A TIC (tenancy in common) agreement is a lease agreement where two or more co-owners have an ownership share of a particular property. When owning real estate through TICs, the ownership does not need to be split evenly. One investor could own 40%, another 5%, 15%, 30% and 10%–with up to 35 owners. Through a tenant in common lease, everyone can have a piece of the pie. Since the taxpayer holds a deed to real estate as a tenant in common, the investment qualifies under the like-kind rules of IRS Section 1031. If you are interested in deferring capital gains upon the sale of your investment property, investing in a property through a TIC is eligible for that deferment. This type of investment can appeal to taxpayers who are tired of managing real estate.
There are many benefits to owning commercial real estate through a TIC agreement. Owning quality commercial real estate at a lower expense, diversification, larger property access, passivity, and lower minimum investments. It provides a secure investment with a predictable rate of return. Through tenancy in common, Millcreek Commercial is able to make investing in commercial real estate easier than ever before and break down the barriers that once reserved investing for the wealthy.
TICs allow owning quality commercial real estate at a lower expense
Individuals tend to choose tenancy in common over full ownership due to its flexibility and affordability in comparison. For example, not every investor can afford a property selling for $3.2M completely out of pocket; however, with tenancy in common, an investor is able to contribute their perfect dollar amount and still have ownership in the property. The amount of return is proportional to the amount of initial contribution at the time of sale.
Investing through tenancy in common ownership provides a strength in numbers approach to your portfolio. This kind of portfolio diversification is especially attractive to investors in circumstances of economic downturn.
Larger Property Access
Through a tenancy in common agreement, an investor has the opportunity to invest in a much larger building or piece of land than if he/she were to be investing independently. This is advantageous for many reasons: you’re able to get the returns of quality real estate with lower capital expenditures, start laddering up to larger properties, and build wealth.
If you are looking for a hands-off investment opportunity, you are not alone. Many investors are tired of the daily operations of managing commercial properties. One major benefit of co-owning a Millcreek Commercial property is the passive income that it generates monthly—directly to your bank account.
Lower Minimum Investments
This is a benefit to all investors as access to larger properties, as mentioned above, becomes a reality. With low minimums, it requires less upfront cost to invest in commercial real estate while still reaping the benefits of a high quality commercial real estate investment. A typical minimum investment when purchasing a whole property is a lot higher than a minimum investment through a TIC—some commercial mortgage deposits require 25%-40% down payment, depending on the level of risk.
If you are looking to invest in commercial real estate but aren’t sure where to start, a tenancy in common agreement is a great way to get your feet wet and explore real estate investments. Investing through a TIC is less of a commitment than if you were to invest in a whole building your first go-around. Our properties are triple-net, backed by a corporate guarantee, have a single-tenant, long-term lease, and are recession-resilient, giving you a stable and profitable opportunity to invest in commercial real estate. With any questions on TIC leases or their benefits, don’t hesitate to contact us!