What is Tenants-in-Common (TIC)?

• The key to TIC investing is fractional ownership. A group of investors is organized, or sponsored, under a TIC structure and the group is then able to acquire a large commercial property with out paying any closing costs.
  TIC investments are ideal for knowledgeable investors tired of personal day-to-day property management, but still attracted to the benefits of real estate ownership. TIC investments share the full tax and wealth preservation benefits of sole-owned real estate, typically offer the same or better cash flow, and eliminate the headaches of day-to-day management. They also provide long-term investment appreciation potential.
• TIC investors are directly on title to the property and are allowed to sell their interests to other TIC investors and to buyers outside of their TIC agreement.
• Tenant in Common is a form of holding title to real property. It allows the owner/owners to own an undivided fractional interest in the entire property. In addition, it has become the preferred investment vehicle for real property investors who wish to defer capital gains via a 1031 exchange and own real property without the management headaches.
• A popular choice among real estate investors seeking replacement property for their IRC Section 1031 tax deferred exchange is Tenant-in-Common Ownership (TIC), also known as fractional ownership. Under this co-ownership structure, you will own an undivided fractional interest in an entire property and share in your portion of the net income, tax shelters, and growth. Further, you will receive a separate deed and title insurance for your percentage interest in the property and have the same rights as a single owner. Because Tenants In Common opportunities are often "packaged" with management and financing in place, Tenants In Commons offer superior efficiencies in the identification, acquisition, financing, closing, and operating stages of real estate ownership.

TIC investments provide simplicity by eliminating active property management headaches.

• Individuals who are tired of the day-to-day burdens of being a landlord or who own land and would like an income producing property will appreciate the benefits of a Tenants In Common investment. The Tenants In Common program gives you a "coupon clipper" or "mailbox management" investment that can save you time and money.
• Cash flow is generally paid monthly and is tax-sheltered via depreciation pass through and interest deductions. You may also share in the appreciation of the property when sold.
• Tenants In Commons provide the flexibility to avoid the taxable boot if your preferred real estate doesn't allow you to meet the full debt and equity requirements.
• A ready inventory of Tenants In Common properties allows individuals to easily identify properties within the 45-day identification period, acquire within the 180 days, or have a "back-up" property in case their preferred real estate falls through.
  

NNN PLUS Lease

• The NNN PLUS lease is a triple-net lease in which the lessee completely leases the replacement property under an escalating rental payment plan. Under triple net lease properties the lessee takes on the responsibility to sublet the property. In addition to rent, taxes, insurance and maintenance, the lessee also pays the debt-carrying expenses.
• TIC interests combined with a NNN PLUS lease provide the real estate buyer with the advantages of ownership in a larger property with appreciation, revenue and annual depreciation benefits without many of the management problems associated with individually-owned rental property.
• The triple-net lease ends whenever the Tenants-in-Common (TIC) vote to terminate it or, in any event, when the TIC owners sell the entire property. The lessee is a real estate ownership and management company with an established history of 1031 experience.
  

The Purchase Process

1. Buyer reviews property details and conducts preliminary due diligence.
   • Please contact a Solid Investments representative for property details
     
2. Buyer signs all purchase documents.
   • Vesting instructions
   • Purchase and sale agreement
   • NNN PLUS lease view summary
   • Tenants-in-Common agreement view summary
   • Loan assumption agreement
   • Buyer has 10 business days to perform remaining due diligence to its complete satisfaction
     
3. Buyer and seller close the agreement and sign the following documents.
   • Due diligence completion acknowledgement
   • Escrow closing documents
   • 1031 accommodator documents
     
4. Buyer has funds transferred, receives deed and rental payments begin.
   • Rental payments begin the month after closing and are prorated for the month of closing
   • Deed received in 60 to 90 days from the county recorder

Tenants-in-Common FAQs

Question: In a nutshell, what is TIC (Tenants-in-Common) ownership?
Answer: TIC ownership combined with NNN leases provide the real estate buyer with the advantages of
ownership in a larger property, revenue and annual depreciation benefits without many of the day-to-day management problems associated with individually-owned rental property.

Question: What purchase amounts are ordinarily required for TIC ownership?
Answer: Revenue Procedure 2002-22 issued by the IRS allows up to 35 TIC (Tenants-in-Common) owners in any one property. Minimum purchase requirements are structured to meet this limitation and can range as low as $150,000 equity. The typical entrance in whole commercial building begins at $1 million, but through TIC ownership, the average person is able to enjoy ownership in an institutional-type property with a minimum purchase. Besides reliable income and growth potential, these properties are able to attract tenants with greater financial strength and stability than possible for the individual landlord.

Question: What happens if I fail to close on my 1031 exchange?
Answer: You will have to pay your capital gains taxes. Failure to close is the top reason clients reveal as to why they pay capital gains. By identifying a TIC property, you can reduce your potential tax risk, and avoid a failed closing. If you fail to close on other identified properties, you are able to move all your proceeds into the TIC (Tenants-in-Common) property you identified.

Question: Is there any liability exposure associated with TIC ownership?
Answer: The mortgages on most of the TIC properties offered by the TIC company are non-recourse. The TIC debt structure generally allows for the debt financing to be assumed. Assumption usually occurs without the need for qualification or loan assumption fees.

Question: What if I want to sell my TIC ownership?
Answer: On a decision requiring unanimous vote, such as a sale decision, a 60% - 75% (depending on your TIC
agreement) vote by the TIC owners will be sufficient to initiate the impasse resolution procedure. This procedure
allows the TIC owners with 60% - 75% (depending on your TIC agreement) or more of the property to make an offer to buyout the dissenting owner with 25% or less of the property. The dissenting TIC owners can either: (1) accept this offer, (2) buy out the 75% TIC owners at the same price per percentage ownership, or (3) change their dissenting vote to a consenting vote.

Question: What happens to my TIC ownership if I die?
Answer: Your ownership interest will pass to your heirs pursuant to your will just like any other asset. Currently, the estate tax code provides that they will also receive a stepped-up tax basis to fair-market value, but you should check with your CPA or tax adviser because not all circumstances are alike. The income taxes which were deferred because of your 1031 exchange are potentially forgiven forever.