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The Newbie Investor’s Guide to TIC Properties

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Investing in real estate properties is a great move to diversify your portfolio, but it can also be risky. You need to study market movements and trends so that you can better plan your business transactions.

For one, location is key when looking for property investments. A small condominium unit in a heavily populated area can have a greater resale value than a larger apartment in a not-so-ideal location. Second, there’s the matter of how much cash you have on hand to invest. Some property buyers start with just a down payment and take a loan for the remaining amount. When they’ve earned enough from the property’s sale, that’s when they start buying properties in cash.

Third, you can invest as an individual, property or corporation. You can also be a tenant in common (TIC) properties. This has yet to become a well-known market but has the potential to be a lucrative endeavor.

Here’s some basic information that can help newbies in real estate understand what you’re dealing with when offered a TIC property.

The TIC Concept

TIC simply means that several owners keep sole ownership of a commercial property without seeking other traditional methods such as limited partnership or formation of an entity. If you enter into a TIC property deal, you’ll become one of the owners and shall have all the rights to the said property as a single owner would despite the fact that the property’s ownership goes beyond one and to other people.

If you’re not into risky real estate dealings, this can come as a surprise and a somewhat scary type of deal. To go deeper into the concept of TIC, you actually own an exclusive fractional interest in the property and are simultaneously entitled to an exclusive portion of the net income and tax shelters. You’ll also hold a separate deed and title insurance for the part of the interest in the property. Thus, TIC property owners have all the rights of a single real estate owner while keeping a property with several other owners.

Handshake of a real estate agent and a client.

Benefits of Holding a TIC Property

A TIC property arrangement has multiple benefits for buyers and sellers alike. Buyers are given a chance to own a property which in any other way would have been impossible to own. TIC arrangements allow future owners to combine resources with other investors so that purchasing a property becomes more affordable for each investor, and still permit them to have all the rights of a sole owner. Additionally, TIC properties also provide different tax deductions and the opportunity to seek substantial due diligence.

For TIC property sellers, they can take advantage of the high property appraisals and increased marketing options. Sellers can even sell their fraction to several other buyers who will also become fractional owners of the whole property. Sellers can gain even more with this arrangement than when the deed and title are sold to just one buyer.

Moreover, there are now financial institutions that have started offering “fractional loans,” which allow TIC owners reduced risks and hazards on co-ownership as they keep their mortgages for TIC property arrangements.