What is Tenant in Common?
At Millcreek Commercial, tenant in common ownership opportunities make us “TIC”.
Tenant in Common (TIC) is an arrangement in which multiple parties own a percentage share of a property. The parties may own equal or different-sized portions of the property. For instance, a TIC property with two owners could be split 50/50, 70/30, or any other arrangement totaling to one hundred percent of the property. Additionally, new parties can be brought in at any time. For instance, if a property is owned by two investors split evenly, one could choose to sell half of his share to a new investor making the new arrangement 50/25/25. Below are just a few advantages of TIC ownership.
First, TIC ownership allows investors to diversify their portfolios by investing in several different types of properties across various markets. Combining resources with other investors makes investment-grade real estate more accessible. For example, an investor could diversify by owning a portion of a health clinic in rural Texas while also owning a portion of a CVS in urban Chicago. This provides safety and stability to his portfolio.
No right of survivorship
Another benefit of TIC ownership is that each co-owner can choose an heir to their interest upon death rather than their portion getting passed to other co-owners. In a joint tenancy, one owner’s portion would be passed to the other owner upon his or her death, but when investing in a TIC property, investors can choose an heir offering lasting financial stability for loved ones.
Defer capital gains taxes
TIC properties also satisfy the “like-kind” requirement for a 1031 exchange. Any property located within the US and used for the purpose of business or investment is considered “like-kind”.This means investors can use tenant-in-common ownership to defer capital gains taxes through a 1031 exchange.
Why We Love Tenant in Common
Aside from the basics, tenant in common deals are incredibly advantageous to investors in terms of benefits. These small investments enjoy the same benefits that larger/whole-building investments enjoy. For example, a $225,000 purchase of a single tenant net lease asset with a quality tenant and a long-term lease yields the same benefit, in proportion, as if I bought that asset by myself. All the benefits, not all the capital is required.
Residential vs. Commercial
A residential investment property has many wonderful benefits, but we don’t think those benefits outweigh the benefits associated with owning commercial real estate. From re-tenant fatigue (the constant process of finding new tenants), constant maintenance and upkeep, to hunting down the rent check every month, commercial real estate offers much more peace of mind. Businesses occupy the space, so they have every incentive to keep it clean and in good working order. Owning commercial real estate allows for greater scalability, especially with the possibility of tenant in common ownership.
Visit our available properties to get started on your tenant in common ownership journey.