TIC in 1031 Exchange is an agreement signed between two or more investors owing to a single property. TIC or Tenancy In Common gives simultaneous property ownership of the property for the investors. Under this arrangement, an investor is permitted to invest in the property even for a limited quantity of cash.
A popular choice for real estate investors hoping to take part in a 1031 exchange is a Tenant in Common (TIC) arrangement. Section 1031 of the IRC (Internal Revenue Code) allows real estate owners to defer taxes and gains whether they secure “like-kind” replacement property of equal or greater value, as well as exchange property that is used for investment or productive use in a business or exchange. TIC properties are an excellent choice for those looking for inactive income, diversification, a more conservative investment, and those that have less than $1 million to invest.
1031 Exchange Place has been associated with the TIC industry since 1997 and can help exchangers select from the biggest selection of tenant in common properties. Given below are some of the primary benefits for the tenant in common investments.
Benefits of TIC’s
When the NNN lease structures are combined with professional, third-party property management makes the investor hassle free from the headaches of day-to-day management.
TIC provides access to Investment Grade Real Estate
1031 Exchange and cash buyers get access to high quality, institutional grade, NNN properties that are only available to larger real estate investors because of TIC properties, and the low investment minimums.
Low Minimum Investment
An estimated 28% of all 1031 exchanges include capital amounts of $500,000 or less. The cost of entrance into the triple-net lease (NNN) market typically starts around $1,000,000, thereby locking many 1031 investors out of this field. However, tenant in common proprietorship is available for as little as $50,000 and gives these exchangers access to investment-grade real estate and the passivity provided by NNN properties.
TIC provides greater liquidity or ability to resell
New buyers need not qualify for an existing loan as under TIC there is no debt against the property, which makes the process of reselling investors interest more comfortable
Diversification and Safety
In a typical 1031 exchange, the taxpayer identifies three potential replacement property and consequently purchase only one. TIC ownership makes it monetarily feasible to identify and obtain an ownership interest in many properties, thereby decreasing risk through diversification. Under this even with very low investment as low as $50,000, an investor can buy more than one TIC property to diversify the exchange.
Regular Monthly Income
The tenant corporation ensures the lease payments to the property owners for the term of the rent. It simply gets credited to the investor’s bank account every month.
Along with other real estates, another benefit of TIC owners is that their proportionate shares of depreciation to claim against the property income on their tax return.
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