like TICs are a great fit for retirement monies like a self-directing IRA. With current low-interest rates and the volatility of the stock market, TICs are a popular choice for those wanting to receive a consistent return with their retirement.
In part one of this two-part blog series, we went over some of the basics of TIC investments and their benefits as TIC 1031 exchanges. As it turns out, the list of benefits is so long that we needed to extend it to this space.
TIC, or tenancy-in-common investments, refer to real estate that is co-owned by multiple investors. Here are some more potential financial benefits of using this kind of exchange.
Tax Returns and Depreciation
Just like with other forms of real estate ownership, depreciation is something that can be claimed against income on a tax return. Sheltering income is another benefit to investing in real estate over other investment options.
On the flip side, if your property appreciates while you own it, you’ll receive your share on a pro-rata basis if the property is eventually sold. This kind of appreciation contributes to the overall ROI you can expect for your real estate investment.
With TIC investments, the tenant corporation involved in your purchase will guarantee lease payments to property owners throughout the lease. With no hassle or inconvenience, these funds are simply deposited into your bank account via direct deposit on a monthly basis. Rents are pre-negotiated and disclosed in the lease - providing 10-15 years of predictable income.
Limited Fees and Expenses
In most cases, TIC investments and properties will come with almost no fees or expenses. Closing costs are generally not included, and you can get a prorated rent check sent to you on the same day you sign your agreement. There are also major savings typically offered through limiting appraisals and other basic investment costs.
Convenience and Availability
Our 1031 Exchange Place advisors can put you in front of TIC inventory options. For this reason, TICs are incredibly convenient to acquire – some investors use them as a backup replacement property option in case they have their first choices fall through.
In addition, TIC investments that fall under the Real Estate category – rather than securitized TICs or DST investments – are available to everyone. Those other types are generally restricted only to accredited investors, but that’s not an issue in this case.
For more on TIC 1031 exchanges, or to learn more about any of our 1031 tax exchange services, speak to the pros at 1031 Exchange Place today.
We'd love to guide you through the 1031 process, let us know how we can help!