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. POTENTIAL 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 potential 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.
TENANT-IN-COMMON (TIC) RISKS:
- TIC interests are only available to accredited investors
- TIC interests are subject to the usual risks of real estate
- TIC interests' cash flows and returns are not guaranteed
- TIC interests involve fees that may offset tax savings
- TIC interests are generally illiquid. There is currently is no secondary market
- TIC interests require a high level of due diligence
- TIC interest risks include failure to meet required completion deadlines as well as the potential lack of cash flow
- Value of property could decline
- Loan default could result in loss of entire investment
- Tenant-In-Common interests' values can be negatively affected by fees and costs
- Co-owners of Tenant-In-Common properties do not directly participate in the day-to-day management of the properties
- Tenant-In-Common interests may be subject to unfavorable tax rulings which could result in immediate tax liabilities
SECURITIES OFFERED THROUGH Private Asset Group, Inc. (PAG), A member of FINRA/SIPC. Frank Dunn is securities licensed in CA, CT, ID, IL, KS, ME, MT, NC, NJ, NM, NY, OR, PA, TX, UT, VT, WA, WI, WY. 1031TaxSavings.com and its parent company Capstone Financial Services, LLC are independent and not affiliates of PAG, Inc.
OSJ: 3070 Bristol Street, Ste. 500, Costa Mesa, CA 92626 - 877.428.1031
This site has been prepared for informational purposes only and does not constitute an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investment strategy. Such offers may only be made by written prospectus and only in a jurisdiction where the security is duly registered or exempt from registration therein. The information contained herein was current as of publication but is subject to change without notice. The information contained herein was obtained from sources believed to be reliable; however, we make no guarantee regarding its accuracy or completeness. Furthermore, due consideration should be given to risks associated with real estate ownership such as market, interest rate, and default risks.
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