Tenant-In-Common (TIC)

・What is a Tenant-In-Common (TIC)？

Tenant-In-Common (TIC)
Tenant-In-Common Investment is one of the Real Estate Investment plans in which you hold the commercial property as Tenancy In Common. TIC is a plan to let you hold a title of Real Estate properties. With low minimum purchase requirement, you, as an investor, can own larger, institutional quality properties that any individual can hardly own by himself. From the very first year of investment, you can receive predictable monthly payment that may escalate annually. You can see the contractual obligation that a master lessee and tenants are responsible for all tenant’s liabilities, default, and management fees. TIC is mostly used as a 1031 exchange; you still have an opportunity to substitute this for an annuity plan because you can invest directly.

    【Benefits】
  • Defer Capital Gain Tax, Depreciation Recapture tax, and State taxes when property is sold
  • Obtain a Deed for undivided fractional ownership of property
  • Avoided from property management, while receiving steady income
  • Receive possible appreciation based on a percentage of the ownership
  • Contractual agreement to receive monthly steady income
  • Master lessee is responsible for all tenant’s liabilities, default, lawsuits, maintenances
  • Master lessee is also responsible for collecting rent and vacancy risk

    【Notes】
  • Need consensus of 70% of other owners when you sell your share
  • Receive deduction for depreciation and paid interest

    【Notes about 1031 Exchange】
  • Must identify the property within 45 days after the closing date of sold property
  • Must choose an accommodator
  • Have to close escrow within 180 days after the closing date of the sale

・Process of Tenant-In-common (see after #4 when direct investment)

  1. Sell the property you currently own
  2. Appoint an accommodator and open account for 1031 Exchange with them
  3. Transfer the money (whole proceeds from sale) into that account
  4. Designate replacement property
  5. Sign the purchase agreement, loan assumption agreement
  6. Open Escrow
  7. Transfer the fund from 1031 Exchange account
  8. Sign NNN Plus (*1)lease agreement
  9. Establish LLC (*2)
  10. Designate bank account for monthly lease payments
  11. Close Escrow
  12. Receive a Deed

(*1) covers the liabilities insurance, property tax, maintenance fee as proportionate to ownership
(*2) Limited Liability Company
Tenant-In-Commonの設定概略図
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