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TIC ADVANTAGES
The following TIC advantages clearly show why TIC has become the preferred 1031 replacement property choice for more and more investors throughout the United States.
1. INSTITUTIONAL GRADE PROPERTIES For a minimum investment that may be as low as $100,000 you can participate as an owner of institutional grade property (typically available only to institutional investors).
2. MONTHLY CASH FLOW, BUILD UP OF EQUITY Normally cash flow is paid monthly. The amount of cash flow can vary as determined by rental activity and other economic factors effecting the real estate market. Ordinarily a significant amount of the cash paid out is not taxable because of depreciation deductions. Equity build up is anticipated due to amortization of debt on the property as well as appreciation in value.
3. RELIEF FROM MANAGEMENT Landlords are often heavily burdened with management responsibilities which cost time and money. These landlords as well as raw land owners will appreciate the professional management which is provided for TIC properties. Management is typically a national real estate company which has an extensive track record in all phases of property acquisition and management.
4. FINANCING ALREADY IN PLACE When you purchase TIC property you do so with financing in place which can be assumed without special qualifications. Ordinarily the loan is non-recourse (no personal guarantee required).
5. OPTIMIZE THE AMOUNT OF DEBT AND EQUITY INVESTED IN YOUR REPLACEMENT PROPERTY TIC’s allow for greater flexibility in locating a replacement property which will optimize the amount of debt and equity. This is important for a number of reasons including the ability to avoid taxable “boot”.
6. TIMELY AND ASSURED CLOSING ON REPLACEMENT PROPERTY Exchangers often have difficulty identifying and closing on replacement property within the 45 day identification period and the 180 day acquisition period. This is not a problem with TIC property. By the time a TIC property becomes available for investment all lease, title, financing and other issues have been resolved. As a minimum, it would probably be wise to include a TIC property as an identified property. It can be your primary choice or a backup in case some other preferred replacement property acquisition cannot be completed.
7. DIVERSIFICATION AND RISK REDUCTION The low minimum investment for TIC ownership makes it easy to purchase two or more replacement properties so you can easily diversify property type, property location, tenants, industries, etc.
