TICs (Tenants in Common)

[Austin Deardorff]

Hello Everyone,

For the topic at hand - I recently learned about Tenants in Common (TICs) as a real estate investment option. Although I am not currently pursuing one, as I understand they can be fairly pricey, I was wondering if anyone had any experience purchasing or selling a TIC and if so, did you use it to continue deferring your capital gains since, if done correctly, it is my understanding a TIC can be used with a 1031 exchange. The only case I can see this occurring is for an experienced investor with a fair amount of cash produced directly from capital gains and not a single lucrative investment has presented itself to justify purchasing, even with a 1031 exchange, therefore a TIC is used, which is less costly than the taxes which would be paid on the gains.

From what I've read, there can be a lot of downsides to TICs and a firm understanding of the investment is required to ensure you don't end up spending more than you would if you were to just cash out with the capital gains. 

I hope this make sense and I would love to learn more from someone with experience or more knowledge than myself on the topic!

Thanks

[Dave Foster]

@Austin Deardorff, TIC products, syndicated by broker/dealers under SEC law do qualify for tax deferred treatment under a 1031 exchange. They have fallen out of favor these days to a product called the DST or Delaware Statutory Trust. Same impact, same mechanism of syndication and same qualification for 1031 treatment. DSTs and TICs are often used in a 1031 situation where a suitable replacement property cannot be found or a suitable amount of property cannot be found so a DST or TIC is used to "round out" the purchase. They can also be used to provide a transition from active to passive real estate management. @Mark Creason, and @Robert Hetsler both live in that world and can speak more directly to the nuance of each.  

The key for my purposes is that if crafted correctly they do indeed provide an alternative to actual real estate ownership that qualifies for a 1031 exchange.