Real estate investors seeking tax-sheltered income may find tenants in common (TIC) an appealing form of real estate investment. It is one way of plunging into commercial real estate. The investor owns a percentage of an institutional-grade property along with other investors. This opportunity allows for “common” real estate investors to invest in larger-scale endeavors that they would never be financially equipped to invest in if they stood alone.
How Tenants in Common Functions
The ownership for tenants in common is arranged by sponsors that form a TIC investment group for each property. TIC sponsored properties include regional shopping malls, large luxury apartment buildings even class A high-rise office buildings in major cities. When investing in TICs, the investor receives a title deed for an undivided fractional share in a large institutional-grade property. The portion owned by the investor can be passed on to his/her heirs upon death. TIC is created by deed, will or operation of law.
Limitation of Tenants in Common
- TICs often limit the number of investors allowed on one piece of property.
- All owners must share and pay all profits and losses proportionately.
- The TIC sponsor can’t advance funds to cover any expenses.
- Each owner vote is equal to his/her percentage of ownership.
- The IRS requires unanimous approval of all owners to borrow against the property or to sell it.