TIC Overview

A Brief Summary of TIC Exchanges

Section 1031 exchanges may include acquisition of real estate interest through Tenant in Common (TIC) ownership. A TIC property is one in which an investor owns an undivided fractional interest in an entire property and shares in the pro-rata portion of the net income, depreciation, amortization, and property appreciation. The investor receives a separate deed and title insurance for its percentage interest in the property. Each tenant in common is entitled to share with the other tenants the possession of the whole parcel and has the associated rights to a proportionate share of rents or profits from the property, to transfer the interest, and to demand a partition of the property. These rights generally provide a tenant in common many, but not all, of the benefits of sole ownership of real property.

Because TIC opportunities are often "packaged" by a sponsor with management and financing in place, TICs offer efficiencies in the identification, acquisition, financing, closing, and operating stages of real estate ownership.

TIC properties provide an opportunity for diversification, and low equity requirements that may allow smaller individual investors to invest in large institutional investment properties. But, TICs involve additional costs over the costs of direct ownership. Income generated from a TIC property can often be sheltered from tax through using depreciation and interest deductions.