Newbie from Ashland, OR

[Alaiya Aguilar]

Hi,

My name is Alaiya Aguilar and I'm new to BP.  I currently am a part owner in 2 TICs.  One in Salt Lake City, UT and the other in Greensboro, NC.  I've been in them for 8 years and have been unhappy with the lack of control and poor returns.  The North Carolina investment is currently worth about half of what we paid for it.

I am joining BP because it's a great resource for information and I want to educate myself on what's happening in real estate today as I look to the future.

Specifically, I want help figuring out how and when to get out of the TICs with hard real estate lessons learned but with some capital intact! ( The term of the TICs are both up in 2016.)

Thanks and I look forward to "meeting"you!

[Brian Burke]

@Alaiya Aguilar unfortunately your experience isn't all that uncommon for folks that invested in TIC deals during that time of the market. Even direct investors of real estate that purchased in 2006 experienced (or are still experiencing) a lot of pain as a result of the greatest real estate collapse since the great depression.

I suppose that one could opine that the TIC sponsorship was bad, that TICs are inherently risky, the timing was bad, you got burned by the market, etc. The fact is that some or all of those factors might be true but it doesn't mitigate the damage. In my opinion DSTs are far superior to TICs because there is one trustee that has authority to execute decisions much like in a GP/LP type of structure. That said, in any group-sponsor investment there is exposure to market risk and sponsor quality.

Your challenge lies in the TIC's unique feature of requiring unanimous consent. You might be stuck with it for another 10 years, but that depends on what the legal documents specify. Does everyone have to agree to hold another ten years? What if everyone doesn't agree to hold another ten years? Since you can't sell without everyone signing the deed, if the plan was to extend only by unanimous consent and without that consent you sell, well...how do you sell if some want to extend? That's how TICs get into some type of "zombie" state where not everyone agrees on what to do so nothing gets done.

Sometimes you see fractional interests come on the market. Let's say there are 20 owners all with equal shares, and 15 of them want to sell. A 75% interest in the property can be sold to another party, and the remaining 5 people all own 1/5th of the remaining 25%. These interests are really hard to sell because the new owners don't want the hassle of these other 5 TIC owners so the 75% interest trades at a substantial discount to market value.

Your challenge here is to see how many people want to do what.  This means looking at the deed to find out who the other owners are and doing research to try to find these people -- because the sponsor probably won't tell you.  If you are able to contact a number of them directly, you might be able to develop a unified plan as to your percentage interest collectively.

I guess that's why I prefer DSTs, at least with those you can't get stuck because of indecision.  I hope this all works out for you!