What is a TIC?
A TIC is still considered real estate but comes with some unique features. Owners typically hold a deed, allowing it to qualify for an IRS Section 1031 tax-deferred exchange for investment property. It’s essential to consult with tax, legal, and financial professionals to review the specifics, including how to match previous debt and property value with the terms of the TIC investment.
A TIC has a maximum number of 35 partners. In most cases, it is you and 34 others.
Although a TIC is still considered real estate, licensed real estate agents cannot sell them. Because a TIC is treated as a security, it falls outside the scope of a real estate license. Instead, TIC opportunities are typically offered through licensed securities dealers or appropriately licensed financial planners.
TIC investments are typically limited to Accredited Investors. It’s important to consult with appropriately licensed professionals to confirm eligibility. In general, an Accredited Investor is someone who has earned at least $200,000 in each of the past two years (or $300,000 jointly with a spouse) or has a net worth exceeding $1 million individually or jointly – excluding the value of their primary residence.
A TIC can hold ownership in a wide variety of real estate, including apartments, shopping centers, office buildings, and more – virtually any type of commercial or investment property.
Advantages of a TIC
There is no personal management by the investor.
Capital Gain Taxes might be deferred in a IRS Section 1031 Exchange if the TIC is the right fit relative to debt and value.
A TIC typically provides a stable monthly income with a reasonable rate of return on the investment.
The investor gets the benefit of any appreciation when the TIC property sells.
The investor can reinvest in another TIC project when after the first TIC project sells.
Disadvantages of a TIC
The individual investor has no control over the property or associated risk factors.
It’s not a liquid investment. The investor will not control the decision as to when the TIC property will be sold or exchanged for another.
Investors considering a TIC should be prepared for a long-term commitment, as these investments are generally less liquid and not easily sold quickly. It’s essential to thoroughly research the management team and their track record before investing. Always seek guidance from qualified tax, legal, and financial professionals to ensure the investment aligns with your goals and circumstances.
Duane graduated with a business degree and a major in real estate from the University of Colorado in 1978. He has been a REALTOR® in Boulder since that time. He joined RE/MAX of Boulder in 1982 and has facilitated over 3,000 transactions over his career. Duane has been awarded REALTOR® Emeritus by the National Association of REALTORS and the Circle of Legends by RE/MAX LLC. Duane is also the author of two books, REALTOR for Life and The Velocity of Wealth. You can reach out to Duane at BoulderPropertyNetwork.com or email DuaneDuggan@boulderco.com